Tuesday, May 15, 2018

Contractors Can File Claims Pertaining to Novated Contracts

The Government filed a motion to dismiss a claim filed by Cooper/Ports America (CPA) with the ASBCA (Armed Services Board of Contract Appeals) because the company was not the contractor within the meaning of the Contract Disputes Act at the time the claim accrued.

In 2015, the Government awarded a contract to Shippers Stevedoring Company (Shippers) for stevedoring and related terminal services. IN 2016, CPA acquired Shippers and entered into a novation agreement with the Government.

CPA opposed the Government's motion arguing that under the novation agreement executed by the Government, it has the legal right to assert claims that pre-date the novation agreement, i.e. as the successor in interest under the contract, has the right to assert a claim accruing prior to the novation agreement.

The Board did not sustain the Government's motion. The Board ruled that the Government expressly recognized CPA as the contractor in the novation agreement and recognized CPA as "entitled to all rights, titles and interest of the Transferor in and to the contracts as if the Transferee were the original party to the contracts.
To read this broad recognition as excluding the right to pursue a claim accruing to the original contractor, as the government urges us to do in this case, would do violence to the clear intent of the agreement.
If the tables were turned, and CPA had urged us to limit its assumption of "all obligations and liabilities of, and all claims against, the Transferor under the contracts as if the Transferee were the original party to the contracts" to those liabilities or claims expressly spelled out in the agreement by the Government, we doubt the Government would acquiesce.
The Government cannot have it both ways.

You can read the full decision by clicking here.

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