Owner Did Not Waive Right to Damages by Terminating Design Contract for Convenience

Chinese Hosp. Ass’n v. Jacobs Eng’g Grp., Inc., 2019 BL 330340, 2 (N.D. Cal. Sept. 03, 2019)

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Christine Z. Fan

This case arises out of the alleged breach of contract and defective design for the construction of a new hospital in San Francisco.  During construction, property owner and plaintiff Chinese Hospital Association (“Chinese Hospital”) became aware of alleged defects involving the designs provided by its subcontractor, architect-defendant Jacobs Engineering Group, Inc. (“Jacobs”).  Chinese Hospital terminated its contract with Jacobs for convenience mid-construction.

Continue reading “Owner Did Not Waive Right to Damages by Terminating Design Contract for Convenience”

Massachusetts Supreme Court Declares That State Contract Principles, Not Federal Precedent, Govern the Interpretation of Termination for Convenience Clauses

A.L. Prime Energy Consultant, Inc. v. Mass. Bay Transport Auth., 479 Mass. 419 (May 2, 2018)

In a case of first impression, the Massachusetts Supreme Court held that general contract principles, and not federal case law, govern the treatment of termination for convenience clauses in state procurement contracts.

In January 2015, the Massachusetts Bay Transportation Authority (“MBTA”) issued an invitation for bids for the supply of ultra-low sulfur diesel fuel for a two year term.  Following bidding, the MBTA awarded the contract to A.L. Prime Energy Consultant, Inc. (“Prime”) in July 2015.  The contract included a termination for convenience clause that provided:

The [MBTA] may, in its sole discretion, terminate all or any portion of this Agreement . . . at any time for its convenience and/or for any reason by giving written notice to the Contractor thirty (30) calendar days prior to the effective date of termination. . . . (emphasis added).

Approximately a year later, the MBTA determined that it could acquire its fuel supply from a different supplier at a lower price.  Accordingly, the MBTA notified Prime of its intent to terminate the contract for convenience. Continue reading “Massachusetts Supreme Court Declares That State Contract Principles, Not Federal Precedent, Govern the Interpretation of Termination for Convenience Clauses”

Court of Federal Claims Rules Contracting Officer’s Failure to Exercise Independent Business Judgment Renders Partial Termination for Convenience an Abuse of Discretion and Breach, but Holds Subsequent Termination for Cause of Remainder of Contract to Be Appropriate

Securiforce Int’l America, LLC v. United States, 125 Fed. Cl. 749 (March 21, 2016)

Plaintiff Securiforce International America, LLC (“Securiforce”) was awarded a contract by the Defense Logistics Agency Energy (“DLA Energy” or the “agency”) to deliver diesel fuel and gasoline to eight Department of State sites in Iraq.  But, within three months of the award, the agency partially terminated the contract for the convenience of the government.  The remainder of the contract was terminated for cause shortly thereafter.

As a result of its termination, Securiforce submitted claims to DLA Energy’s contracting officer, seeking, among other things, a declaration from the contracting officer that the termination for convenience was invalid and constituted a breach of contract.  The contracting officer denied the claims. Continue reading “Court of Federal Claims Rules Contracting Officer’s Failure to Exercise Independent Business Judgment Renders Partial Termination for Convenience an Abuse of Discretion and Breach, but Holds Subsequent Termination for Cause of Remainder of Contract to Be Appropriate”