United States: Teaming Agreements Under Fire: Decision Chips Away At The Enforceability Of Teaming Agreements

In recent years, federal and state courts in Virginia have slowly chipped away at the ability of teaming partners to enforce what they presumed were contractual rights against one another; however, these courts have left open the possibility that a party to a teaming agreement may retain some enforceable rights against its partner. Troublingly for prospective subcontractors, a recent decision from the Virginia Supreme Court further weakens the enforceability of teaming agreements.

By way of background, the United States District Court for the Eastern District of Virginia held in 2012 that a teaming agreement's inclusion of percentage figures for the distribution of work provided a sufficiently definite basis for treating the teaming agreement as an enforceable contract. See Cyberlock Consulting, Inc. v. Info. Experts, Inc., 876 F. Supp. 2d 672, 679 (E.D. Va. 2012). The court reversed course less than a year later, however, determining that the percentage figures merely "set forth a contractual objective and agreed framework for the negotiation of a subcontract in the future along certain established terms." Cyberlock Consulting, Inc. v. Info. Experts, Inc., 939 F. Supp. 2d 572, 581 (E.D. Va. 2013), aff'd, 549 F. App'x 211 (4th Cir. 2014) (internal quotations and alterations omitted). This position was cited approvingly by the Virginia Supreme Court when it held that a similar teaming agreement, which laid out certain minimum percentages of work, did not constitute an enforceable contract. See Navar, Inc. v. Fed. Bus. Council, 291 Va. 338 (2016).

Since the Cyberlock and Navar decisions, contractors and subcontractors have continued to negotiate teaming agreements under Virginia law, often under the presumption that at least certain terms, particularly the obligation of the parties to negotiate in "good faith" to form a definite, enforceable subcontract after award, will remain enforceable. A recent decision by the Virginia Supreme Court, however, suggests that while this may be true in theory, any successful lawsuit premised on that theory may result in only a hollow victory under certain circumstances. See CGI Fed. Inc. v. FCi Fed., Inc., 814 S.E.2d 183 (Va. 2018).

CGI Federal involved facts familiar to experienced contractors. In order to pursue an award set aside for small businesses, FCi, an eligible small business, sought out a large teaming partner to improve its technical ability, while CGI, an ineligible business, sought out a small-business partner to pursue part of the award. After CGI determined it required at least 40 percent of the work in order to make the effort worthwhile, the parties negotiated a teaming agreement that contemplated a future subcontract that would allocate 45 percent of the work to CGI (this figure was later revised to 41 percent after FCi was required to direct work to additional subcontractors). In a twist that would appear to breach the duty to negotiate in good faith, however, FCi's initial proposal to the government assigned considerably less work to CGI than contemplated by the teaming agreement, a tactic repeated in FCi's subsequent revised proposals. FCi won the award on this basis and entered into subcontract negotiations with CGI, offering the latter between 16 percent and 22 percent of the total share of work; after the parties failed to negotiate a subcontract, FCi terminated CGI for cause.

CGI brought suit, alleging three theories of recovery: (i) breach of the teaming agreement, (ii) fraudulent inducement and (iii) unjust enrichment, and the suit eventually reached the Virginia Supreme Court. Consistent with Cyberlock and Navar, the court summarily disposed of CGI's breach claim, holding the teaming agreement did not create an enforceable agreement binding FCi to award a subcontract with any specific allocation of work. More surprisingly, however, the court also rejected CGI's claims for fraudulent inducement and unjust enrichment, seemingly cutting off alternative paths of recovery contractors may have previously assumed were available.

With respect to fraudulent inducement, the court determined that for the same reasons the teaming agreement was not sufficiently definite to constitute an enforceable contract, it also barred recovery of damages by CGI because the agreement provided no basis for calculating such damages. With respect to unjust enrichment, the court determined that the agreement's provisions stating each party would bear its own costs were sufficiently definite to be enforceable, precluding CGI's recovery on this basis. Although the court suggested CGI could have sought to void the agreement on the basis of fraud to pursue damages strictly on the basis of its tort claims, the court's holding with respect to CGI's fraudulent inducement claim suggested damages under such a theory would have been limited simply to its bid preparation costs.

In light of CGI Federal, contractors should assess whether they can reasonably rely on the terms and conditions of their teaming agreements to provide meaningful assurances regarding the negotiation of a prospective subcontract without binding themselves to more definite terms prior to any prime award, at least under Virginia law. Accordingly, unless contractors wish to consider the law of other forums when negotiating their teaming agreements, they must pay close attention to the specific terms and conditions of their contracts when evaluating what is and is not enforceable and govern their pre-award conduct accordingly.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions