Cascade Pacific International v. The United States
33 Cont. Cas. Fed. 73,958, 1985 U.S. App. LEXIS 15270, 773 F.2d 287 (1985)
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Rule of Law:
A contractor's definitive statement that it is unable to perform according to a contract's material specifications constitutes an anticipatory repudiation, which justifies the government's immediate termination of the contract for default. The government is entitled to receive goods that strictly conform to contract specifications and is not required to accept non-conforming goods, even with a price reduction.
Facts:
- On July 1, 1980, Cascade Pacific International (CPI) entered into a fixed-price supply contract with the General Services Administration (GSA) to provide builders' hardware, including spring hinges.
- The contract specifications required the hinges to be plated with a US10 finish, have button tips, and meet a specific metal thickness.
- In December 1980, CPI tendered a shipment of hinges for inspection, which GSA rejected because they were painted instead of plated and failed to meet other specifications.
- CPI offered to provide the non-conforming painted hinges in exchange for a price reduction, but GSA refused to waive the plating requirement, stating the painted finish was not as corrosion-resistant and had an unacceptable appearance.
- On May 7, 1981, after GSA's refusal, CPI sent a letter to GSA stating that if the agency would not accept painted hinges, 'we will be unable to perform.'
- By May 21, 1981, CPI had failed to make delivery on thirteen of the fifteen orders it had received for the spring hinges.
- While CPI claimed that conforming plated hinges were not manufactured, GSA confirmed with a competitor, Mallin, that Mallin did in fact manufacture and supply plated hinges that met the contract specifications.
Procedural Posture:
- The GSA Contracting Officer (CO) issued a decision to terminate CPI's contract for default.
- The CO subsequently assessed excess reprocurement costs against CPI, which GSA recovered by offsetting payments due to CPI on other contracts.
- CPI appealed both the default termination and the cost assessment to the General Services Administration Board of Contract Appeals (the board).
- The board consolidated the appeals, affirmed the default termination, and awarded the Government $3,611.75 in common law breach of contract damages.
- CPI, as appellant, appealed the board's decision to the U.S. Court of Appeals for the Federal Circuit.
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Issue:
Does a government contractor's statement that it is 'unable to perform' if required to meet a material contract specification constitute an anticipatory repudiation that justifies the government's termination of the contract for default?
Opinions:
Majority - Judge Miller
Yes. A contractor's unequivocal statement of inability to perform a material term of a contract constitutes an anticipatory repudiation, justifying immediate termination for default. The government, like any contracting party, is entitled to strict compliance with contract specifications and has the right to reject non-conforming goods. GSA was not required to accept CPI's proffer of painted hinges, even at a reduced price, as they did not conform to the material requirement of a plated finish. CPI's statement that it would be 'unable to perform' was a 'positive, definite, unconditional, and unequivocal manifestation of intent' not to render the promised performance, which amounted to an anticipatory breach. This breach gave GSA the right to terminate the entire contract immediately, including orders not yet due. Furthermore, awarding common law damages instead of 'excess reprocurement costs' did not violate CPI's due process rights, as CPI had fair notice of the basis for the claim (its breach) and the amount sought.
Analysis:
This case reinforces the government's strong right to demand strict compliance with material terms in its procurement contracts, clarifying that convenience or cost-savings for the contractor does not compel the government to accept non-conforming goods. It solidifies the application of the common law doctrine of anticipatory repudiation in government contracts, establishing that a contractor’s clear statement of inability to perform is grounds for immediate default termination. The decision also signals a focus on substance over procedural formalism in administrative appeals, holding that a claim for damages is valid so long as the breaching party has fair notice, regardless of whether the claim was initially mislabeled as 'excess reprocurement costs.'
