## Facts

- A federal procurement office solicited sealed bids to supply trap rock for a WPA airport project in Bridgeport, Connecticut, using a printed “Invitation, Bid, and Acceptance (Short Form Contract)” form.
- Sylvan Crest Sand & Gravel Co., a quarry operator, submitted four bids for different trap rock screening sizes; an Assistant State Procurement Officer accepted the bids on June 29, 1937.
- Each accepted form listed an approximate quantity and unit price, stated that delivery was “to be delivered to project as required,” and indicated delivery should start immediately upon receiving instructions from the project contact.
- The reverse-side printed conditions included a clause reserving to the government “the right to cancel” the contract “at any time.”
- Sylvan Crest alleged it was ready to perform but the government never requested or accepted any deliveries and never issued a cancellation notice.
- Sylvan Crest sued for breach of four alleged contracts, seeking lost profits based on the government’s failure to request delivery within a reasonable time.
- The government moved to dismiss or for summary judgment, arguing the cancellation clause made its promise illusory and therefore no enforceable contract existed.
- The district court entered summary judgment for the government on the ground that the cancellation reservation rendered the agreements nonbinding.

## Issues

1. Whether a government contract reserving a right to cancel “at any time” is illusory and unenforceable after bid acceptance.
2. Whether the agreements could be construed to impose an implied obligation on the government to either request delivery within a reasonable time or give notice of cancellation.
3. Whether summary judgment was proper where enforceability turned on contract construction and alleged failure to act within a reasonable time.

## Decision

- The Second Circuit reversed the summary judgment and remanded for trial.
- The court held the agreements were not illusory merely because the government reserved a right to cancel.
- The court construed the cancellation clause as requiring affirmative action (notice) to terminate, not as permission to remain indefinitely inactive without consequence.
- The government’s acceptance was construed to carry an implied promise: within a reasonable time it must either call for delivery “as required” or exercise cancellation by notice.
- Because the contracts were reasonably construed as binding, questions of breach (including what constituted a reasonable time) and damages could not be resolved as a matter of law on summary judgment.

## Legal Principles

- A cancellation-at-any-time clause does not automatically negate consideration or mutuality; courts may construe such clauses to preserve enforceability.
- Where contract language and formal acceptance show intent to form a binding agreement, a court will avoid an interpretation that nullifies the transaction.
- A reserved cancellation power may be read as requiring notice or other affirmative steps to terminate, rather than allowing indefinite nonperformance without termination.
- In supply arrangements with “as required” demand language and no fixed schedule, an implied obligation may require the buyer to act within a reasonable time by demanding performance or canceling.
- If a plausible construction creates binding obligations, summary judgment is improper where factual issues remain regarding reasonable time, breach, and damages.

## Conclusion

The Second Circuit treated the government’s accepted bid forms as enforceable contracts despite a broad cancellation clause, holding that the government at least had an implied duty to either request delivery within a reasonable time or cancel by notice; the case was remanded for trial on breach and damages.


Sylvan Crest Sand & Gravel Co. v. United States, 150 F.2d 642 (2d Cir. 1945)