Generally, the federal government can enter into contracts with aircraft manufacturers or an owner of a patent for airplanes for the following activities:
- to produce airplanes or airplane parts for the use of the federal government; and
- to pay bonuses to the manufacturer or royalties to the owner of the patent.
When the federal government enters into a contract with one of its citizens, it divests itself of the sovereign character and takes the character of an ordinary citizen as to the particular transaction in force. The government further has no immunity to recede from the fulfillment of its obligation[i].
Such contracts are dissoluble and the manufacturer will obtain the payment for work done at the time of their abandonment or cancellation of the contract by the federal government. In Glenn L. Martin Co. v. United States, 84 Ct. Cl. 54 (Ct. Cl. 1936), the court observed that “a contingent fee is valid where there has been a valuable consideration therefore and the contractor has performed his part of the contract.”
Likewise, even in cases where the producer agrees to produce airplanes or airplane parts only according to certain specifications, with proper workmanship and materials, and where the producer assures no guaranty about performance in flight, the producer is entitled to payment for those units accepted by federal government inspectors as complying with the specifications, regardless of the fact that they are afterward rejected because of insufficient performance.
In contracts for the construction of an experimental plane, the federal government has the authority to make performance requirements such as speed and climbing ability. The government can also make changes in design, which the aircraft company must follow in the performance of the contract. Further, even in cases where the changes incorporated by the federal government in contracts makes it impossible for the contractor to meet the requirements of the contract, the aircraft company must facilitate the attainment of the intended object of the contract, without a breach of the terms of the contract.
However, where the federal government gives defective specifications, the federal government will be liable for damages sustained by the company through its attempt to perform its work under defective specifications furnished by the federal government.
Just like any other contract, a right of action and the statute of limitations in contracts between the federal government and an aircraft manufacturer accrues and begins only when the period of credit has expired, when an account is due and payable, or when there is a breach of the contract[ii].
[i] Glenn L. Martin Co. v. United States, 84 Ct. Cl. 54 (Ct. Cl. 1936).
[ii] Manufacturers Aircraft Asso. v. United States, 77 Ct. Cl. 481 (Ct. Cl. 1933).