Austin Instrument v. Loral

A defense contractor who failed to deliver might have blown its chance of getting another contract with the U.S. military.

In 1965, Loral Corp. ("Loral") won a $6 million contract with the U.S. Navy to manufacture & deliver radar sets. In turn, Loral award Austin Instrument, Inc. ("Austin") a sub-contract for 23 of the 40 radar components.

In 1966, the next year, Loral received another contract from the Navy &, again, sought bids for the same 40 components.

Austin informed Loral that it would stop the current delivery unless the new 1966 contract for all 40 components would be for a higher price. After this ultimatum, Austin stopped delivering to Loral.

Facing with a dilemma of losing the Navy contract, Loral acceded to the higher demanded price by Austin for the 1965 sub-contract. However, after the delivery to the Navy, Loral sought to recover the price increases.

Austin sued Loral for the higher price for the 2nd (1966) contract.