## Facts

- The United States Navy contracted with DeKonty Corporation to construct a child care facility at the Los Angeles Air Force Station.
- During performance, the Resident Officer in Charge of Construction repeatedly warned DeKonty that the Navy might terminate the contract for default and, on July 5, 1985, recommended default termination to higher authority while noting such recommendations were not always approved.
- DeKonty stopped work on July 16, 1985.
- On July 19, 1985, an internal memorandum stated that DeKonty was being processed for default, asked the payment office to process progress payment (partial payment) #5, and instructed the office to check with the termination contracting officer on contract status and whether funds should be released.
- DeKonty’s principal later called the payment office and was told the payment was “on hold” until advised by the contracting division; DeKonty treated this as a refusal to meet contractual payment obligations.
- Progress payment #5 was due on August 8, 1985, but DeKonty formally abandoned performance on August 1, 1985, despite being told on July 22, 1985, to keep working.
- The Navy terminated the contract for default. DeKonty appealed to the Armed Services Board of Contract Appeals (ASBCA), which found the government anticipatorily breached by expressing intent to withhold the progress payment and awarded damages; the United States appealed.

## Issues

1. Whether the Navy’s internal instruction to check contract status before releasing progress payment #5, combined with a payment-office statement that the payment was “on hold,” constituted an anticipatory repudiation of the government’s duty to make that payment.
2. Whether any such repudiation justified DeKonty’s abandonment of performance and entitled it to breach damages rather than default termination consequences.

## Decision

- The Federal Circuit reversed the ASBCA.
- The court held the government did not anticipatorily repudiate the contract by temporarily holding payment #5 pending the default-termination decision.
- Because there was no anticipatory repudiation, DeKonty was not justified in abandoning performance based on the payment “hold.”

## Legal Principles

- Anticipatory repudiation in government contract disputes requires a positive, definite, unconditional, and unequivocal manifestation of intent not to perform.
- Conditional or temporary administrative actions—such as processing a payment while directing a status check, or placing a payment “on hold” pending guidance—do not, without an absolute refusal, satisfy the repudiation standard.
- Statements by individuals lacking contracting authority generally do not constitute a binding repudiation of the government’s contractual obligations.
- A contractor’s decision to stop work before a payment is due, absent a clear refusal to pay, weighs against finding an excusing repudiation.

## Conclusion

The Federal Circuit concluded that the Navy’s temporary payment hold and internal cautions pending a termination decision did not amount to an unequivocal refusal to pay and therefore did not constitute anticipatory repudiation; DeKonty’s abandonment was unjustified, and the ASBCA’s breach-damages award was reversed.


United States v. DeKonty Corp., 922 F.2d 826 (Fed. Cir. 1991)