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Home / Fulltext Opinions / Supreme Court of Virginia / W.J. SCHAFER ASSOCIATES, INC. v. CORDANT, INC., LENZAR ELECTROOPTICS, INC. v. CORDANT, INC.

W.J. SCHAFER ASSOCIATES, INC. v. CORDANT, INC., LENZAR ELECTROOPTICS, INC. v. CORDANT, INC.


W.J. SCHAFER ASSOCIATES,
INC. v. CORDANT, INC.

LENZAR ELECTROOPTICS,
INC. v. CORDANT, INC.


October 31, 1997

Record No. 961945

Record No. 961964

W.J. SCHAFER ASSOCIATES, INC.

v.

CORDANT, INC.

 

LENZAR ELECTROOPTICS, INC.

v.

CORDANT, INC.

OPINION BY SENIOR JUSTICE ROSCOE B. STEPHENSON, JR.

FROM THE CIRCUIT COURT OF FAIRFAX COUNTY

Thomas S. Kenny, Judge

Present: Carrico, C.J., Compton, Hassell, Keenan and Kinser,
JJ., and Stephenson and Whiting, Senior Justices.


These are appeals of a judgment rendered on separate jury
verdicts arising from a single trial. In Record No. 961945, the
dispositive issue is whether a so-called "Teaming
Agreement" constitutes an enforceable contract for the sale
of goods. In Record No. 961964, we decide whether promissory
estoppel should be recognized as a cause of action.

I

By an amended motion for judgment filed September 28, 1995,
Cordant, Inc. (Cordant) sought damages from Ogden Government
Services Corp. (Ogden), W.J. Schafer Associates, Inc. (Schafer),
and Lenzar ElectroOptics, Inc. (Lenzar) based upon claims arising
out of Cordant’s efforts to secure a government contract to
convert certain personnel records to a computer-accessible form.
In the motion for judgment, Cordant set forth the following
claims: Count I, breach of contract by Ogden; Count II, breach of
contract by Schafer and Lenzar; Count III, promissory estoppel
against Ogden; Count IV, promissory estoppel against Schafer;
Count V, promissory estoppel against Lenzar; Count VI, fraud and
deceit by Ogden; Count VII, constructive fraud by Ogden; Count
VIII, fraud and deceit by Ogden, Schafer, and Lenzar; and Count
IX, constructive fraud by Ogden, Schafer, and Lenzar.

After about a three-week trial, the jury returned the
following three verdicts in favor of Cordant: a verdict against
Ogden for breach of contract with damages fixed at $0; a verdict
against Schafer for breach of contract with damages fixed at
$300,000; and a verdict against Lenzar for promissory estoppel
with damages fixed at $150,000. The trial court entered judgment
on the verdicts, and Schafer and Lenzar appeal. [1]

II

On April 15, 1991, the United States Air Force issued a
Request for Proposal (RFP), seeking bids for its project to
convert its personnel records stored on microfiche to a system of
electronic data accessible by computer. The system was known as
"Automated Records Management System" (ARMS).

For nearly two years prior to the RFP, Cordant, a computer and
telecommunications integration systems company, prepared to
submit a bid as a prime contractor. The ARMS project required
Cordant to procure software and equipment necessary for
"scanning" or "digitizing" the microfiche.

In preparing to bid on the project, Cordant solicited pricing
and product information from various companies, including Ogden.
Ogden was a software development firm with prior experience on
Air Force contracts and expertise in the type of software
necessary for the ARMS project. Ogden also had a corporate
affiliation with Schafer, another technology company that had
been developing image scanning equipment known as
"digitizers." Cordant believed that having access to
Schafer’s digitizer would enhance its chances of securing the Air
Force contract.

On May 24, 1991, Ogden signed a document with Cordant entitled
"Teaming Agreement," and Cordant signed the document on
July 23, 1991. [2] The Teaming Agreement provided,
in pertinent part, that Cordant would "propose" Ogden
to the Air Force as "an exclusive Subcontractor" for
the products and services set forth in Exhibit A to the
Agreement. Ogden would "supply pricing" for the
products and services listed in Exhibit A, which specifically
included software development services and the Schafer digitizer.
Cordant and Ogden each would "bear its own costs, risks and
liabilities incurred as a result of its obligations and efforts
under [the] Agreement," and neither party would have the
"right to any reimbursement, payment, or compensation of any
kind from the other party during the period prior to the
Government contract." Cordant and Ogden also agreed that, if
Cordant became the prime contractor of the ARMS project, they
would "negotiate in good faith in a timely manner a
Subcontract Agreement." Cordant reserved the right, "in
its sole discretion to withdraw its participation from this
procurement at any time prior to award [of a contract by the Air
Force] if [Cordant] determin[ed] that such withdrawal [was] in
[its] best interest." The parties agreed that the Teaming
Agreement "contain[ed] the entire agreement between the
parties and supersed[ed] any previous understandings, commitments
or agreements, oral or written." Finally, with regard to the
availability of the Schafer digitizer, Exhibit A to the Agreement
provided as follows:

[C]ompliant with the requirements specified in the RFP
[, the Schafer digitizer] will be available for delivery
on August 31, 1991. By July 31, 1991, [Cordant] shall
make a determination, through consultations with
[Ogden's] representative, on the probability of product
availability by contract award. If sufficient and
satisfactory progress has not been made in order to make
the product available by contract award, [Cordant] reserves the right, in its sole discretion, to pursue a
replacement product . . . . In the event
that the [Schafer digitizer] is not available to
[Cordant], it is agreed by the parties that it shall not
be available to any other party participating in the
Project.

 

Following its execution of the Teaming Agreement, Ogden
submitted to Cordant initial pricing information, which covered
both services and products, including digitizers. Shortly
thereafter, Ogden reduced its estimated price for software
development services.

On August 9, 1991, Cordant submitted a bid to the Air Force
for the ARMS project. Cordant’s own evidence established that, at
the time its bid was submitted, it knew that the Schafer
digitizer was not yet fully developed or commercially available.
In December 1991, Cordant submitted to the Air Force its
"best and final" offer (BAFO), listing Lenzar, a
recently-acquired wholly-owned subsidiary of Schafer to which
Schafer had delegated its obligation to provide the digitizers,
as the supplier of the digitizers. Again, at the time it
submitted its "best and final" bid, Cordant knew that
the Schafer digitizer was still in development and not in
production, that there was "a risk that one will not be
available," and that it was not "commercially
available."

On January 9, 1992, the Air Force awarded Cordant the ARMS
contract for the amounts set forth in Cordant’s BAFO. Thereafter,
Lenzar insisted on Cordant’s negotiating a written subcontract
with it. By April 1992, however, there remained "unresolved
contracting issues," and Cordant had not yet provided Lenzar
with a draft subcontract. Nevertheless, on April 17, 1992,
Cordant requested that Lenzar provide it with "adequate
written assurances" that Lenzar would perform its
"obligation to deliver [the digitizers] as committed under
the teaming agreement." In response, Lenzar reiterated its
request for negotiation of a written subcontract. Cordant,
thereupon, declared that Lenzar’s response "constitute[d] an
anticipatory repudiation of [the] Agreement," and, on June
2, 1992, Cordant sent Lenzar a "termination" letter.
Thereafter, Cordant secured from another company a product to
replace the Schafer digitizer.

III

Schafer contends that the Teaming Agreement is not an
enforceable contract for the sale of digitizers. It is, Schafer
asserts, merely an agreement to agree in the future and,
therefore, too vague and indefinite to be enforced. Cordant
responds that the Teaming Agreement "reveals a document that
clearly sets forth in significant detail the obligations of the
parties."

The Teaming Agreement is clear and unambiguous; indeed,
neither party contends otherwise. When a written agreement is
clear and unambiguous, it is the duty of a court, not a jury, to
determine whether an enforceable contract exists. Pierce
v. Plogger, 223 Va. 116, 120, 286 S.E.2d 207, 210 (1982).
Therefore, whether the Teaming Agreement contains the requisites
of an enforceable contract is a matter of law.

In Allen v. Aetna Casualty & Surety, 222 Va.
361, 281 S.E.2d 818 (1981), an insurance company "did
bargain for and obtain plaintiff’s agreement not to retain
counsel to prosecute his claim in exchange for [the company's] promise to effect full and final settlement with him." Id.
at 362, 281 S.E.2d at 819. The insurance company subsequently
breached this agreement with the plaintiff. Id. We noted
that the crucial question in Allen was "whether the
terms of the agreement . . . were too vague and
indefinite to enforce." Id. at 363, 281 S.E.2d at
819. In holding that the agreement was not an enforceable
contract, we said

there must be mutual assent of the contracting parties
to terms reasonably certain under the circumstances in
order to have an enforceable contract. Here, there was no
such mutual commitment. No sum was specified in the
agreement, nor was any method or formula alleged for
determining the amount payable in settlement. A court
should not determine the terms of the settlement upon
which the parties might ultimately agree. As the
agreement provided no reasonable basis for affording a
remedy for its breach, it is too vague and indefinite to
be enforced.

 

Id. at 364, 281 S.E.2d at 820.

In the present case, the Teaming Agreement provided that
"[f]or all items identified in Exhibit A, [Ogden] shall
supply pricing." However, no price for the digitizers was
set forth in the Agreement, and the Agreement shows that the
parties knew that the digitizers might not be available for use
if the ARMS contract were awarded to Cordant. In that regard, the
Agreement states that, by July 31, 1991, Cordant "shall make
a determination, through consultations with [Ogden's] representative, on the probability of [the digitizer's] availability by contract award" and that, "[i]f
sufficient and satisfactory progress has not been made in order
to make the [digitizer] available by contract award, [Cordant] reserves the right, in its sole discretion, to pursue a
replacement product."

Clearly, therefore, the Teaming Agreement shows by its express
terms that it was not an enforceable contract for the sale of
digitizers. There was no mutual commitment by the parties, no
obligation on the part of Ogden to sell the digitizers or on the
part of Cordant to purchase them, no agreed purchase price for
the product, and, indeed, no assurance that the product would be
available when needed. It follows, therefore, that, if the
Teaming Agreement was not enforceable against Ogden as a contract
for the sale of goods, it also was not enforceable against
Schafer under the claim that Schafer was Ogden’s delegate within
the meaning of the Uniform Commercial Code, i.e., Code
 8.2-210(1).

IV

Next, we consider Lenzar’s appeal. The jury found that Lenzar
was not liable to Cordant on its breach of contract claim.
However, the jury found against Lenzar on Cordant’s claim of
promissory estoppel.

Lenzar contends on appeal, as it did at trial, that promissory
estoppel is not a cognizable cause of action in Virginia.
Cordant, citing Georgeton v. Reynolds, 161 Va. 164,
170 S.E. 741 (1933), claims we previously adopted promissory
estoppel as a cause of action. We do not agree. In Georgeton,
promissory estoppel was not asserted offensively as an
affirmative claim, but was applied defensively to establish
consideration for a unilateral contract (a release). Id.
at 173-74, 170 S.E. at 744.

In the alternative, Cordant asks us to create a new cause of
action for promissory estoppel, adopting the approach set forth
in Restatement (Second) of Contracts  90(1) (1981). The Restatement
provides that "[a] promise which the promisor should
reasonably expect to induce action or forbearance on the part of
the promisee . . . and which does induce such action or
forbearance is binding if injustice can be avoided only by
enforcement of the promise."

Although we have addressed the doctrine of promissory estoppel
and even assumed, without deciding, the existence of such a cause
of action, we never have held that such a cause of action exists
or should be created. See, e.g., Tuomala v. Regent
University
, 252 Va. 368, 376, 477 S.E.2d 501, 506 (1996)
(noting that this Court "[has] not applied the doctrine in
this Commonwealth"); Stone Printing and Mfg. Co. v. Dogan,
234 Va. 163, 165-67, 360 S.E.2d 210, 211-12 (1987) (assumed,
without deciding, doctrine of promissory estoppel applies; held,
however, elements not proved). Today, however, we hold that
promissory estoppel is not a cognizable cause of action in the
Commonwealth, and we decline to create such a cause of action. See
Virginia School of the Arts v. Eichelbaum, 254 Va.
___, ___, ___ S.E.2d ___, ___ (1997) (this day decided); Ward’s
Equipment
v. New Holland North America, 254 Va. ___,
___, ___ S.E.2d ___, ___ (1997) (this day decided).

V

In sum, we hold that no enforceable contract for the sale of
digitizers by Schafer to Cordant existed, and, with respect to
Lenzar, promissory estoppel is not a cognizable cause of action.
Accordingly, the judgment of the trial court will be reversed in
each appeal and final judgment will be entered in favor of
Schafer and of Lenzar.

Record No. 961945 — Reversed and final judgment.

Record No. 961964 — Reversed and final judgment.

 

FOOTNOTES:

[1] The trial court had struck
Cordant’s evidence relating to the fraud claims.

[2] At the time of the Agreement’s
execution, Cordant was known as Centel Federal Systems, Inc., and
Ogden was known as Evaluation Research Corporation.

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