United States v. DeKonty Corporation

The United States Navy (plaintiff) entered into a contract with DeKonty Corporation (DeKonty) (defendant) to construct a childcare facility at Los Angeles Air Force Station. The Resident Officer in Charge of Construction (ROICC) warned DeKonty several times during DeKonty’s performance that DeKonty was at risk of termination for default. On July 5, 1985, the ROICC recommended to the Navy’s contracting officer (CO) that DeKonty’s contract be terminated for default. DeKonty was notified about the recommendation and informed that most default termination recommendations did not ultimately result in termination. Regardless, DeKonty stopped work on July 16. On July 19, the ROICC sent a memorandum to naval command suggesting that, because DeKonty’s contract was pending before the CO for potential default termination, the status of DeKonty’s contract should be confirmed before releasing partial payment #5 to DeKonty, which was due on August 8. On July 22, the Navy encouraged DeKonty to continue performing the contract. On July 25, DeKonty called the Navy’s payment office and was informed that partial payment #5 was on hold. On August 1, DeKonty formally abandoned performance; the Navy subsequently terminated DeKonty’s contract for default. DeKonty petitioned the Armed Services Board of Contract Appeals (Board), claiming that the Navy committed an anticipatory breach of contract by refusing to make partial payment #5, as demonstrated by the ROICC’s July 19 memorandum and DeKonty’s July 25 telephone call with the Navy payment office. The Board ruled for DeKonty and awarded breach-of-contract damages. The Navy appealed.