As evidence in litigation, email is often useful and sometimes dispositive. Because it is less formal than correspondence and more permanent than the telephone, it can be an important piece of the puzzle in complex cases. But what happens when the use of email conflicts with a requirement in the contract? Even then, it should not be taken lightly. In Mabus v. General Dynamics C4 Systems, Inc., 633 F.3d 1356 (Fed. Cir. 2011), the Federal Circuit affirmed the government’s use of email to issue delivery orders even when it was prohibited by the contract.
The case involved the validity of a delivery order issued by email under an indefinite delivery/indefinite quantity (ID/IQ) contract for computerized radio communications equipment. Although email delivery orders were formally prohibited by the contract, the contractor accepted 16 of them over a period of several years.
In 2003, the government exercised a contract option and issued a series of delivery orders by email. The contractor rejected the new delivery orders, citing the contract language prohibiting their issuance by email. The contractor claimed that it was “a little shocked” by the government’s new orders. The contractor believed that the items ordered by the government had been deleted from the contract during negotiations preceding the email orders. The government argued that its email orders were valid. As to the effect of the negotiations, the government pointed out that there had been no signed contract modification—”the contract, as written, remains in full force and effect.”
The contractor filled the government’s orders in accordance with its duty to proceed. (See FAR 52.233-1(i).) In a 2009 opinion by Administrative Judge Cheryl Scott, the Armed Services Board of Contract Appeals sided with the contractor. The Board found that the Navy’s unilateral delivery orders were invalid because they were not issued in strict compliance with the contract.
The Federal Circuit reversed the Board decision, holding that the contractor was bound by the doctrine of equitable estoppel to accept the government’s email delivery orders. As stated in the court’s opinion, equitable estoppel requires three elements: (1) “misleading” conduct; (2) “reliance” on the misleading conduct; and (3) “prejudice” to the party that relies.
The court found that the contractor’s acceptance of email delivery orders was misleading in light of its “later change in course.” Reliance was evident from the fact that the government could have chosen to issue delivery orders in strict compliance with the contract if it had known that the contractor would reject orders sent by email. The prejudice was the government’s “inability to obtain radios under its contractually negotiated pricing.”
It is obvious from the opinion that the court believed the contractor to be overreaching. It suggests that the contractor consciously changed its position as to acceptance of email delivery orders in order to avoid performing unprofitable work. But the opinion conveys a level of inconsistency in the government’s position as well. On one hand, the government argued that the contractor’s informal course of conduct in accepting email deliveries overrides the contractual prohibition against them. On the other, it argued that negotiations had not been concluded and that “the contract, as written, remains in full force and effect.” Perhaps a little more negotiation could have yielded a better result for both sides.