Citation. 287 F.3d 1058 (Fed.Cir. 2002)
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Brief Fact Summary.
The government agreed to consider using a particular fire protection company if it needed firefighting services. The terms of the alleged agreement granted both the government and the firefighting company the right to choose whether they wished to work with one another if the other came calling.
Synopsis of Rule of Law.
"It is axiomatic that a valid contract cannot be based upon the illusory promise of one party, much less illusory promises of both parties."
The Appellant, Ridge Runner Forestry (the "Appellant") is a fire protection company. The Forestry Serve issued a request for quotations ("RFQ") and the Appellant responded to the RFQ. The Appellant signed a document called "Pacific Northwest Interagency Engine Tender Agreement (the "Tender Agreement"). The Tender Agreement entirely incorporated the RFQ into it and included the two following provisions in bold type. First, "Award of an Interagency Equipment Rental Agreement based on response to this Request for Quotations (RFQ) does not preclude the Government from using any agency or cooperator or local EERA resources". Second, "Award of an Interagency Equipment Rental Agreement does not guarantee there will be a need for the equipment offered nor does it guarantee orders will be placed against the awarded agreements." The contractor was also allowed to "decline the governments need for equipment for any reason." The relevant provision read "Because the equipment needs of the government and availability of contractor's equipment during an emergency cannot be determined in advance, it is mutually agreed that, upon request of the government, the contractor shall furnish the equipment offered herein to the extent the contractor is willing and able at the time of order." The Appellant signed Tender Agreements for five different years. As a result of the government not using its services for several years, the Appellant brought suit alleging a violation of the "implied duty of good faith and fair dealing." The Department of Agriculture Board of Contract Appeals (the "Board") found no contract existed.
Is there a valid contract?
No. The court made an initial observation that "[t]o be valid and enforceable, a contract must have both consideration to ensure mutuality of obligation … and sufficient definiteness so as to 'provide a basis for determining the existence of a breach and for giving an appropriate remedy.' " The presence or lack of consideration concerns whether or not a promise or performance is bargained for. There is no consideration if "by its terms the promisor or purported promisor reserves a choice of alternative performances…." The court distinguishes [Ace-Federal Reporters, Inc. v. Barram] and observes that the "contract [in Barram] obligated the government to fulfill all of its requirements for transcription services from enumerated vendors or obtain a waiver. The Tender Agreements here are nothing but illusory promises. By the phrase illusory promise is meant words in promissory form that promise nothing; they do not purport to put any limitation on the freedom of the alleged promisor, but leave his future action subject to his own future will, just as it would have been had he said no words at all." The government if they wished could call on the Appellant to obtain firefighting service. On the same note, if the government requested the Appellant's services, the Appellant did not have to perform if it did not want to. "It is axiomatic that a valid contract cannot be based upon the illusory promise of one party, much less illusory promises of both parties."
This case demonstrates that in order for there to be a valid contract, the parties must be obligated to do something. If they can back out of the "agreement" for any reason there really is no "agreement".