ANTICIPATORY REPUDIATION

Contractors often encounter contract interpretations by the contracting officer which seem incorrect and overreaching.  Disputes arise as to the meaning of contract language which place the contractor and the government at odds over what performance is required.  The contractor takes the position that the government's demands are "out of scope" and the government reacts by threatening to terminate for default if the contractor does not follow the contracting officer's directions.  Totally frustrated by the looming possibility of having to invest more time and money in the project, the contractor considers refusing to follow the contracting officer's directions.

While there is old case law supporting the proposition that the contractor "has no right to make a useless thing and charge its customer for it", the contractor must always remember the Changes and Disputes clauses, unique to government contracts, require the contractor to perform the work and seek relief afforded by those and other appropriate clauses in the contract.  The cardinal change doctrine allows a contractor to avoid performance of material changes to the contract, but stopping work under any circumstances most likely will result in termination for default.

For those contractors who are new to government contracts, the government's power to compel continued performance is strange indeed.  Directions to perform work when the contractor disagrees with contract interpretation might well entitle the contractor to refuse to do the work in the commercial setting.  Government contracts are contracts of adhesion in which the government dictates the terms and conditions.  The government requires continuation of the work while the contractor seeks remedies under the Disputes clause. 

Government contractors need especially to be wary of anticipatory repudiation.  If, through words or deeds, the contractor communicates an intention not to perform, the government may immediately terminate for default on the basis of anticipatory repudiation.  The words or deeds must be definite, unconditional and unequivocal, but any suggestion the contractor intends not to perform work directed by the contracting officer may well result in termination for default.  The anticipatory repudiation grounds for termination for default apply even to the most outrageous demands by the government.  Displaying an intent not to perform probably will result in termination for default.

bill@spriggsconsultingservices.com         bill@spriggslawgroup.com