Korea Development Corp. v. United States

9 Cl. Ct. 167, 1985 U.S. Claims LEXIS 883
CourtUnited States Court of Claims
DecidedNovember 18, 1985
DocketNo. 121-84C
StatusPublished
Cited by7 cases

This text of 9 Cl. Ct. 167 (Korea Development Corp. v. United States) is published on Counsel Stack Legal Research, covering United States Court of Claims primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Korea Development Corp. v. United States, 9 Cl. Ct. 167, 1985 U.S. Claims LEXIS 883 (cc 1985).

Opinion

OPINION

YOCK, Judge.

Plaintiff brings this contract action before the Court based on the Tucker Act, 28 U.S.C. § 1491 (1982). The plaintiff alleges in its complaint that the Government breached its contractual obligation to pay for extra costs incurred in obtaining a 100 percent performance bond acceptable to the defendant and in extra costs incurred when various construction items were deleted from the contract. Plaintiff’s prayer for recovery is based on theories of express and implied-in-fact contract law.

The defendant has now moved for summary judgment. For the reasons set out herein, the defendant’s motion for summary judgment is granted and the case is to be dismissed. R.U.S.C.C. 12(b). The material facts are not in dispute.

Facts

On July 28, 1978, the United States Agency for International Development (AID), an agency of the United States Government, executed a grant agreement with the Republic of Bangladesh. In essence, AID agreed in that grant to provide the Republic of Bangladesh with up to 150 million dollars of foreign aid assistance for the purpose of assisting that third world nation’s efforts to grow sufficient agricultural crops to feed its people. This grant focused primarily on improving Bangladesh’s fertilizer distribution and marketing systems. Under the terms of that agreement, AID reserved the right to approve certain documents generated in connection with the construction projects which it financed. Contracts, plans, specifications, schedules, and financial guarantees and bonds were included in the types of documents that were subject to AID approval.

In carrying out its part of this agreement, the Republic of Bangladesh through its agency, the Bangladesh Agricultural Development Corporation (BADC), issued an invitation for bids in late 1980 for the construction of a “bagged product fertilizer warehouses project” in the Republic of Bangladesh. On March 24, 1981, the plaintiff in this action, Korea Development Corporation (KDC), submitted a bid in the amount of $53,000,000 to BADC. In paragraph 3 of its bid, KDC stated:

If our bid is accepted we will, if required, obtain the guaranty of an Insurance Company or Bank or other sureties (to be approved by you) to be jointly and severally bound with us in the sum not exceeding 100 percent of the above-named sum for the due performance of the Contract under the terms of the Bond to be approved by you.

A bid opening was held on March 25, 1981, and the International Engineering Company, Inc. (IECO), acting in the capacity of BADC’s agent, determined that KDC had submitted the responsive and low bid. Accordingly, on April 20, 1981, IECO recommended to BADC and to AID that the contract be awarded to KDC.

The approval by AID was required before the contract could be awarded. In exercising this authority, AID was acting pursuant to the grant agreement that it had executed with the Republic of Bangladesh. After a complete evaluation of the contract, bid documents, financial capabilities of the respective bidders, and taking into account the recommendations of the project engineer/manager (IECO), AID approved the award of the contract to KDC on June 16, 1981.

Thereafter, by letter dated June 20,1981, BADC notified KDC that it accepted KDC’s bid. The letter also stated in pertinent part:

You are, therefore, requested to furnish the 100% performance bond as required in the tender document for due performance of the contract within ten (10) days as provided in the Bid Bond form which is incorporated by reference in your Bid Bond.
You will please note that the submission of the bond is a condition precedent [169]*169to execution of the formal contract agreement. As such your prompt action in this matter will highly be appreciated.

In response to BADC’s letter of intent to award the contract, KDC, on June 24, 1981, requested that it be allowed to furnish a bank guarantee of 10 percent of the contract amount in lieu of the 100 percent performance bond called for by the bid documents, and that its tender requirement to furnish the bond in 10 days be extended until such a decision could be made. There followed several meetings and many letters back and forth on the bond matter between the various parties to the agreements. Although AID initially was willing to consider KDC’s request, BADC throughout the discussions was adamant that a 100 percent performance bond was called for by the contract documents, and was appropriate under the circumstances. Asserting in a letter to KDC dated July 14, 1981, that it was “the only party that has a contractual relationship with KDC,” BADC insisted that the 100 percent performance bond “is an explicit condition” of the bid documents, and that KDC therefore provide “a 100% performance bond in the form of either a surety bond or an irrevocable letter of credit.” KDC eventually complied with this requirement. By letter dated October 15, 1981, KDC stated to BADC in pertinent part:

We now take pleasure in enclosing the required Bank Guarantee No. 455/81&PB/USD/029 dated 15th Oct. 1981 for US$50,000,000/-(U.S. DOLLAR FIFTY MILLION) jointly issued by American Express International Banking Corporation & Indosuez-French International Bank, Dacca in favour of you.1

On October 16, 1981, BADC and KDC entered into a contract for construction of the fertilizer warehouse project. The instrument itself set forth the legal relationships among the various entities involved. For example, the document made it clear that BADC and KDC were the parties to the contract. Clause 73 of the contract specifically stated:

Legal Effect of AID Approvals and Decisions
The parties hereto understand that the contract has reserved to AID certain rights such as, but not limited to, the right to approve the terms of this contract, the Contractor, and any or all plans, reports, specifications, subcontracts, bid documents, drawings, or other documents related to this contract and the project of which it is part. The parties hereto further understand and agree that AID in reserving any or all of the foregoing approval rights, has acted solely as a financing entity to assure the proper use of United States Government funds, and that any decision by AID to exercise or refrain from exercising these approval rights shall be made as a financier in the course of financing this project and shall not be construed as making AID a party to the contract. The parties hereto understand and agree that AID may, from time to time, exercise the foregoing approval rights, or discuss matters related to these rights and the project with the parties jointly or separately, without thereby incurring any responsibilities or liability to the parties jointly or to any of them. Any approval (or failure to disapprove) by AID shall not bar the Employer or AID from asserting any right, or relieve the Contractor of any liability which the Contractor might otherwise have to the Employer or AID. [Emphasis added.]

In addition, IECO was designated to act as BADC’s project manager/engineer/agent. Clause 2, Part II of the contract provided in pertinent part:

(3) The Engineer will act as agent for, and representative of, BADC in all mat[170]

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Cite This Page — Counsel Stack

Bluebook (online)
9 Cl. Ct. 167, 1985 U.S. Claims LEXIS 883, Counsel Stack Legal Research, https://law.counselstack.com/opinion/korea-development-corp-v-united-states-cc-1985.