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Actions Speak Loudly: Conduct Can Extend Acontract Beyond Expiry

Wednesday, May 26, 2010 04:14 am


When investigating an expired contract?s validity,courts will take a close look at the parties? conduct. Acting as though a contract is still in effect can be as sound a way to extend a contract as agreeing to a new effective date in writing. That reality cost the contractor in Cherne Contracting Corp. v. Marathon Petroleum Co., 578 F.3d 735 (8th Cir. 2009) $1.5 million in profits it expected to collect by performing a construction contract.

In 2004, general contractor Cherne Contracting Corporation (Cherne) signed a letter of intent with Marathon Petroleum Company, LLC (Marathon), the owner and operator of a Detroit petroleum refinery. It stated that Marathon intended to award a contract to Cherne. The letter of intent?s addenda served as a valid contract governing the parties? relationship between May 14 and July 23 and authorizing Cherne to begin limited revamp work prior to a refinery "turnaround" (or shut-down and repair). Cherne continued to perform pre-turnaround revamp work after July 23, and Marathon continued to pay Cherne for the work. Then, on September 13 and in compliance with the letter of intent?s termination p [...]

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