Justice HEARN.
This case concerns whether a subcontract for the maintenance of aircraft requires a contractor to turn to a subcontractor for all maintenance the contractor needs to fulfill a contract with the United States Army. The contractor, DynCorp, contends the contract does not create an exclusive relationship between the parties and it may send aircraft to other maintenance providers. The subcontractor, Stevens, contends the contract is a requirements contract under which DynCorp must send all aircraft requiring maintenance to Stevens.
Stevens moved for a partial summary judgment on the issue, the trial court granted the motion, and the court of appeals reversed and granted partial summary judgment to DynCorp. We reverse the court of appeals' decision in part and affirm in part, holding the contract is a requirements contract for certain aircraft.
DynCorp is a large defense contractor who was interested in being awarded a contract from the United States Army to service the Army's fleet of C-12, RC-12, and UC-35 aircraft. In furtherance of the goal of securing the contract, DynCorp looked to Stevens as a potential subcontractor.
DynCorp and Stevens executed a "Teaming Agreement" which set forth how the parties would cooperate in attempting to procure the Army contract (the Prime Contract). The Teaming Agreement provides that should DynCorp be awarded the Prime Contract, it would award a subcontract to Stevens to perform certain work required under the Prime Contract and specifies in detail what work Stevens would perform.
The Army awarded the Prime Contract to DynCorp, and DynCorp and Stevens subsequently executed a subcontract (the Subcontract). The Subcontract begins with a preamble which provides in part:
The body of the Subcontract begins with a definitional section which defines the term "Aircraft" as: "All Army RC/C-12 and UC-35 aircraft covered under the Prime Contract." The Subcontract has a "Statement of Requirements" which provides that:
The Subcontract makes use of "CLINs" — "Contract Line Item Number[s]" which are carried over from the Prime Contract — to describe the work to be performed and defines eight CLINs as covered by the Subcontract. The Subcontract contains a Statement of Work defining the different CLINs in part as:
The Subcontract provides a schedule of per-unit or per-hour prices for each of the CLINs.
Section G limits the parties' relationship based on the funding available from the Prime Contract. It provides that if funds from the Prime Contract are exhausted for any CLIN, Stevens has no obligation to continue to perform that CLIN and DynCorp is not liable for any performance Stevens engages in after the funding for a CLIN is exhausted.
The Subcontract provides that DynCorp may terminate the contract or seek other remedies upon the occurrence of any of several enumerated ways in which Stevens may default. Among those, Stevens may default by failing to faithfully perform its obligations for ten days after receipt of a cure notice, receiving three or more cure notices in one year, or suspending its operations.
The Subcontract contains an integration clause providing: "This Subcontract constitutes the entire understanding of the parties with respect to the subject matter hereof, and supersedes all prior representations and agreements, except for those specifically and expressly incorporated herein." Finally, the Subcontract provides that it is to be construed according to the "federal common law of government contracts."
The parties performed under the Subcontract for approximately nine years until Stevens believed that DynCorp was sending C-12 and RC-12 aircraft covered by the Subcontract
The circuit court denied both motions for judgment on the pleadings, but granted Stevens' partial motion for summary judgment, holding the Subcontract "is a `requirements contract' which obligates DynCorp to send to Stevens all C-12, RC-12, and UC-35 aircraft submitted to DynCorp under [the Prime Contract] for the purpose of allowing Stevens to perform the aviation maintenance services specified in that [Subcontract]." In support of that holding, the circuit court found the Subcontract is unambiguous, the Teaming Agreement is incorporated into the Subcontract, and the language of the Subcontract combined with the language of the Teaming Agreement unambiguously establishes that the Subcontract is a requirements contract.
DynCorp appealed asserting the circuit court erred in granting partial summary judgment before the completion of discovery, in granting partial summary judgment on grounds not before the court, in finding the Teaming Agreement was incorporated into the Subcontract, and in holding the Subcontract created an exclusive relationship between the parties. The court of appeals reversed the circuit court, first holding the Teaming Agreement is not incorporated into the Subcontract. Stevens Aviation, Inc. v. DynCorp Intern. LLC, 394 S.C. 300, 307-09, 715 S.E.2d 655, 659-60 (Ct.App.2011). The court reasoned that the reference to the Teaming Agreement is in a "whereas" clause and such clauses are generally not considered contractual and not permitted to control express provisions of a contract. Id. at 308, 715 S.E.2d at 659. The court went on to find the contractual language establishes the parties did not intend to incorporate the Teaming Agreement because an incorporation provision contained in a "whereas"
Having found the Teaming Agreement was not incorporated, the court considered the language of the Subcontract and concluded it does not establish an exclusive relationship between the parties and therefore is not an enforceable requirements contract. Id. at 309-11, 715 S.E.2d at 660-61. As an initial matter, the court found the Subcontract does not apply to UC-35 aircraft because it does not contain per-unit pricing for those planes. Id. at 309-10, 715 S.E.2d at 660. Addressing exclusivity generally, the court acknowledged some language in the Subcontract suggests exclusivity, but found other language established that no exclusive relationship exists. Id. at 311, 715 S.E.2d at 661. Specifically, the court quoted the language in the Subcontract's Statement of Work providing that Stevens is to perform strip and paint services "at the direction of DynCorp" and is to perform other maintenance "as directed by DynCorp." Id. The court concluded the Subcontract is not an enforceable contract and therefore DynCorp is only obligated to pay Stevens for work already performed. Id. Finally, the court granted partial summary judgment to DynCorp. Id. at 312, 715 S.E.2d at 661. This Court granted certiorari to review the court of appeals' decision.
While federal law governs the Subcontract, the South Carolina Rules of Civil Procedure and South Carolina Rules of Appellate Procedure govern the resolution of this
Stevens contends that regardless of whether the Subcontract incorporates the Teaming Agreement, it establishes an exclusive relationship between the parties and is an enforceable requirements contract. We agree as to the C-12 and RC-12 aircraft and conclude the court of appeals erred in holding to the contrary.
Under the federal common law, a services or supply contract must fit into one of three forms: a contract for a definite quantity, a contract for an indefinite quantity, or a requirements contract. Ace-Federal Reporters, Inc. v. Barram, 226 F.3d 1329, 1331 (Fed.Cir.2000). As set forth in Torncello v. United States, 681 F.2d 756 (Ct.Cl.1982), and quoted by subsequent federal decisions, these three forms of supply contracts are described as:
Torncello, 681 F.2d at 761-62 (citations omitted).
"Contract interpretation begins with the plain language of the agreement." Gould Inc. v. United States, 935 F.2d 1271, 1274 (Fed.Cir.1991). In determining which type of services or supply contract parties entered into, a court is to look "beyond the first page of the contract to determine what were the legal rights for which the parties bargained." Crown Laundry & Dry Cleaners, Inc. v. United States, 29 Fed.Cl. 506, 515 (1993). Courts are to "assume that the parties intended that a binding contract be formed," and "[t]hus, any choice of alternative interpretations, with one interpretation saving the contract and the other voiding it, should be resolved in favor of the interpretation that saves the contract." Torncello, 681 F.2d at 761, see also Crown Laundry, 29 Fed.Cl. at 515-16 ("[B]ecause it must be assumed that the
Here, the contractual language indicates an intent to establish an exclusive relationship between the parties. The Subcontract's Statement of Requirements provides that Stevens, as DynCorp's subcontractor, is to provide aircraft maintenance to "the Government's fleet of C-12/RC-12 Aircraft . . . under the Prime Contract." (emphasis added). The use of the word "fleet" indicates Stevens is to service all of the government's C-12 and RC-12 aircraft covered by the Prime Contract rather than just those aircraft DynCorp chooses to send to Stevens.
Additionally, the Statement of Requirements provides that DynCorp "is not required to purchase from the Subcontractor any requirement in excess of the total funding" under the Prime Contract. That language implies that DynCorp is required to purchase from Stevens all requirements within the total funding provided by the Prime Contract. If that was not
The Subcontract's Statement of Work also evidences an intent to create an exclusive relationship. Its description of the "strip and paint" work states that Stevens "shall provide all" services needed to "strip and completely repaint aircraft." (emphasis added). The Subcontract defines "Aircraft" as including "all" C-12 and RC-12 aircraft covered by the Prime Contract. Similarly, the Statement of Work's description of the "aircraft condition inspection" work states that Stevens "shall provide all" services needed to "perform all the requirements" of the Prime Contract's Statement of Work. The Statement of Work also states that Stevens "shall perform both Depot and Non-Depot Maintenance." Finally, the Subcontract sets forth a detailed list of per-unit pricing for each of the items of work Stevens is to perform. While these provisions do not explicitly state that the Subcontract creates an exclusive relationship between the parties, they utilize language consistent with and indicative of such a relationship.
Additionally, to interpret the Subcontract as not creating an exclusive relationship would render the Subcontract's termination provisions superfluous. The Subcontract's termination provisions permit DynCorp to terminate the Subcontract if Stevens fails to perform despite receipt of cure notices. If the Subcontract is not a requirements contract, the termination provision would be superfluous. DynCorp would not need to issue cure notices or formally terminate the contract. DynCorp could effectively unilaterally terminate the contract at any time by choosing to not send additional aircraft to Stevens.
The court of appeals erroneously discounted that contractual language and focused on the "at the direction of" language used in the Subcontract's Statement of Work for the "strip and paint" and "site organizational maintenance work." Stevens Aviation, 394 S.C. at 311, 715 S.E.2d at 661. Presumably, the court of appeals believed that language indicated Stevens was only to perform work on those aircraft that DynCorp directed it to perform work on, thus leaving open the
For the "site organizational maintenance" work, the Subcontract's description of that work is instructive:
In other words, "site organizational maintenance" is work that needs to be performed at a special location — Stevens' facilities. The fact that Stevens cannot transfer its work under the Subcontract to its facilities without DynCorp's prior authorization in no way conflicts with the premise that Stevens is to perform all such work required by DynCorp. In short, we interpret these provisions as meaning that Stevens is to perform all "strip and paint" work and all "site organizational maintenance" work, but is to do so subject to DynCorp's instructions.
Accordingly, we find the unambiguous language of the Subcontract, regardless of whether the Teaming Agreement is incorporated, establishes an exclusive relationship between the parties as to C-12 and RC-12 aircraft covered by the Prime Contract. Therefore, we hold the Subcontract is an enforceable
Stevens also contends the court of appeals erred in holding the Subcontract does not create an exclusive relationship as to UC-35 aircraft covered by the Prime Contract. We disagree.
The Subcontract mentions the UC-35 aircraft in only one provision. The definitions section of the Subcontract defines "Aircraft" as "All Army RC/C-12 and UC-35 aircraft covered under the Prime Contract." However, the remainder of the Subcontract makes clear that it covers only RC-12 and C-12 aircraft by the use of provisions specific to those aircraft and the absence of any provisions related to the UC-35 aircraft. Specifically, the "Statement of Requirements" provides that Stevens "shall provide" services for "the Government's fleet of C-12/RC-12 Aircraft." The UC-35 is never mentioned in the Statement of Work nor in the descriptions of the CLINS covered by the Subcontract.
Finally, we hold the court of appeals erred in granting summary judgment to DynCorp. While this Court has not yet addressed whether an appellate court may grant summary judgment to a party who did not move for that relief below,
We need not decide whether to adopt the rule from these other jurisdictions because the limited circumstances wherein an appellate court may grant summary judgment are not present here. Accordingly, we hold the court of appeals erred in granting summary judgment to DynCorp.
We hold the Subcontract is a requirements contract creating an exclusive relationship as to the C-12 and RC-12 aircraft, reverse the court of appeals' holding to the contrary, and reinstate the circuit court's grant of summary judgment as to this issue. We also affirm the court of appeals' holding that the Subcontract is not a requirements contract as to the UC-35 aircraft. Finally, we reverse the court of appeals' grant of summary judgment to DynCorp.
TOAL, C.J., PLEICONES, BEATTY and KITTREDGE, JJ., concur.