Thursday, July 10, 2008

Leaders and followers

An interesting discussion came up on the AALS Contracts List Serve today. Professor Chaim Saiman, University of Villanova, posted the following:

I have this general impression the contract law applicable to government contracts is somewhat hived off from what we call “general contract law” into a smaller category of “government contract law.” More specifically, I think that citations from the Ct. of Fed claims are not often cited by courts of general jurisdiction as “contract law”, and that contracts treatises casebooks., hornbooks etc. tend not to do rely on this body of case law in the formation of general principles (disclaimer: I’ve never actually paid attention to this, so I may be way off). So far as I can tell from some quick research into the Tucker Act, other than the fact that jurisdiction is conferred to the Ct. of Fed. Claims / Fed. Cir., there is nothing special about the substantive law principles of these contracts.

So my questions are:

Are my general impression/assumptions about the distinctness of gov contract law correct?
If so, why is this the case?

My position is that government contracts are just a subset of contracts, subject to the same general rules of contract (including UCC Article 2) unless specific federal law applies. In the case of wartime contracts, the Federal Acquisition Regulations and the Defense FARS are examples of these. The Armed Services Board of Contract Appeals tends to apply general contract principles, in addition to specific federal rules. I would argue that the federal courts handling contract disputes are “followers” of contract doctrine, rather than designers and developers in many cases. In the case of wartime contracts, I find that the lack of more substantive federal regulation has led to some special questions that require a close look at the operation of traditional contract doctrine. For instance, UCC Article 2-615’s provisions on impracticability don’t operate as neatly as I might like when it comes to delay or excuse claimed during wartime due to extreme risk of personal hazard to contractor personnel (for more on this see, Impracticability Under the U.C.C. for Wartime Contracts).

If we accept that the federal government is more of a “follower” when it comes to the default contract rules behind regulations, the really interesting part of Chaim’s question is the “why”. Sure, the contract formation aspect of government contracting is highly regulated by the bidding processes (even if not always followed by the government itself). This would certainly distinguish the “relational” aspect in some areas of government contracting where there is only one buyer. Yet, many of us have ample complaints about Article 2, so this would seem to be the perfect opportunity for the federal government to work an “end run” around it when it comes to performance of sale of goods contracts . Then, once the federal courts apply Article 2 in a different way at least as a leader, the opportunity for others in non-government contracts would be ripe for the same. Article 2 and the common law of contracts have been with us for some time and the mass privatization (particularly defense oriented) came later.

There does not seem to be enough incentive to rewrite the law of contracts, but there are so many specific privatization "patches" that need regulating as issues come up. So, the opportunity to be a leader would seem to arise primarily in the court setting, either between the government and a contractor or a contractor and a sub. There certainly are some cases that are "leaders" (ie. Transatlantic Financing on impracticability). Why there are not more case leaders, I am not sure that I can say, but I will give it some thought. There may be opportunity for leading in the wartime contracts area as we see these cases hit the courts.

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