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.
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.