Opinion ID: 209723
Heading Depth: 2
Heading Rank: 3

Heading: Incorporation of the Letter of Essential Need

Text: Here, Northrop claims that the Army breached a warranty contained in the Letter of Essential Need and incorporated by reference into the contract-in-suit. In agreement with the Court of Federal Claims, we hold that the Letter of Essential Need is not incorporated by reference, and that therefore Northrop's claim must fail. The starting point for this analysis is the delivery order issued by the Air Force for the Omnicast software. The delivery order states that [t]he `LEASING TERMS AND CONDITIONS' to Special Offer # 330 Revision 03 ... were incorporated... in order to facilitate this [Delivery Order]. By thus explicitly referring to the Terms and Conditions and reciting that they were incorporated, the delivery order successfully incorporates the Terms and Conditions by referenceindeed, both Northrop and the United States agree that the Terms and Conditions form part of the contract-in-suit. Northrop contends that the Terms and Conditions, in turn, incorporate the Letter of Essential Need by reference as a contract term. Northrop points to the opening paragraph of the Terms and Conditions, which states that [i]t is hereby mutually understood and agreed that as inducement for Contractor entering into this Agreement, the Government has provided required information relative to the essential use of the software Asset which includes, but is not limited to, a description of the currently identified applications to be supported and planned life-cycle operations for the leased software (emphasis added). According to Northrop, the required information referenced here is the statement, contained in the Letter of Essential Need, that the leased software was essential to the operation of ABCS 6.0 as [it is] integral to the system. However, the Terms and Conditions do not refer to the Letter of Essential Need explicitly, as by title or date, or otherwise in any similarly clear, precise manner. As the Court of Federal Claims explained, the phrase required information relative to the essential use of the software could reasonably be interpreted to refer to the Letter of Essential Need or to any number of other prior communications, written and oral, between various representatives of Northrop and the Army. See Northrop Grumman, 78 Fed.Cl. at 48. Further, even assuming for the sake of argument that this reference is sufficiently explicit, the Terms and Conditions nevertheless do not clearly incorporate the referenced material. Rather, the Terms and Conditions merely recount that the Government has provided the required information as inducement for Contractor entering into this Agreement. As in Smithson, this recital is hardly the type of clause that should be read as incorporating fully into the contract some extrinsic text containing additional contract terms. 847 F.2d at 794. [I]f that were the parties' purpose, they would have explicitly so provided. Id. We can only conclude from the absence of such explicit language regarding the required information that the parties did not intend to incorporate it by reference. See, e.g. Serralles v. United States, 46 Fed.Cl. 773, 785 (Fed.Cl.2000) ([T]he incorporating document must not only refer to the incorporated document, it must bring the terms of the incorporated document into itself as if fully set out.). [1] Because the contract-in-suit does not incorporate the Letter of Essential Need, Northrop cannot maintain its claim for breach of warranty under the contract. Furthermore, the Terms and Conditions, which postdate the Letter of Essential Need, contain an integration clause specifying that these lease terms and conditions constitute the entire agreement between [the parties] relative to the CECOM Starburst lease transaction under the [Northrop-Air Force] contract (emphasis added). This integration clause neither incorporates the Letter of Essential Need nor permits its incorporation or the incorporation by reference of any other extrinsic document. Thus, the integration clause prevents Northrop from relying on the Letter. See Betaco, Inc. v. Cessna Aircraft Co., 32 F.3d 1126, 1134 (7th Cir.1994) (The essence of the integration inquiry... is whether the parties intended their written contract to embody the entirety of their agreement; if so, extrinsic evidence of an additional warranty ... cannot be admitted. Thus, although the integration clause speaks in terms of agreements rather than warranties, if it is given effect and the signed purchase contract is deemed to be a fully integrated agreement, it effectively operates so as to preclude the plaintiff from relying on purported warranties beyond the four corners of that agreement.). Having determined as a matter of law that the Letter of Essential Need does not form part of the contract-in-suit, we may affirm on this ground and need not reach the Court of Federal Claims' interpretation of the language in the Letter.