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Court Questions Teaming Agreement

Authored by attorney Michael L. Sterling

In W.J. Schafer Associates, Inc. v. Cordant, Inc., 493 S.E. 2d 514 (Va. 1997) the court held a teaming agreement was unenforceable on the ground that “agreements to agree in the future” are “too vague and too indefinite to be enforced.” However, the case provided a "road map" of terms to include in an effort to make teaming agreements enforceable. Then in 2002, a Virginia court upheld a teaming agreement and issued an injunction compelling specific performance of the agreement in EG&G, Inc. v. Cube Corp., 63 Va. Cir. 634, 2002 WL 31950215 (Va. Cir. Ct. Dec. 23, 2002).

Now, in Cyberlock Consulting, Inc. v. Information Experts, Inc., the U.S. District Court for the Eastern District of Virginia (April 3, 2013), held that a teaming agreement expressing that the parties would negotiate a subcontract in the future was just an “agreement to agree” and thus unenforceable. This new case takes a different turn and makes the issue more complicated. Among other things, the court questions provisions that indicate the subcontract is subject to negotiation, the teaming agreement is subject to termination upon failure of subcontract negotiations, the subcontract was subject to government approval, the statement of work was not express as to which party would do work items, the amount of work was based on what was known at the time and other provisions which are often seen in teaming agreements. If you plan to enter into a teaming agreement you should review it carefully in light of this new decision. It may be necessary to delete certain conditions and attach a full version of the subcontract to the teaming agreement.  Not suffice to identify your company with the Board of Contractors.

These articles are meant to bring awareness to these topics and are not intended to be used as legal advice.

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