Government’s Default Termination Threat Was Improper Coercion, Says ASBCA

The Government improperly threatened to terminate a contractor for default, because there was no good reason to believe the contractor had actually defaulted.

In a fascinating new decision by the Armed Services Board of Contract Appeals, the Government’s threat–made to a contractor with cash-flow issues–amounted to coercion, and invalidated a settlement agreement that awarded the contractor much less than it probably should have received.

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Release of Claims Can’t Be Undone by Refusing Government Payment

I recall sitting in a mediation one day when the mediator, a judge, told me and my client that we all have lightning in our fingers. He went on to explain that this means, once you sign a contract, it’s like magic in the sense that you can’t get out of the contract and are bound by it, absent certain exceptional circumstances.

I was reminded of this concept while reading a recent opinion from the Armed Services Board of Contract Appeals that dealt with the effect of a contractor signing a release with the government and then trying to back out of that release by refusing payment from the government.

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