Everett Plywood Corporation v. United States
651 F.2d 723 (Ct.Cl. 1981)

  • The US Forest Service (USFS) made a contract with Everett to allow them to cut timber on Federal land.
  • After the contract was signed, USFS found that building a road to retrieve the timber would cause unacceptable environmental damage. So they partially cancelled the contract.
  • Everett sued for breach of contract.
  • The Trial Court found for USFS. Everett appealed.
  • The Appellate Court reversed and awarded damages.
    • The Appellate Court found that the contract contained provisions addressing "various supervening events and the effect such events should have upon the contract," and it "provided for termination in some instances, but did not contain any provision for termination in the event that occurred."
    • The Court agreed that USFS should have cancelled the contract because of the environmental problems. However, the Court found that the liability for that breach falls on USFS.
      • USFS could have put in a clause saying that they might need to cancel the contract for environmental reasons. But they didn't, and Everett didn't factor that into how much they would be willing to pay for the contract.
  • If a government agency adds a clause to a contract saying that a finding of unacceptable environmental damage will result in the contract getting canceled, that could lower the bids. However, this case says that not putting that clause in could get them in trouble, because the costs of cancellation are borne by the government agency.