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”

United States Court of Appeals for the Fourth Circuit Holds Recovery on Contractor’s Claim for Wrongful Termination Limited by Provisions of Termination for Convenience Clause; Contractor’s Suit Dismissed Because Claim Was Subject to Contractually Prescribed Disputes Procedures

Hancock Electronics Corp. v. Washington Metropolitan Area Transit Authority, 81 F.3d 451 (4th Cir. 1996).

In the spring of 1994, the Washington Metropolitan Area Transit Authority (“WMATA”) awarded Hancock Electronics Corporation (“Hancock”) a contract to provide replacement braking systems for approximately 300 rail cars. The contract required Hancock to design, manufacture and install the braking systems. The contract further required Hancock to demonstrate its contract performance to WMATA and provide certain technical data about the braking systems.

Because it apparently did not possess the ability to monitor the testing of the brake systems’ software, WMATA subcontracted the testing function to a third party. In addition, as part of the testing process, WMATA requested Hancock to provide certain technical documentation, including the brake systems’ software. WMATA sought Hancock’s permission to provide the technical data to the third party responsible for testing, who had agreed to enter into a lifetime nondisclosure agreement. Hancock refused. Continue reading “United States Court of Appeals for the Fourth Circuit Holds Recovery on Contractor’s Claim for Wrongful Termination Limited by Provisions of Termination for Convenience Clause; Contractor’s Suit Dismissed Because Claim Was Subject to Contractually Prescribed Disputes Procedures”