Avoid the Government’s Secret Weapon When You Don’t Adequately Respond to Contract Disputes
Anticipatory repudiation in government contracting occurs when one party ( usually the contractor) communicates to the other party (the Contracting Officer) “a distinct and unequivocal absolute refusal to perform the promise.” See Dingley v. Oler, 117 U.S. 490, 503 (1886);
What Can The Government Do?
When there is sufficient evidence to support repudiation as a defense, the government has the right to discontinue performance of its obligations under the contract and seek legal redress if the other party anticipatorily repudiates the contract. United States v. Dekonty Corp., 922 F.2d 826, 827-28 (Fed. Cir. 1991) (citing Dingley, 117 U.S. at 499-500).
Does the Government Have to Mitigate Damages?
The short answer is that it should be doing this. In federal contracting “The obligation to mitigate damages arises ‘[o]nce a party has reason to know that performance by the other party will not be forthcoming.’” Stockton East Water District v. United States, 109 Fed. Cl. 760, 803 (2013) (quoting Indiana Michigan Power Co. v. United States, 422F.3d 1369, 1375 (Fed. Cir. 2005).
- The government has reason to know when you submit a response to a cure notice and the contents create doubt as to your performance. One can argue that if the government has doubt then it should affirmatively ask the question.
Some Forms of Anticipatory Repudiation in Federal Contracting?
Oftentimes, a heated disputed arises and emotions start to flow. Contractors may sometimes threaten to walk away from the project. Is this enough for the government to act? The answer depends on the facts of each case. However, if strong enough facts are present, the court may very well agree with the contracting officer’s termination for default.
- The Armed Services Board of Contract Appeals found that a federal contractor’s refusal to perform may be expressed orally, in writing, or through action. Fairfield Scientific Corp., ASBCA 21151, 78-1 BCA ¶ 13,082, at 63,907-08.
Tip: Anticipatory Repudiation may occur at any stage of performance, and that the Government may “take immediate action to safeguard its interests when a contract upon which it is relying cannot or will not be brought to fruition, seems obvious.” James E. Kennedy v. United States, 164 Ct. Cl. 507, 514 (1964).
Tip: Your response to a cure notice may serve as anticipatory repudiation.
Tip: Repeated communications that if X does not happen, then you cannot complete the job. This is especially true in construction contracts.
Tip: The Government may issue a cure notice as a precursor to a possible termination of the contract for default. Discount Co. v. United States, 554 F.2d 435, 438-39 (Ct. Cl. 1977).
How Can Your Response to a Cure Notice Help You?
When the Government justifiably issues your company a cure notice, you then have an obligation to take the necessary steps to demonstrate to the contracting officer or give her assurances that you will make progress toward a timely completion to provisions of the contract.
The U.S. Court of Appeals for the Federal Circuit has ruled that the failure of a government contractor to give adequate assurances of performance in response to a validly issued cure notice can be treated as repudiation of the contract. Danzig AEC Corp., 224 F.3d 1333, 1337 (Fed. Cir. 2000); see also Tubular Aircraft Products, Inc. v. United States, 213 Ct. Cl. 749, 750 (1977).
- Do not take chances when responding to a contractor cure notice
- The government often will use the argument that the response created communication of anticipatory repudiation.
- This can be hard to overcome on appeal
Is anticipatory repudiation a legal cause of action?
An anticipatory breach of contract in federal government contracting is an action that shows one the contractor’s intention to fail to fulfill its contractual obligations to another the government. An anticipatory breach of contract is also referred to in government contract law as an anticipatory repudiation.
Tip: Anticipatory repudiation is also available to the contractor as a cause of action for supplies or services contracts.
Contact a Government Contract Law Attorney
If you are a federal contractor seeking immediate help with responding to a cure notice or appealing the contracting officer’s termination for default decision due to anticipatory repudiation, please contact our office at 1-866-601-5518.