Two cases illustrate that if you want to get paid by a government customer, you have to comply with the legal formalities, quite possibly more so than when dealing with a commercial customer.
• U.S. NeuroSurgical, Inc. v. City of Chicago, No. 07-3520 (7th Cir. Jul. 9, 2009) (affirming district court judgment after bench trial): A vendor built a computer information system for the Chicago Department of Health. In a classic example of lack of foresight in negotiating a fixed-price contract, the agreement called for the vendor to include document-scanning capabilities if the city determined that this would be appropriate — which of course the city did. The vendor later asked the city for an extra $532,000 to cover the extra cost. There was a dispute about whether a city official orally agreed to this, but it didn’t matter: The increase had not been approved in accordance with the procedures set forth in the city code. Result: The vendor lost its lawsuit to collect the additional $500K.
• Northrop Grumman Ship Sys. Inc. v. Ministry of Def. of Venezuela, No. 07-60861 (5th Cir. July 9, 2009) (reversing and remanding district-court judgment): A shipyard sued Venezuela to enforce what it claimed was an agreement to settle a dispute, under which Venezuela would pay $70 million. The appeals court held that the purported settlement agreement was unenforceable, even though it had been agreed to by Venezuela’s lawyer. One of the appeals court’s reasons was that the settlement had not been approved by the Venezuelan government in accordance with the requirements of Venezuelan law. (The case has an interesting twist: Venezuela’s lawyer was famed trial attorney Richard ‘Dickie’ Scruggs, now serving a prison term after pleading guilty to charges stemming from an indictment for attempting to bribe a judge in an unrelated case.)