Contract Management and Negotiation Flashcards

A contractor claims the government's actions constituted a 'constructive change.' This means:

Answer: The government's conduct had the practical effect of changing the contract without a formal order

A constructive change occurs when government acts or omissions—such as defective specifications or overzealous inspection—effectively change contract requirements even though no formal change order was issued.

Which of the following is a key element that must be proven to establish anticipatory breach of contract?

Answer: One party clearly and unequivocally repudiated its future performance obligations before performance was due

Anticipatory breach requires an unequivocal declaration or action by one party indicating it will not perform when the time comes, allowing the other party to treat the contract as breached immediately.

In a firm-fixed-price incentive contract, what does the 'point of total assumption' (PTA) represent?

Answer: The cost level above which the contractor bears 100% of cost overruns

The PTA is the cost level at which the contractor's share ratio has caused its profit to reach zero, meaning it absorbs all costs above that point up to the ceiling price.

A contract's 'severability clause' serves what purpose?

Answer: It ensures that if one provision is found unenforceable, the rest of the contract remains valid

A severability (or savings) clause provides that an invalid or unenforceable provision can be severed from the agreement without voiding the entire contract.

Which negotiation tactic involves one party claiming they lack authority to make final decisions in order to buy time or protect their position?

Answer: Limited authority tactic

The limited authority tactic involves a negotiator claiming they must consult a higher authority before agreeing, which can extract concessions and protect the negotiator from making irreversible commitments.

In commercial contract drafting, an 'entire agreement' (merger) clause is intended to:

Answer: Establish that the written contract supersedes all prior negotiations and representations

A merger clause (also called an integration clause) provides that the written agreement is the complete and final expression of the parties' intent, preventing either party from introducing evidence of prior oral or written negotiations to modify its terms.

When negotiating a long-term supply agreement, a 'most favored customer' (MFC) clause typically obligates the seller to:

Answer: Provide the buyer with pricing no less favorable than that given to any other customer

An MFC clause ensures the buyer receives pricing at least as favorable as the seller offers to any other customer, protecting against the seller giving better deals to competitors.