In a case out of the Civilian Board of Contract Appeals, F.O.G., LLC v. Department of the Interior, CBCA 8203, 2026 WL 1191881 (CBCA 2026) a contractor claimed damages that included “financial hardship” damages due to slow payments. The financial hardship damages included personal damages to the contractor’s president and his wife. Are these damages recoverable? Drumroll…The Board ruled that the contractor cannot recover such financial hardship damages.
As it relates the personal financial hardship damages, the Board ruled, “Neither [the contractor’s] president nor his wife are a party to this contract, are in privity of contract with [the government], or are the beneficiaries under this contract. [The contractor], therefore, cannot recover for any losses that either one has suffered individually and that [the contractor] claimed in this appeal.” F.O.G., LLC, supra.
As it relates to other financial hardship damages, the Board claimed, “[i]nterest on borrowings, such as the penalties on missed loan payment that [the contractor] seeks, are unallowable.” F.O.G., LLC, supra. “[The contractor] also cannot recover damages claimed for its difficulty securing future financing or future contracts as a result of vendor disputes and account closures because these damages are ‘too remote and speculative.’” Id. (citation omitted).
Although there is truth that an impact to cash flow will create a financial hardship. No doubt about that. However, not all financial hardship damages are recoverable in breach of contract actions.
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