Upon Owner’s Termination-for-Convenience, Contractor Must Cease All Work and Cancel All Orders

Quality Asphalt Paving, Inc. v. Dept. of Transp. & Public Facilities, 71 P.3d 865 (Alaska 2003)

In this case, a state agency accepted bids on a contract to widen a state highway.  Shortly after the state awarded the contract to a contractor, the state terminated it under a termination-for-convenience clause in the contract.  The contractor sued for costs and damages.  A hearing officer awarded damages to the contractor, but did not award prejudgment interest.  The trial court affirmed, and the parties appealed.

The Supreme Court of Alaska held that once the state serves notice of termination, the termination-for-convenience clause in the contract requires the contractor to stop all work, place no further orders, and cancel all existing orders.  It also held that although the contractor’s bid included amounts for mobilization and demobilization, the contractor was only entitled to mobilization costs actually incurred, and not to demobilization costs that customarily become part of the next project.  In addition, the court held that administrative appeals do not qualify for prejudgment interest.