595 F.2d 595 | Ct. Cl. | 1979
delivered the opinion of the court:
This case comes before the court on the parties’ cross-motions for summary judgment. The petition alleges the breach of an oral contract entered into between plaintiff and the Department of the Army in settlement of a claim for equitable adjustment under a contract. Defendant’s answer asserts a counterclaim in the nature of a setoff for amounts allegedly due on another contract between the parties. We conclude that plaintiffs claim is without merit, as is the counterclaim. Therefore they must be dismissed.
Plaintiff, Kleinschmidt Division of SCM Corporation, entered into a negotiated fixed-price contract, No. DAAB05-71-C-3415 (contract No. 3415), with the Department of the Army on June 30,1971, for the manufacture of teletypewriter sets and related software. Approximately 1 year later, a disagreement arose over the extent to which the plaintiff was required to incorporate certain lubrication data into contract drawings without charge to the defendant. Plaintiff appealed the final decision of the contracting officer to the Armed Services Board of Contract Appeals (ASBCA) on November 14, 1972, which docketed the case as No. 17936. It was dismissed without prejudice on April 3, 1975.
On March 26, 1973, plaintiff sought an equitable adjustment under the contract in the amount of $122,301.76 for the alleged late and unreasonable review
2. Final settlement was reached at $55,000.00 including settlement on the small claim presently before the board and waiver of any other claims the contractor may have against this contract aside from those which are directly associated with the Government initiated defective pricing action.
3. Mr. Gaples asked how soon could he expect execution of the Supplemental Agreement and when he could expect payment. I advised him that I would try to get the modification for his signature to him as soon as possible,
The settlement was confirmed by Major Mulholland by letter dated February 12, 1976.
The parties hotly dispute the nature and scope of the settlement. Plaintiff contends that this dispute involves only the proper interpretation of an agreement as depicted by Major Mulholland’s memorandum, that its interpretation is fully supported, and that the agreement was a fully enforceable oral contract which defendant breached. Defendant responds that the controversy as to the terms of the contract demonstrates that there was no "meeting of the minds,” that the telephone negotiations did not constitute an enforceable legal contract, and that, in any event, the controversy constitutes a dispute as to fact under the contract which requires primary resolution by the administrative agency. Without deciding the other issues, we conclude that the purported settlement reached January 6, 1976, was not a contract.
The purported agreement proposed to settle a dispute arising under a negotiated fixed-price supply contract which was subject to the Armed Services Procurement Regulations (ASPRs). Settlements are fully covered in the ASPRs. Thus, a settlement agreement changing the price the Government pays for goods is a contract modification under 32 C.F.R. § 1-201.2 (1975), as follows:
Contract Modification means any written alteration in the * * * price * * * or other contract provisions of an existing contract, whether accomplished by unilateral action in accordance with a contract provision, or by mutual action of the parties to the contract. It includes (i) bilateral actions such as supplemental agreements,
A settlement of the contract dispute negotiated by the parties is a supplemental agreement as defined in 32 C.F.R. § 1-201.18 (1975), as follows:
Supplemental Agreement means any contract modification which is accomplished by the mutual action of the parties. (See 16-103.)
Negotiated settlements are contracts under 32 C.F.R. § 1-201.4 (1975), as follows:
Contracts means all types of agreements and orders for the procurement of supplies or services. * * * It also*463 includes supplemental agreements with respect to any of the foregoing.
Thus, the regulations view a settlement as a separate written contract altering the rights and liabilities of the parties.
Section 1-201.18 refers to 32 C.F.R. § 16-103 (1975) which prescribes the proper form to be used for supplemental agreements. Section 16-103 provides as follows:
16-103 Amendment of Solicitation/ Modification of Contract (Standard Form 30).
(a) General. This paragraph prescribes a single form for * * * (ii) modification of contracts * * *.
(b) Conditions for Use. This form shall be used for:
* * * * *
(v) supplemental agreements as defined in 1-201.18; and
* * * * *
The regulations provided that "[.sjhall is imperative.” 32 C.F.R. § 1-201.16 (1975). There can be no doubt that the regulations require that settlements are written contracts to be executed on standard form 30.
Parties are presumed to know and required to be cognizant of the governing regulations. Nonetheless, plaintiff was well aware of the fact that the oral agreement contemplated the bilateral execution of a written document. In Major Mulholland’s memorandum, which plaintiff relies on as accurately setting out the substance of the negotiation and settlement, it was reported that "Mr. Gaples asked how soon could he expect execution of the Supplemental Agreement and when he could expect payment.” In Major Mulholland’s letter to plaintiff of February 12, 1976, it was stated, "[a]s soon as funds are approved, I will forward a Supplemental Agreement to obligate them.” See note 1 supra. It cannot be contested that the telephone conversation contemplated the finalization of the settlement by the execution of a written contract on standard form 30 which was the condition precedent for the payment of Government funds. It was standard form 30, containing the Government’s view of the terms of the contract, that was delivered to plaintiff and which plaintiff refused to execute.
We note that this case does not squarely present the question of the enforceability of oral contracts with the Government. Instead, the case deals with the problem of what effect the parties’ clear understanding of the procedures and regulations governing settlements had on their intent to consummate a binding contract. It should be kept in mind that oral understandings must first be contracts before they are enforceable. In this case, we simply hold that the understanding between the parties was not a contract and cannot sustain a breach of contract action in this court.
Defendant’s counterclaim, as set out in its brief, is restricted to a claim for a setoff against any proceeds recovered by plaintiff in this suit. Since plaintiff receives nothing, there is nothing to which a setoff can apply. Defendant also seeks summary judgment on the question of whether plaintiff is entitled to interest on the settlement amount and to attorney’s fees and costs incurred in defending a defective pricing action on contract No. 3415
For these reasons, we deny plaintiffs motion for summary judgment and grant defendant’s cross-motion for summary judgment insofar as it pertains to the enforceability of the alleged contract of settlement. The other issues raised by defendant are, as indicated, moot or denied. Defendant’s counterclaim is dismissed. The petition is dismissed.
"Reference is made to Contract No. DAAB05-71-C-3415, our telephone conversation of 6 January 1976 and your letter of 7 January 1976.
"This letter confirms our settlement for your request for Equitable Adjustment on the referenced contract for the sum of $55,000.00. Funds have been requested for the settlement but they have not been approved because of potentially deficit appropriation accounts involved. As soon as funds are approved, I will forward a Supplemental Agreement to obligate them.”