Limitation of Liability after Unilateral Definitization

[LM32]

I have a Letter Contract which contains FAR 52.216-24 Limitation of Government Liability, and also contains FAR 52.216-25 Contract Definitization. My understanding of the limitation of liability clause is that it goes away after contract definitization. However, the contractor and the government were unable to reach agreement on a definitized contract, and the Contracting Officer therefore unilaterally definitized the contract. I would think that the limitation of liability clause is no longer applicable, but I have not seen caselaw addressing the situation where the contract was unilaterally definitized. The final sentence in 52.216-25© gives me pause on this issue, as it says "In any event, the Contractor shall proceed with completion of the contract, subject only to the Limitation of Government Liability clause." This clause's "in any event" could be read to refer to the first proposition, that agreement on a definitive contract was not reached by the target date... It could also be read to refer to the second proposition, that the CO may determine a reasonable price or fee. If the first, my belief that the Limitation of Liability clause is no longer in effect is still supportable. But if the second, then it seems to say that the Limitation is still in effect. Has anyone come across this issue or have any thoughts on whether the Limitation is still applicable after unilateral definitization by the government?

[Navy_Contracting_4]

I have a Letter Contract which contains FAR 52.216-24 Limitation of Government Liability, and also contains FAR 52.216-25 Contract Definitization. My understanding of the limitation of liability clause is that it goes away after contract definitization. However, the contractor and the government were unable to reach agreement on a definitized contract, and the Contracting Officer therefore unilaterally definitized the contract. I would think that the limitation of liability clause is no longer applicable, but I have not seen caselaw addressing the situation where the contract was unilaterally definitized. The final sentence in 52.216-25? gives me pause on this issue, as it says "In any event, the Contractor shall proceed with completion of the contract, subject only to the Limitation of Government Liability clause." This clause's "in any event" could be read to refer to the first proposition, that agreement on a definitive contract was not reached by the target date... It could also be read to refer to the second proposition, that the CO may determine a reasonable price or fee. If the first, my belief that the Limitation of Liability clause is no longer in effect is still supportable. But if the second, then it seems to say that the Limitation is still in effect. Has anyone come across this issue or have any thoughts on whether the Limitation is still applicable after unilateral definitization by the government?

Paragraph ( c) - including its subparagraphs (1) and (2) - of 52.216-25 deals with unilateral definitization. Subparagraph ( c)(2) says ?To the extent consistent with paragraph ( c)(1) of this section, all clauses, terms, and conditions included in this letter contract shall continue in effect, except those that by their nature apply only to a letter contract.? Wouldn?t you consider 52.216-24 to be a clause ?that by [its] nature appl[ies] only to a letter contract?? If so, this sentence would seem to say that it (52.216-24) would not continue in effect.

In my experience, the definitization modification (whether unilateral or bilateral) deletes 52.216-24, since the obligations of the Government are now fully addressed by the terms of the definitized contract.