Is Your Teaming Agreement Enforceable?

by Smith Anderson
Contact

Teammates who pursue a federal contract[1] should agree up front and in detail regarding their respective obligations if the contract is awarded.  Only agreeing to negotiate specific terms after an agency award is unlikely to create an enforceable contract.  This is the lesson presented by the Cyberlock decision from the Eastern District of Virginia[2] and the Charlotte Motor Speedway decision from the North Carolina Court of Appeals.[3]

Teaming agreements are hybrid creatures under the law.  While the Federal Acquisition Regulations recognize their validity, state law generally determines their enforceability as “contracts”.  Except in very rare circumstances, federal law does not regulate the enforceability of teaming agreements or subcontracts between private parties.[4]

In Cyberlock, the Virginia trial court refused to enforce a teaming agreement where the prime contractor agreed that its teammate would be subcontracted 49% of the work once the agency awarded the contract.  The teaming agreement included a scope of work that the contractor would perform, but the agreement “did not set out any further details about the work anticipated to be performed” by the subcontractor/teammate.  The teaming agreement also said it was subject to approval by the awarding agency and would terminate should the parties fail “to reach agreement on a subcontract after a reasonable period of good faith negotiations.” 

The Virginia federal court concluded that the teaming agreement was an unenforceable “agreement to agree” under Virginia law and refused to provide the subcontractor/ teammate with any relief against the prime contractor.  “Mere ‘agreements to agree in the future’ are ‘too vague and to indefinite to be enforced,’” according to the Virginia court.

North Carolina courts also refuse to enforce “agreements to agree.”  The North Carolina Court of Appeals affirmed this principle in the October 2013 Charlotte Motor Speedway decision.  In the case, Cabarrus County and the City of Concord promised in writing to commit $80,000,000 in infrastructure improvements and transportation investments to encourage the plaintiffs to construct a motor sports dragway in Cabarrus County.  The letter was not specific regarding how the improvements would be financed, but the letter expressed the Government’s “commit[ment] to partnering with you” and stated that “the $80,000,000 will be formalized in an agreement that will also provide an outline of a schedule to prioritize projects and identify the investment that [plaintiffs] plans to make through the construction of the drag strip . . .” 

The plaintiffs built the drag strip but did not enter into a signed agreement with the County and City, and the City and County did not provide the promised improvements.  The plaintiffs sued for fraud, specific performance and breach of contract, but the Court of Appeals found the trial court properly dismissed these claims because the letter was silent on several key terms, rendering it “void for indefiniteness.” 

In particular, the Government's letter was “silent as to any specific obligation on the part of Plaintiffs and unclear as to precisely when Defendant would be required to expend the $80 million.”  The Court of Appeals also noted the preliminary nature of the letter, which said that a “formalized . . . agreement” would be negotiated at a later time.  “It is wholly unclear what Plaintiffs were bound to do, or not do, by virtue of this document.”  The contract claims therefore were dismissed.  The non-contract claims were dismissed because there was no definite promise in the letter regarding when money would be paid by the city and county and how the money would be spent.

Contractors who team to pursue the award of a federal contract should clearly define each party’s obligations.  An ideal teaming agreement might attach all the terms of the parties’ negotiated subcontract, specifying the responsibilities, payments and remedies of each party in case of a breach, and with the subcontract going into effect upon contract award.  Alternatively, parties can team through a joint venture, a separate legal entity that requires the participation of both teammates.  In either case, the teaming agreement should not be subject to further negotiations.

Negotiating a detailed teaming agreement takes more time, but a detailed agreement is more likely to be enforced.  A detailed agreement also provides both parties with greater clarity in their respective obligations.  This result is preferred to the outcome in Cyberlock, where a subcontractor who expected to team with a prime contractor was “frozen out” of the procurement because of the lack of an enforceable contract with the prime. 

If a contractor has questions whether or not its teaming agreement is sufficiently specific to be enforceable, the contractor should engage a government contracting attorney to review the teaming agreement before the contractor agrees to participate in the team.

[1] FAR 9.602(a).

[2] Cyberlock Consulting, Inc. v. Info. Experts, Inc., 2013 U.S. Dist. LEXIS 49092 (E.D. Va. Apr. 3, 2013.

[3] Charlotte Motor Speedway LLC v. County of Cabarrus, No. COA12-1361, (N.C. Ct. App. Oct. 1, 2013).

[4] See, e.g., Boyle v. United Technologies Corp., 487 U.S. 500, 507, 108 S. Ct. 2510, 2515, 101 L. Ed. 2d 442 (1988); Woodward Governor Co. v. Curtiss Wright Flight Sys., Inc., 164 F.3d 123, 127 (2d Cir. 1999). 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Smith Anderson | Attorney Advertising

Written by:

Smith Anderson
Contact
more
less

Smith Anderson on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.