Contract Management and Negotiation Flashcards

A contract clause states: 'TIME IS OF THE ESSENCE.' What legal effect does this language have?

Answer: It makes any delay a material breach regardless of how minor

When a contract states time is of the essence, failure to perform by the specified date is a material breach entitling the non-breaching party to terminate and seek damages, even for brief delays.

Which of the following describes the 'duty to mitigate' in contract law?

Answer: The non-breaching party must take reasonable steps to minimize losses after a breach

The duty to mitigate requires the injured party to take reasonable steps to reduce their losses after a breach; damages recoverable are reduced by any amount the injured party could have avoided.

A 'step-in right' clause in a contract gives the buyer the ability to:

Answer: Take over and complete the work directly if the contractor fails to perform adequately

Step-in rights allow the buyer (or a designated substitute) to assume control of the supplier's operations or complete performance themselves when the supplier is in default or at risk of default.

Under the doctrine of 'substantial performance,' a contractor who has not fully completed every contract requirement:

Answer: May recover the contract price less the cost to remedy minor deficiencies

Substantial performance allows a contractor who has completed the essential purpose of the contract with only minor defects to recover the contract price, offset by the cost of correcting the deficiencies.

A 'deemed approval' provision in a contract specifies that:

Answer: If a party does not respond to a submission within a defined period, approval is automatically granted

Deemed approval clauses prevent indefinite delays in the review process by treating silence as approval after a specified review period expires.

In the context of government contracting, 'unallowable costs' under FAR Part 31 are costs that:

Answer: Cannot be charged to or reimbursed under a government contract

FAR Part 31 identifies certain costs—such as entertainment, lobbying, and certain executive compensation—as unallowable, meaning they cannot be billed to or recovered from the government.

What is the primary distinction between 'termination for default' and 'termination for convenience' in government contracts?

Answer: Termination for default is a punitive action for non-performance; termination for convenience allows the government to end the contract without fault and compensates the contractor for work done

A default termination treats the contractor as having breached and may expose it to reprocurement costs, while a convenience termination is a no-fault action that entitles the contractor to settlement costs for work completed and preparations made.