Academic journal article The George Washington International Law Review

Resolving the Practicum Scenario in the United States

Academic journal article The George Washington International Law Review

Resolving the Practicum Scenario in the United States

Article excerpt

I. PRACTICUM FACTS: RELEVANT PARTIES, BACKGROUND, CONTRACTUAL TERMS

The United States and ALIENA (a hypothetical sovereign nation) have entered into a treaty for the joint operation of a military installation (air field) on an island where ALIENA exercises sovereignty. As permitted by the governing treaty, for maintenance work on the airfield, the United States has entered into a two-year contract with FIXIT, a corporation created under the law of TERTIA (another hypothetical sovereign nation).

The United States awarded the maintenance contract to FIXIT because FIXIT offered the lowest price. The contract, however, provided that the contract price could be adjusted after one year if FIXIT could prove that its performance costs had significantly increased due to factors unforeseeable at the time (for example, if unanticipated events resulted in increased labor and material costs). The contract also sets forth specific rules concerning all claims relating to the contract as one of its terms. For example, regardless of whether monetary claims are brought by the contractor against the United States or by the United States against the contractor, the contract provides that all claims shall be considered and resolved in accordance with the administrative and judicial procedures provided by the laws of the United States.

II. THE NATURE OF THE PARTIES' DISAGREEMENTS

The contract between the United States and FIXIT requires FIXIT to acquire and use equipment comprising an invention described in and covered by a United States patent in its contract performance on the airfield. FIXIT does not have, nor can it acquire, a license from the patent owner, INVENTIX, to use the invention. Nonetheless, FIXIT acquires the specified equipment and uses it, as provided by the terms of the contract.

During the performance of the contract, low-ranking officials of ALIENA approach FIXIT. These officials threaten to delay approvals for: (1) the import of materials needed for contract performance and (2) necessary labor permits. These threats disappear when FIXIT enters into a subcontract with FAMILIA (a company secretly controlled by the ALIENA officials concerned) for purported work on the air force base contract. No such work is actually contemplated or performed by FAMILIA, however. FIXIT records its payments under the subcontract to FAMILIA in its account books as costs incurred in the performance of the maintenance contract with the United States.

During performance of the maintenance contract, FIXIT also uncovers the presence of a substantial amount of asbestos (a previously popular and widely-used insulation material, now recognized to be harmful to humans). The United States orders FIXIT to remove all of the asbestos. Under the comprehensive regulations of ALIENA dealing with the disposal of toxic waste, expensive safety equipment must be obtained and employed for this operation. FIXIT asserts that this work is beyond the scope of the maintenance contract and, therefore, requests additional compensation for this work.

After a year of performance, FIXIT requests an upward contract price adjustment based upon all of its incurred costs, including its subcontract payments to FAMILIA. FIXIT requests additional payments of an additional $1 million (U.S.). INVENTIX seeks compensation for the use of its invention by FIXIT during its performance of the maintenance contract.

III. RESOLUTION

A. Forum and Remedies

Because the contract between the United States and FIXIT involves the "procurement of construction, alteration, repair or maintenance of real property," the resolution of claims related to it is governed by the Contract Disputes Act of 1978.1 As noted in the practicum facts, the application of this legislation is expressed by the inclusion of a clause entitled "DISPUTES," in the contract, which is sanctioned by the Contract Disputes Act2 and required by a regulation. …

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