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Contractor Bore Risk of Loss for Abandoned Vehicles, Fuel

Claims seeking compensation for lost vehicles and fuel under a jet fuel contract calling for delivery to a military combat zone were summarily denied by the Armed Services Board of Contract Appeals because the contract terms put the risk of loss on the contractor. Due to an unforeseen deterioration of security conditions, the government directed the contractor to abandon or destroy disabled, repairable vehicles, and to spill fuel to prevent its acquisition by enemy combatants. The contractor sought compensation for the lost vehicles and fuel, arguing the government breached the contract by denying the contractor a reasonable opportunity to repair, tow, or recover the disabled vehicles. The contractor also claimed recovery based on an alleged oral settlement agreement and mutual mistakes of fact regarding the parties' expectations of the risk of loss, insurance costs, and military directives that would materialize during performance. Finally, the contractor claimed the government improperly failed to disclose superior knowledge of the likelihood of the need to abandon the disabled vehicles and did not give the contractor time to make repairs.
Risk of Loss
The contractor's claims were denied based on the plain language of the contract. The Risk of Loss clause provided the contractor would bear all risk and responsibility for any damage to, or loss of, equipment during performance, and there were no express or implied terms granting the contractor the right to interrupt performance to repair disabled vehicles. Moreover, any oral discussions regarding the alleged settlement agreement lacked the legal consideration, actual authority, and signed writing necessary to modify the contract. There was neither evidence of a mutual mistake of fact concerning the extent of hostilities to be encountered during performance, nor of any government superior knowledge of the hostilities or the resulting orders to abandon the vehicles. A related claim seeking compensation for vehicles stolen from a United States military base could not be summarily determined due to jurisdictional concerns, because it was unclear whether the claim sounded in tort or whether it was a new claim requiring independent certification to the contracting officer. (International Oil Trade Center, ASBCA, ¶92,350)

(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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