Solar Turbines, Inc. v. United States
23 Cl. Ct. 142 | United States Court of Claims | 1991
What This Case Means for Subcontractors
Solar Turbines contracted with the Navy to design and build a RACER energy recovery system. The contract was modified 34 times, ballooning costs. In 1984, the parties agreed to a $55 million cap on government liability. When disputes arose, Solar argued the cap should be waived based on testing requirements and a partially signed termination agreement. The court ruled the $55 million ceiling was enforceable and the government could terminate the contract at any time without triggering additional liability.
Key Takeaways
- •A liability cap in a contract modification is binding even if the contract has extensive testing provisions—don't assume testing requirements override cost limits.
- •An initialed but unsigned agreement (like a proposed termination deal) won't waive a liability ceiling—get full signatures on any document meant to modify contract terms.
- •Termination-for-convenience clauses can exist independently of liability caps—the government's right to terminate doesn't automatically unlock a cost ceiling.
The termination clause permitted the government to terminate at any time, unlinked to the $55 million ceiling.
Frequently Asked Question
If my contract has a cost ceiling, can I get around it by pointing to testing requirements or a partially signed change order?
No. Courts will enforce a stated liability cap even if the contract includes extensive testing provisions or you have an initialed but unsigned agreement. To modify or waive a cost ceiling, you need a fully executed, signed document that clearly states the new terms. Partial signatures and implied waivers won't work.
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