A default termination is a drastic sanction the exercise of which should be sustained only upon a demonstration of full compliance by the Government with the established procedural safeguards and substantive requirements applicable.23 Under paragraph (a) of the Default clause the Government may terminate a contract on the following grounds: (i) if the contractor fails to deliver the supplies or to perform the service in question on time; or (ii) if the contractor fails to perform any of the other provisions of the contract, or so fails to make progress as to endanger performance of the contract, after having received at least ten days' notice from the contracting officer to correct or "cure" such failure. Notice in advance of termination need not be given, however, where "extensive repair or readjustment is necessary in order to produce a fully operable product." 24 In other words, a "contractor is entitled to a reasonable period in which to cure a nonconformity provided that the supplies shipped are in substantial conformity with *** [the] speci

fications" in the first place.25

See J. D. Hedin Construction Co. v. United States, 187 Ct. Cl. 45, 57 (1969) (“* * * The Board, we think, failed to recognize that a default-termination is a drastic sanction (see Schlesinger v. United States, 182 Ct. Cl. 571, 584, 390 F.2d 702, 709 (1968)) which should be imposed (or sustained) only for good grounds and on solid evidence."). (Italics supplied.)

24 See Radiation Technology, Inc. v. United States, 177 Ct. Cl. 227, 232 (1966) (“* ** [T]he contractor is entitled to a reasonable period in which to cure a nonconformity provided that the supplies shipped are in substantial conformity with contract specifications.")

25 Id.

The contracting officer did not indicate whether his decision to terminate was predicated on subparagraph (i) or (ii), but it is clear from the record that the termination was based on appellant's alleged failure to comply with the warranty provisions, which is covered by (ii). In that case the appellant should have been given an opportunity to remedy the deficiencies as contemplated under the contract, unless it can be said that the microscope did not conform substantially to the specifications.

It has not been shown that the Government fulfilled the "cure notice" requirement. Thorough examination of the record does not reveal any document that can even be remotely characterized as constituting such notice. Whatever complaints the Government may have made prior to acceptance, relating to its difficulties with the microscope, including threats to terminate, were vitiated by the act of acceptance.

The Government has not alleged that there was such substantial non

compliance with the specifications as to have obviated the need to give the appellant notice to cure. Having accepted and used the microscope, the Government is hard-put to prove that it did not conform because of poor manufacturing or workmanship. There is evidence in the record that acceptable publishable pictures could be produced by the microscope.26 Mr. Massie testified that there were periods when he

Tr. 292, 345, 352-53, 426, 469-70.

regarded the operation of the instrument as satisfactory.27 He also admitted that he could have damaged the microscope on occasion by mishandling.28

The Government has not, in short, established that its problems were due to deviation from the specifications or to defects in the design, workmanship, and material of the instrument rather than to operator misuse. Put another way, there has been no showing by a preponderance of the evidence that defective manufacturing or workmanship was the most probable cause of the malfunctions and deficiencies.

Given the long, clouded history of this contract, the nature of the inspection or demonstration of performance prior to acceptance should have been a model of thoroughness. The finality of acceptance can be overcome only upon proof of the reasonableness of inspection. An article does not become latently defective simply because it fails to

function. It must be shown that the failure was caused by a defect which would not ordinarily be disclosed by a careful examination.29

27 Tr. 372.

28 Tr. 45, 46, 69, 145. Mr. Irwin Bluestein, appellant's general manager, testified that an "operator can unintentionally, by a mismanagement of the controls, damage the instrument. (Tr. 556.)

29 Compare Gale Machine & Tool Co., ASBCA No. 13954 (September 9, 1969), 69-2 BCA par. 7880, at 36,656, in which acceptance was held not to preclude recovery under a warranty clause for obviously defective pins of which the Government was knowledgeable before acceptance where the pins were of such a "material and character whereby they would not be affected" by "abusive handling * storage or use." We are unable to find here

In this case, the record would not support a finding that the inspection was reasonable. Neither, in our opinion, has the Government established that acceptance was induced by such gross mistakes as amount to fraud.

In our view the appellant has demonstrated substantial compliance with its obligation to service. the microscope under the Guarantee of Equipment clause. Repairs and replacement of parts were made within a reasonable time.30 There is evidence that the appellant rendered extra service going beyond that which was required by the clause.31

For all these reasons, on the record before us we are unable to find that degree of noncompliance by the appellant with the specifications that would excuse the Government from notifying the appellant at least ten days prior to termination. We, therefore, hold that the Government was required to give the appellant a reasonable opportunity to cure or correct any deficiencies before terminating the contract for default.32 Its failure to do so ren

on the record before us that the microscope and its components that malfunctioned were of such material and character that they would not be affected by abusive handling or use (Tr. 434-5, 485, 486-92, 556, 584, 589-91, 612, 644, 649; Appellant's Exhibits G, I, J and L).

30 Tr. 310.

31 Tr. 117, 118, 309, 383; appellant's letter, dated January 18, 1972 (Tab A4).

32 Bailey Specialized Buildings, Inc. V. United States, 186 Ct. Cl. 71, 85-6 (1968). As the Court pointed out, whether ten days' notice would have been sufficient time to correct the defects is "hindsight speculation. * * * It may be that by accelerating the work, plain

dered the termination for default wrongful.33

Under subparagraph (e) of the Default clause, in case of an improper termination for default, the rights and obligations of the parties are to be treated as if the termination had been issued for the convenience of the Government, provided that the contract contains. a termination for convenience clause.34 This contract contains such

tiff could have cured the defects in ten days. In any event, it was entitled to the opportunity to do so.

33 Id.; Roberts International Corporation, ASBCA No. 10954 (June 13, 1968), 68-2 BCA par. 7074.

34"(e) If, after notice of termination of this contract under the provisions of this clause, it is determined for any reason that the Contractor was not in default under the provisions of this clause, or that the default was excusable under the provisions of this clause, the rights and obligations of the parties shall, if the contract contains a clause providing for termination for convenience of the Government, be the same as if the notice of termination had been issued pursuant to such clause. If, after notice of termination of this contract under the provisions of this clause, it is determined for any reason that the Contractor was not in default under the provisions of this clause, and if this contract does not contain a clause providing for termination for convenience of the Government, the contract shall be equitably adjusted to compensate for such termination and the contract modified accordingly; failure to agree to any such adjustment shall be a dispute concerning a question of fact within the meaning of the clause of this contract entitled 'Disputes.' Clause 11. Standard Form 32. note 4, supra.

a clause.35 Accordingly, the termination for default is treated as a termination for convenience of the Government.36

The appeal is sustained and remanded to the contracting officer for whatever relief, if any, to which the appellant may be entitled under the Termination for the Convenience of the Government clause of the contract.

CONCLUSION

The appeal is sustained and remanded to the contracting officer.

SHERMAN P. KIMBALL, Member.

WE CONCUR:

WILLIAM F. McGRAW, Chairman. SPENCER NISSEN, Member.

35 "TERMINATION FOR THE CONVENIENCE OF THE GOVERNMENT:

"The clause set forth in Sub-part 1-8.701 of the Federal Procurement Regulations is incorporated into this solicitation for offers and the resulting contract by reference with the same force and effect as though herein set forth in full. Any determination of costs under paragraph (c) or (e) of the clause set forth in Subpart 1-8.701 shall be governed by the principles for consideration of costs set forth in Sub-part 1-15.2 of the Federal Procurement Regulations (41 CFR 1-15.2), as in effect on the date of this contract." (p. 9.) 38 Note 33 supra.