Danzig v. AEC Corporation

The United States Navy (plaintiff) entered into a contract with AEC Corporation (defendant) to construct a training center. The original contract completion deadline was October 1990; however, the deadline was extended by mutual agreement to April 27, 1991, after AEC failed to meet the original deadline because of issues with its surety. In February 1991, AEC’s surety froze AEC’s bank account and AEC’s work progress declined substantially. On March 20, the Navy issued a cure notice, stating that AEC’s failure to adequately pursue continued contract performance raised concerns that AEC would fail to meet the performance deadline. AEC responded to the cure notice by letter on April 3 and April 5, stating that (1) unspecified government actions contributed to the delay; and (2) the financial strangulation by AEC’s surety made it impossible for AEC to timely complete the contract or to provide an updated estimate for when the contract work would be completed. By early April, AEC removed its files and equipment from the worksite, disconnected the worksite’s telephone, and reduced the worksite staff to two people. The Navy issued a final cure notice on April 9; AEC did not respond. The Navy then terminated AEC’s contract for default. AEC appealed to the Armed Services Board of Contract Appeals (Board), which invalided the default termination. The Navy appealed.