{"id":898410,"date":"2021-01-19T13:52:29","date_gmt":"2021-01-19T20:52:29","guid":{"rendered":"https:\/\/www.myconstructionexpert.com\/blog\/?p=898410"},"modified":"2021-01-19T13:52:32","modified_gmt":"2021-01-19T20:52:32","slug":"termination-for-default","status":"publish","type":"post","link":"https:\/\/www.myconstructionexpert.com\/blog\/termination-for-default\/","title":{"rendered":"Burden Supporting Termination for Default"},"content":{"rendered":"\n<p><strong><a href=\"https:\/\/www.myconstructionexpert.com\/blog\/when-is-a-contractors-termination-for-default-proper\/\" target=\"_blank\" rel=\"noreferrer noopener\">Terminating a contractor for default<\/a> is a \u201c\u2018drastic sanction\u2019 and \u2018should be imposed (or sustained) only for\u00a0<u>good grounds and on solid evidence<\/u>.\u2019\u201d<\/strong>\u00a0<em>Cherokee General Corp. v. U.S<\/em>., 150 Fed.Cl. 270, 278 (Fed.Cl. 2020) (citation omitted).\u00a0\u00a0\u00a0 This is true with any termination for default because terminating a contract for default is the harshest recourse that can be taken under a contract.\u00a0 It is a caused-based termination.\u00a0 For this reason, the party terminating a contract for default needs to be in a position to carry its burden supporting the evidentiary basis in exercising the default-based (or caused-based) termination. \u00a0Stated differently, the party terminating a contract for default needs to justify the reasonableness in terminating the contract for default.<\/p>\n\n\n\n<p>A party looking to terminate a contract for default should smartly work with counsel to best position its justification in exercising the termination for default.&nbsp; Likewise, a contractor terminated for default should immediately work with counsel to best position the unreasonableness or the lack of justification for the default-based termination.<\/p>\n\n\n\n<p>The recent Court of Federal Claims opinion in&nbsp;<em>Cherokee General Corp.<\/em>&nbsp;contains a worthwhile discussion on termination of contracts for default in the&nbsp;federal government contracting arena&nbsp;(including the contractor\u2019s argument that the termination for default should be converted into a termination for convenience).&nbsp; As explained by the&nbsp;<em>Cherokee General Corp<\/em>. Court, a contracting officer is given broad discretion to terminate a contract for default.&nbsp;<em>Cherokee General Corp<\/em>., 150 Fed. Cl. at 277 (citation omitted).&nbsp; This discretion may be overturned if the contracting officer\u2019s decision to terminate the contract for default is \u201carbitrary, capricious, or an abuse of discretion.&nbsp;&nbsp;<em>Id<\/em>. (citation omitted).&nbsp; In support of this broad discretion, however, a court can \u201csustain a [contracting officer\u2019s] default termination \u2018for all of the reasons noted by the contracting officer at the time [of his\/her default termination letter],\u2019&nbsp;or&nbsp;\u2018for any additional valid reason [justifiable by the circumstances].\u2019\u201d&nbsp;<em>Cherokee General Corp<\/em>. at 280 (citation omitted).<\/p>\n\n\n\n<p><strong>A termination based on the&nbsp;contractor\u2019s&nbsp;refusal or inability to perform the work with the necessary diligence is appropriate where the contracting officer reasonably believed that \u201cthere was \u2018no reasonable likelihood that the [contractor] could perform the entire contract effort within the time remaining for contract performance.\u2019&nbsp;If, however, \u201c[t]he&nbsp;delay&nbsp;in completing the work arises from unforeseeable causes beyond the control and without the fault or negligence of the&nbsp;Contractor,\u201d then \u201c[t]he&nbsp;Contractor\u2019s&nbsp;right to proceed shall not be terminated nor the&nbsp;Contractor&nbsp;charged with damages.\u201d&nbsp; \u201cExamples of such causes include (i) acts of God or of the public enemy, (ii) acts of the Government in either its sovereign or contractual capacity, (iii) acts of another&nbsp;Contractor&nbsp;in the performance of a contract with the Government, (iv) fires, (v) floods, (vi) epidemics, (vii) quarantine restrictions, (viii) strikes, (ix) freight embargoes, (x) unusually severe weather, or (xi)&nbsp;delays&nbsp;of subcontractors or suppliers at any tier arising from unforeseeable causes beyond the control and without the fault or negligence of both the&nbsp;Contractor&nbsp;and the subcontractors or suppliers.\u201d&nbsp;<\/strong><\/p>\n\n\n\n<p><strong><u>The government bears the initial burden of proving a&nbsp;<\/u><u>contractor\u2019s<\/u><u>\u201cdemonstrated lack of diligence\u201d which \u201cindicat[ed] that [the government] could not be assured of timely completion<\/u>. The \u201cfactors usually relied upon by courts and contract boards\u201d to determine whether the government has met its burden include \u201ca comparison of the percentage of work completed and the amount of time remaining under the contract; the&nbsp;contractor\u2019s&nbsp;failure to meet progress milestones; problems with subcontractors and suppliers; the&nbsp;contractor\u2019s&nbsp;financial situation; as well as a&nbsp;contractor\u2019s&nbsp;performance history; and other pertinent circumstances.\u201d&nbsp;&nbsp;<u>If the government meets its burden of proof, then the burden shifts to the&nbsp;<\/u><u>contractor<\/u><u>to show that its default was excusable<\/u>.&nbsp;<\/strong><\/p>\n\n\n\n<p><em>Cherokee General Corp<\/em>., 150 Fed.Cl. at 278.<\/p>\n\n\n\n<p>Mentioned above, but worthy of repeating, a party terminating another based on a contractual default needs to appreciate that it maintains a&nbsp;<strong>burden<\/strong>&nbsp;supporting the basis of the termination. &nbsp; Ignoring this burden, or not appreciating the significance of this burden, can result in a party not being able to substantiate the reasonableness and justification for the termination for default. &nbsp;Noteworthy, the discretion afforded a contracting officer under a federal government contract is not the same discretion afforded to every party under every contract. &nbsp;Knowing this makes the appreciation of the burden supporting the basis of the termination for default a very important consideration.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Terminating a contractor for default is a \u201c\u2018drastic sanction\u2019 and \u2018should be imposed (or sustained) only for\u00a0good grounds and on solid evidence.\u2019\u201d\u00a0Cherokee General Corp. v. U.S., 150 Fed.Cl. 270, 278 (Fed.Cl. 2020) (citation omitted).\u00a0\u00a0\u00a0 This is true with any termination for default because terminating a contract for default is the harshest recourse that can be&hellip; <a class=\"more-link\" href=\"https:\/\/www.myconstructionexpert.com\/blog\/termination-for-default\/\">Continue reading <span class=\"screen-reader-text\">Burden Supporting Termination for Default<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","enabled":false},"version":2}},"categories":[9],"tags":[9895,224,11400],"class_list":["post-898410","post","type-post","status-publish","format-standard","hentry","category-construction-contracts","tag-advise-consult","tag-construction-contract","tag-terminating-for-default","entry"],"jetpack_publicize_connections":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v25.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Burden Supporting Termination for Default - Advise &amp; 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