Don't Forget the Batteries!

"Freddy isn’t much good if his batteries don’t work.” Duracell commercial from the 1970s

Who hasn’t had a battery go dead only to find your junk-filled kitchen drawer lacks the battery that you need. Or worse, that you have only one of the two batteries you need. And, yes, that battery in the drawer is mocking you - loudly.

That’s why I cringed when I read the decision issued by the Armed Services Board of Contract Appeals in Appeal of Club Car, Inc., ASBCA No. 61710 (Dec. 30, 2019. At issue was whether the contractor, Club Car, Inc., was obligated to deliver replacement batteries for a number of golf carts that Club Car had supplied to the Army Morale, Welfare and Recreation Fund for use at “golf courses at Army locations across the United States and overseas.” Id., slip op. at 1.

The contract called for Club Car to deliver a replacement battery for each golf cart it delivered to the Fund. However, the Fund elected not to have the replacement batteries to be shipped along with the cart at the time of delivery. Instead, the Fund chose to order replacements “in the ordinary course of business . . . when the original batteries [wore] out.” Id. The Fund chose to do this because, otherwise, “it would bear the responsibility of storing and safeguarding the batteries until needed and would run the risk that the batteries would lose effectiveness during storage.” Id. at 2. Fair enough.

That worked fine during the ten-year term of the contract (as well as the 12 months after contract expiration during which the contractor would be obligated to make deliveries for any orders initiated during the contract term). Whenever the Fund requested a set of replacement batteries, Club Car delivered them as required. However, at the end of the contract there was some number of golf carts for which replacement batteries never had been requested. Club Car declined to deliver any replacement batteries for those carts after the expiration of the 12 month grace period.

Hence, the Fund found it had no batteries left in the drawer. The Fund issued a letter of deficiency demanding that Club Car continue delivery of replacement batteries. Faced with Club Car’s assertion that it was no longer obligated to deliver anything after the 12-month grace period, the Contracting Officer issued a final decision “demanding payment of $310,200 for replacement batteries that were not delivered with the previously delivered carts.” Id. at 2.

Thus, the Fund asserted that replacement batteries were required under the specifications regardless of when ordered. Club Car disagreed taking the position that, yes, it was required to provide replacement batteries when they were requested — but not after the 12-month grace period.

The ASBCA agreed with Club Car. The Board concluded that the Fund’s choice to order “replacement batteries well after the initial cart delivery was a long-standing practice during [the] contract.” Id. at 3. That choice having been made, “the contractor [was] not responsible for the Fund’s failure to order sufficient replacement batteries, just as Club Car would not be responsible if the Fund mistakenly failed to order sufficient golf carts.” Id. at 4. Thus, “[t]here [was] no obligation on Club Car to supply carts or accessories that [were not] ordered pursuant to the ordering clauses.” Id. In other words, once the contract term and the 12-month grace period expired, Club Car’s duties were complete.

I have to confess that I see the equitable appeal of each side’s position. The specs called for a replacement battery; therefore, the Fund should be entitled to a battery. On the other hand, the contractor likely felt that it should not have to be a battery warehouse for years after the contract is over. Hence, it should be entitled to shut down the deal. Either position makes some sense.

Is there a lesson in this case? It would be easy to say one should double check what items are left to be delivered and make sure that all is understood before it’s too late. One could thus chide the parties for not doing that in this case. But, I think that’s too simple. Each party might have simply thought there was nothing to resolve. The spec was pretty clear; the ordering clause and its 12 month limit was pretty clear. However, ten years of performance created a difference in expectations.

How I wish that battery in the drawer would just shut up.