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early days of World War II (if not earlier), the concept of "termination-
for-convenience" has been well understood as a termination authorized by
the contract which would not be a breach. See, e.g., United States v.
Penn Foundry & Mfg. Co., Inc., 337 U.S. 198, 214-216 (1949) (opinion of
Mr. Justice Douglas). That term is not normally used, if it is ever used,
in Government contractual documents to refer to a cancellation by the
United States which violates the agreement. If such a breach-cancellation
were meant, the parties would have used other words such as "cancellation",
"breach", "stoppage", "default", or perhaps "termination" unqualified by
any reference to the convenience of the Department or the Government.
They did not do so and we are justified in reading the precise words they
employed as referring to a termination authorized by the housing contract,
not in breach of it. When the Government terminated the contract, it acted
as if it had that right; it informed the contractor that the agreement "i
hereby terminated for the convenience of the Government."

(d) In sum, we hold that plaintiff has failed to show that the mandatory requirement of Section 8.703 was deliberately waived by a military official empowered to do so. The plaintiff and other Capehart Act contractors may have thought that there could be no termination of these housing contracts for the Government's convenience, and some Government personnel may have had the same view - although the specific contractual references should have been warning to both groups. But that misunderstanding cannot substitute for a valid, deliberate, authorization to bypass the regulation. As suggested in our original opinion, the general policy against subjecting the Government to liability for unearned profits on military contracts is strong and important. For military construction contracts, that policy was embodied in Section 8.703. If we were to find that the competent administrators dispensed with that significant requirement for this particular group of construction contracts, we would need to have a far more definitive showing than has been made here( or in J.W. Bateson Company, Inc. v. United States, No. 365-60).

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The Government has moved that so much of the Complaint herein as requests relief pursuant to the Government Property clause (ASPR 7104.24(a)) be dismissed from this appeal from a partial termination for default.

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It is undisputed that the clause was not expressly incorporated into the contract, inasmuch as it was not one of the clauses designated by an "X" in the space provided in the Invitation for Bids and thus was not incorporated by reference. It is equally clear that the contract authorized use of Government-owned property by the contractor in the performance of the contract and that Government-owned property was, in fact, used therein.

In opposition to the Government's motion to dismiss, appellant contends that the Government Property clause must be read into the contract inasmuch as ASPR requires that the clause be inserted in contracts "when a Department is to furnish to the contractor, or the contractor is to acquire Government property. (ASPR 7-104.24(a)).

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Appellant cites G. L. Christian Associates v. United States, 160 Ct. 2. 1; rehearing denied 160 Ct. ci. 48, as authority for its contention. That case held that it was "both fitting and legally sound to read the termination (for convenience of the Government] article required by the Procurement Regulations as necessarily applicable to the present contract and therefore as incorporated into it by operation of law."

It is clear that the Court's decision in Christian was grounded largely upon the public procurement policy which undergirds the Termination for Convenience clause; to wit, the prohibition against recovery of anticipated but unearned profits. Thus, at page 15, the Court stated:

"We are not, and should not be, slow to find the
standard Termination article incorporated, as a matter
of law, into plaintiff's contract if the Regulations
can fairly be read as permitting that interpretation.
The Termination clause limits profit to work actually
done, and prohibits the recovery of anticipated but
unearned profits. That limitation is a deeply in-
grained strand of public procurement policy. Regu-
larly since World War I, it has been a major government
principle, in times of stress or increased military
procurement, to provide for the cancellation of defense
contracts when they are no longer needed, as well as
for the reimbursement of costs actually incurred before
cancellation, plus a reasonable profit on that work--
but not to allow anticipated profits."

The importance of the Termination for Convenience clause as an expression of public policy was emphasized in the court's denial of a rehearing in Christian. The court equated that policy with the Government's policies regarding contingent fees, anti-discrimination

and cost-plus-a-percentage-of-cost contracting in stressing that "procurement policies set by higher authority (should] not be avoided or evaded (deliberately or negligently) by lesser officials or by a concert of contractor and contracting officer." (at page 66).

The Government Property Clause (see Appendix) bespeaks no procurement policy comparable to the policy against allowance of anticipated profits which the court in Christian determined to be of such paramount importance that incorporation of the Termination for Convenience clause into the contract by operation of law was mandated. Basically, the clause sets forth requirements for the management of the property, many of which would otherwise be reasonably inferred under the law of Bailment, and provides for administrative resolution of problems which would otherwise be the bases for breach of contract actions. While certainly not unimportant, nothing contained in the clause approaches the stature of a public procurement policy so as to require its incorporation into the contract by operation of law.

Incorporation of a clause into a contract by operation of law is an extraordinary action and should be undertaken only under extraordinary circumstances. We fail to perceive such circumstances here. If incorporation of the provisions of the clause is essential to obtaining reimbursement for damages incurred by appellant as a result of the Government's alleged derelictions in providing the Government-owned property, reformation of the contract can be sought in court. Or a suit for breach of contract can be instituted. Moreover, the absence of the clause from the contract does not impair appellant's right to prove before this Board that Government caused delays in connection with furnishing the proper Government property constituted excusable cause for its default.

Also, although the Government has not questioned that the clause was mandated by ASPR 7–104.24(a), such applicability is not free from doubt since the property in question was being held by the appellant under the facilities contract and was merely "authorized" for use on an "as is" basis. We note further that the record, as now constituted, does not reveal that appellant's claim for equitable adjustment was ever presented to the contracting officer or decided by him. Therefore, unless documentation of that claim and decision can be entered into the record, appellant's request to this Board for such relief is premature.

Accordingly, the Government's motion is granted and so much of the Complaint as requests relief pursuant to the Government Property clause is hereby stricken. Appellant may amend its Complaint in light of this decision within thirty days of the date hereof.

Section 4. Implied Contracts


127 F. Supp. 617 (Ct. ci. 1955),

cert. denied, 349 U.S. 938 (1955)

JONES, Chief Judge.


This case involves a contract between the plaintiffs and the defendant for the construction of a paved road at Fairbanks, Alaska. The facts have been set out in detail in our findings and will be referred to only to the extent necessary for an understanding of the issues which gave rise to the suit.


The other issue in the case involves questions of law and arises out of an entirely different set of facts from those just discussed. One of the items involved in the contract was the paving of the road with asphalt. In order to do this work, the plaintiffs had considered renting or buying an asphalt plant in the State of Washington. The rental cost of such a

, plant would have been approximately $10,700. After the job got under way,

. the plaintiffs learned that there was a plant located at Ladd Air Force Base which was under the jurisdiction of one Major Russell who was responsible for the maintenance of the roads at the Air Force Base. One of the plaintiffs made inquiry of Major Russell as to whether arrangements could be made for the plaintiffs to use the plant. Major Russell suggested that certain roads on the Base needed seal coating and if plaintiffs would do this work they could use the plant on the road job. After certain negotiations during which Major Russell represented that he had been given authority to enter into the agreement, the plaintiffs submitted a written proposal which was accepted by Major Russell as Air Installation Officer, whereby the plaintiffs agreed to seal coat the main paved roads on the Base in return for use of the asphalt plant to produce asphalt for the road job.

Upon the approval of that agreement by Major Russell, the plaintiffs proceeded to carry out their part of the agreement which they did by seal coating some nine or ten miles of roads in a manner satisfactory to the Air Force Base authorities. The value of such work was in excess of $10,000.

In the meantime, Major Russell had forwarded to his superior officer copies of the agreement which he had approved for seal coating of the roads in return for the use of the asphalt plant by the plaintiffs. Shortly after the seal-coating job had been completed but prior to the time when the asphalt plant had been delivered to the plaintiffs, Major Russell's superior officer advised him that there was no authority for such an agreement and that work thereunder should be stopped immediately. Major Russell repled that the work had already been completed and urged that since the plaintiffs had carried out their part of the agreement and since the agreement was in the best interests of the Government, the plaintiffs should be permitted to use the asphalt plant. However, Major Russell's superior officer refused to change his position. Major Russell advised the plaintiffs of his inability to carry out the agreement but suggested that arrangements be made to have the plant borrowed by the Alaska Road Commission and then rented by the Commission to the plaintiffs. Major Russell stated that if this could be arranged he would arrange for payment for the work which had already been done by the plaintiffs at Ladd Field. As a result the asphalt plant was turned over by Major Russell to the Alaska Road Cammission which in turn made it available to the plaintiffs at a rental figure of $1.30 per ton. In agreeing orally to that rental figure, the plaintiffs relied upon the assurance previously given by Major Russell that they would be paid for the work which they had already performed at Ladd Field,

The plaintiffs used the asphalt plant in paving the roads under their contract. At or about the time the paving was completed, Major Russell advised the plaintiffs that payment could not be made by the defendant for the seal-coating work which had been performed by them at Ladd Field. Thereupon the plaintiffs refused to sign a change order prepared by the Alaska Road Commission reducing the unit price of asphalt by $1.30 per ton. However, the contracting officer, in the final settlement under the plaintiffs' contract, directed that the change order be considered a written order changing the specifications and that the rental stipulated therein be deemed to be an equitable adjustment of the contract price. Upon completion of the contract, it was determined that 7,820.3 tons of asphalt had been actually used and accordingly $10,166.39 was deducted from payments to the plaintiffs. On appeal to the head of the department, the decision of of the contracting officer was affirmed. No amount has been paid to the plaintiffs on account of the work which they did at Ladd Field.

[2] What the plaintiffs are suing for is the amount just referred to which was deducted from amounts otherwise due them under the contract involved in this proceeding. No question is raised by the defendant as to the fact that the plaintiffs performed the services or that the services were worth at least the amount now sued for. The sole defense of the defendant is that since Major Russell was not a contracting officer with full authority to bind the Government in the fullest contractual sense, the plaintiffs cannot recover on this item. Surely, compelling reasons would be required to have any court sanction any such inequitable result and we do not think such reasons exist. Whatever might be said with respect to the lack of authority on the part of Major Russell to enter into a binding contract, it is certainly true that the plaintiffs proceeded in an entirely appropriate and proper manner in entering into the agreement and did so only after they were assured by Major Russell that he had authority to do so. Likewise, Major Russell had also proceeded in good faith in the entire matter and had been assured by Washington that such an arrangement would be satisfactory. The roads that were seal coated were wholly within the base where the contracting officer was located. It seems incredible that he did not know all about the agreement and by his inaction ratify it. Certainly he did not repudiate the agreement, and he did not appear as a witness. The plaintiffs carried out their part of the agreement for which the Government received the benefit. We feel that there then arose an implied contract under which the defendant was obligated to pay the value of the services rendered by the plaintiffs. Recovery is accordingly allowable for this item in the amount deducted under the contract, $10,166.39. * * *


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