## Facts

- Congress created the Alcohol Fuels Program within the Department of Energy (DOE) to encourage alternative-fuel projects, including through federal loan guarantees; the program office administering the guarantees lacked independent contracting authority.
- DOE issued a loan guarantee to Agrifuels Refining Corporation to finance construction of an ethanol plant.
- Agrifuels contracted with Harbert/Lummus (a joint venture and related entities) to build the plant, with project financing dependent on the DOE guarantee.
- During construction, DOE personnel expressed concern about the project and took actions affecting the continued availability of guaranteed borrowing.
- The Court of Federal Claims found that a DOE contracting officer orally promised Harbert/Lummus that the government would continue guaranteeing future borrowing requests through completion if Harbert/Lummus continued performance, characterizing the promise as an oral unilateral contract.
- The Court of Federal Claims held DOE breached by suspending the guarantee and awarded damages; it rejected Harbert/Lummus’s separate claim that DOE entered a second contract requiring an accelerated construction and payment schedule.
- The United States appealed the finding of an enforceable oral contract and the damages award; Harbert/Lummus cross-appealed on damages methodology and the rejection of the alleged acceleration contract.

## Issues

1. Whether a DOE contracting officer had actual authority, or DOE later ratified the officer’s conduct, to bind the United States to an oral unilateral contract to continue loan guarantees through project completion.
2. Whether DOE entered a separate enforceable contract obligating an accelerated construction and payment schedule.
3. If an enforceable contract existed and was breached, whether the damages award and calculation were proper.

## Decision

- The Federal Circuit reversed the determination that an enforceable oral unilateral contract existed because the contracting officer lacked actual authority to make the asserted commitment and the government did not ratify it.
- The court vacated the damages award because it depended on the unenforceable contract.
- The court affirmed the rejection of Harbert/Lummus’s claim that DOE was bound by a separate acceleration contract.
- The cross-appeal challenging damages became moot given the absence of contractual liability.

## Legal Principles

- The United States is bound by contract only when the government representative acts with actual authority conferred by statute, regulation, or proper delegation; apparent authority does not bind the government.
- A program office’s role in administering a federal program (including loan guarantees) does not itself confer contracting authority where such authority is not independently granted.
- Ratification of an unauthorized commitment requires affirmative adoption by an official with authority, with knowledge of material facts and an intent to be bound; passive awareness or acceptance of continued performance is insufficient.
- Informal assurances or expectations regarding financing continuation or scheduling do not create enforceable government contracts absent clear agreement by an authorized official.

## Conclusion

The Federal Circuit held that the asserted oral promise to continue DOE loan guarantees was unenforceable because no authorized official bound the United States and no authorized official ratified the commitment; it therefore vacated the damages award and affirmed that no separate acceleration contract existed.


Harbert/Lummus Agrifuels Projects v. United States, 142 F.3d 1429 (Fed. Cir. 1998)