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Oral Contract Did Not Contain Termination Right

The termination of an emergency mail transportation contract constituted a breach, according to the Postal Services Board of Contract Appeals, because the oral contract did not provide the government with a termination right. The parties did not dispute they entered into an enforceable oral contract, which the government terminated one week after award when the prior contractor returned. The contractor argued the oral contract was for a six-month term that could not be terminated earlier, while the government contended it had the right to terminate on 24-hours notice without liability. According to the government, the contractor corroborated the parties' agreement on the termination right when she subsequently signed PS Form 7405A, Transportation Services Proposal and Contract for Emergency Services, which included a no-cost termination on notice provision.

Credible Testimony

According to the board, the contractor's testimony and that of a government official presented a "stark contrast" regarding the discussions resulting in the oral contract. However, a contemporaneously prepared pre-award questionnaire did not refer to a termination right and indicated the contractor was expected to perform for the full term. The questionnaire was persuasive evidence the official's recollection was faulty. The contractor, on the other hand, testified credibly that she resigned her job of ten years in reliance on the six-month term. The contractor also established the official coerced her to sign PS Form 7405A by threatening nonpayment for the work she had performed. Because it resulted from economic duress, the contractor's signature was not binding and did not corroborate the government's version of events. The board, therefore, found the totality of the factual circumstances indicated the parties orally agreed to the material terms of the contract without a 24-hour no-cost termination on notice right. ( Sharon Roedel, PSBCA, 93,452)




(The news featured above is a selection from the news covered in the Government Contracts Report Letter, which is published weekly and distributed to subscribers of the Government Contracts Reporter. )


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