## Facts

- General Builders Supply Co., Inc. contracted with the General Services Administration (GSA) to supply 7,859 refrigerators for use in Germany at a fixed unit price.
- General Builders subcontracted manufacturing to Hupp Corp.’s Gibson Refrigerator Division at a slightly lower unit price, leaving General Builders a small per-unit margin.
- The contract required submission of pre-production models for government inspection and approval before full production.
- The government rejected the pre-production models multiple times as nonconpliant with specifications; no production units were manufactured or delivered.
- The contracting officer terminated the contract for default.
- On appeal, the GSA Board of Contract Appeals held the default termination improper and, under the contract’s default clause, treated it as a termination for the convenience of the government.
- On remand, the contracting officer allowed $6,491.77 in incurred costs but denied claimed anticipated profits for both the prime contractor and subcontractor; the Board affirmed the denial.
- General Builders sued in the Court of Claims; the parties filed cross-motions for summary judgment on the purely legal question of anticipatory profits.

## Issues

1. When an improper default termination is converted by the contract’s default clause into a termination for convenience, may the contractor recover anticipated profits on the unperformed portion of the contract?
2. Does the 1962-era default clause language equating the parties’ rights to those under a termination-for-convenience clause authorize “anticipatory gain” beyond the termination-for-convenience recovery scheme?

## Decision

- The Court of Claims denied recovery of anticipated profits on the unperformed work.
- The court held that the default clause conversion required applying termination-for-convenience principles, which do not permit anticipatory profits on work not performed.
- The court granted the government’s cross-motion for summary judgment on the anticipatory-profits issue and denied the contractor’s motion to that extent.
- The allowed recovery remained limited to amounts available under the termination-for-convenience framework (including incurred costs and any permissible profit only on work performed).

## Legal Principles

- A contract clause converting an improper default termination into a termination for convenience makes the termination-for-convenience remedy exclusive absent bad faith or an independent breach.
- Under standard termination-for-convenience rules, a contractor may recover reasonable incurred costs, allowable settlement expenses, and profit on work performed, but not prospective or anticipatory profits on unperformed work.
- A contractor cannot expand recovery beyond the prime contract’s termination-for-convenience measure by asserting subcontractor anticipated profits; the subcontractor’s recovery against the government rises no higher than the prime contractor’s.
- Mere error by the contracting officer, without bad faith, does not transform a termination governed by contractual remedial clauses into a breach claim for full expectation damages.

## Conclusion

The Court of Claims held that an improper default termination, converted by the contract’s default clause into a termination for convenience, limits recovery to termination-for-convenience compensation and bars anticipatory profits on the unperformed portion of the contract for both the prime contractor and its subcontractor.


General Builders Supply Co. v. United States, 409 F.2d 246 (Ct. Cl. 1969)