Virginia Law Teaming Agreements
In recent years, virginia`s federal and state courts have slowly scratched the ability of team partners to enforce what they saw as contractual rights against each other; However, these courts have left open the possibility that a party to an association agreement retains certain enforceable rights against its partner. What worries potential subcontractors is that a recent Virginia Supreme Court ruling further weakens the applicability of association agreements. The court`s decision essentially states that such an agreement is unenforceable under Virginia law to the extent that a potential subcontractor requires a breach of contract for failure to subcontract under the partnership agreement. Nor can the prime contractor rely on this agreement under an association agreement to force his teammate to act as a subcontractor. The court`s opinion also appears to preclude recovery of loss of profits in connection with a claim for fraudulent inducement, provided that the claim is based on an unenforceable contract. Finally, the Tribunal upheld the registration of the summary judgment in favour of FCi with respect to CGI`s unjust enrichment, in which CGI sought to recover the costs it had incurred in preparing the offer and the possible profits made by FCi in carrying out the work it had promised CGI, == References == The court dismissed CGI`s action on the ground that the amended association agreement had created an enforceable contract that governed the relationship between the parties when preparing the State Department`s contract proposal. For example, the amended Association Agreement established reciprocal obligations related to the preparation of the offer and the negotiation of a subcontract and contained provisions obliging the parties to bear their own performance costs and preventing them from recovering lost profits due to a breach of the amended Association Agreement. As a result, the court found that as a victim of fraudulent inducement, CGI had the right either to terminate the contract or to confirm the contract and claim damages. In this case, the court held that CGI was not entitled to claim its contractual claim because CGI was suing for contract and tort damages and therefore upheld the amended association agreement and agreed to be bound by its provisions, which expressly excluded the recovery of lost profits or expenses incurred in preparing the proposals.
The oft-heard assertion that “an association agreement is legally unenforceable” is in fact a half-truth; The truth is that only some of the provisions of an association agreement are inapplicable. Because association agreements can play a crucial role in securing a multi-awarded contract for indefinite delivery and an indefinite quantity, government contractors need a realistic understanding of the strengths and weaknesses of an association agreement. A recent decision of the Virginia State Court addresses four of the main provisions of an association agreement and is therefore a decision that state contractors need to be aware of. CGI has included an association agreement that is quite typical for contractors – for example. B, an agreement that did not explicitly provide for the award of a subcontract when awarding a master contract, that made subcontracting conditional on various future events, and that provided for good faith negotiations for a subcontract and the termination of the association agreement if the parties were unable to negotiate a subcontract. While Beacon argues forcefully that the association agreement is clearer than those deemed unenforceable by the courts under Virginia law, “a precedent requires us not to impose a subcontract on the parties to an association agreement if they have expressly agreed to negotiate the essential terms of a subcontract in the future.” The parties have chosen to enforce Virginia law under the terms of the Association Agreement. Under the clear precedent in Virginia, this association agreement is unenforceable. Given that many commentators use the “myth-truth” checkmark, I thought I would try it in terms of the age-old debate on association agreements in public procurement.
Berenzweig Leonard partners with Red Team Consulting for a monthly newsletter that includes reports on current contract decisions, recent contracts, key protest decisions, events and more. This article was published in the October 2020 newsletter. To subscribe to our govcon newsletter, please send an email to [email protected]. Under the team agreement, CGI agreed to: (a) not work with or assist another contractor competing for the visa contract; (b) provide the necessary staff, equipment and information to assist FCi in preparing the proposal; and (c) appropriate cooperation with FCi to ensure the success of the proposal. The association agreement between CGI and FCi also included provisions for a subcontract for CGI if FCi received the master contract. These provisions included: Contractors may explicitly state which law of the State determines the applicability of the Association Agreement without knowing it. In fact, such a designation is often relegated to the “Miscellaneous” section of the agreement and referred to as a provision of “applicable law”. Despite its one-size-fits-all nature, the determination of the applicable law dictates which law of the State governs the interpretation and applicability of the Association Agreement. If there is an explicit provision of the applicable law in a contract, courts will generally apply that choice unless they conclude that it is contrary to public policy, that there is no rational relationship with the chosen State, or that there has been a lack of scruples, fraud or error [4].
The problem, however, is that many entrepreneurs often choose the law of their home state without first checking whether association agreements are enforceable under that law. Although applicability can be determined on a case-by-case basis, the best practice is to avoid states that tend to find these agreements unenforceable, such as Virginia [5]. In fact, entrepreneurs are well advised to choose the law of a state that has found binding association agreements, such as Pennsylvania [6], Massachusetts [7], California [8] and Texas [9], to avoid the hassle of negotiating such an agreement, only to later discover that it is unenforceable. Following a hearing on FCi`s strike motion, the court overturned the jury`s decision on CGI`s infringement lawsuit and CGI`s award of $12 million. With regard to the infringement action, the court concluded that the association agreement was unenforceable because the conditions after the award were “only desirable” since none of the parties had agreed to be bound by the provisions of the association agreement after the award in terms of division of labour and management positions until a formal subcontract was negotiated and executed. The use of association agreements is fairly well established for the submission of federal government proposals or tender contracts for the purchase of supplies, services, construction, research and development, and information technology. In fact, federal procurement regulations encourage the use of team agreements. Association agreements can also provide opportunities for disadvantaged businesses and small businesses to participate in federal works, procurement or other government procurement contracts. In most cases, state law will determine whether an association agreement is an enforceable contract. Therefore, it is important that any contractor or subcontractor who plans to use an association agreement to offer or file a proposed contract with a federal or other public authority in Virginia understand that the state and federal courts in Virginia have refused to enforce what the parties considered to be a binding and enforceable contract. A review of a number of these decisions shows that the terms of the Association Agreement themselves play a crucial role in its enforcement by a Virginia court. As the court decisions discussed in this article show, Virginia law also remains somewhat uncertain, which must be included in an association agreement to make it a binding contract.
Nevertheless, there are ways to make it much more likely that an association agreement will become enforceable by including or excluding certain conditions in a carefully designed association agreement. The court concluded that these attempts to create “certain terms” had failed. For example, with respect to the phrase “approximately 49 per cent”, the Court stated that “the use of the term `approximately` shows a degree of vagueness. There is no way to legally determine whether a proposed number represents “about 49% of the share of work.” It is not a specific term on which the parties have agreed. The Court concluded that there could be no breach of the Association Agreement, since that provision of the Association Agreement was initially inapplicable and therefore could not be infringed. CGI was not well served by the association agreement with FCi: a jury found that CGI had been fraudulently induced to sign the amended association agreement; and while CGI continued to support FCi in the preparation of the bid, it was subsequently “left at the altar” with no subcontract or recourse. However, government contractors will continue to use association agreements because adhering to complementary skills enhances team members` ability to win contracts and because many supplies are now “team-versus-team”. For concise and practical information on association agreements and other important topics related to government contracts, we invite you to listen to our Williams Mullen GovCon Perspectives podcast. You can access all the short episodes, each of which lasts less than 15 minutes, by clicking here.
In short, if an association agreement explicitly states that the parties still have negotiation work to do on the essential terms of a subcontract, it is unlikely that the association agreement will be enforceable on its own terms in the event that the parties do not agree on the terms of a future subcontract. .