Construction Law Insights

InDyne, Inc. v. Beacon Occupational Health & Safety Servs., 2018 U.S. Dist. LEXIS 182031, 2018 WL 5270331 (E.D. Va. Oct. 23, 2018)

InDyne, Inc. (“InDyne”) submitted a proposal to the United States Air Force (“Air Force”) for a contract to provide services and support for the Solid State Phased Array Radar System and proposed Beacon Occupational Health & Safety Services, Inc. (“Beacon”) as a subcontractor to provide certain medical services. Before submitting the proposal to the Air Force, InDyne and Beacon entered into a teaming agreement (the “Teaming Agreement”). On March 5, 2018, InDyne was awarded the contract with the Air Force. On March 30, 2018, InDyne requested a best and final offer from Beacon for the scope of work to be included in the potential subcontract between InDyne and Beacon. On April 4, 2018, Beacon replied with a letter arguing that the Teaming

Agreement was binding, that InDyne must negotiate in good faith, and that InDyne cannot demand pricing different than that previously submitted in its bid. On April 9, 2018, Beacon returned the subcontract proposed by InDyne, having filled in a price consistent with Beacon’s final proposal and accepting all other provisions except the termination for convenience provision. On April 16, 2018, InDyne informed Beacon that it had awarded the subcontract to another bidder whose proposal included a lower price and InDyne filed a declaratory judgment action. Thereafter, InDyne filed a motion for summary judgment, which Beacon opposed.

The Court granted InDyne’s motion for summary judgment and held that the Teaming Agreement was an “agreement to agree”. When read as a whole, the Teaming Agreement’s language indicated that it was not meant to provide a binding obligation, but was to set forth a contractual objective and agreed framework for the negotiation of a subcontract in the future along certain established terms. In Virginia, agreements to negotiate at some point in the future are unenforceable. Any writing in which the terms of a future transaction or later, more formal agreement are set out is presumed to be an agreement to agree rather than a binding contract. While not conclusive, naming an agreement something other than a ‘contract’ (ex. ‘teaming agreement’) implies that the parties intended it to be a nonbinding express in contemplation of a future contract. 

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