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
Everett sued for breach of
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
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 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