Enforcing a contract against the federal government is a challenging prospect under the best of circumstances. But when your contract turns out not to be enforceable, any hope of any recovery goes out the window.

Adia Holdings, Inc. sued the United States in the U.S. Court of Federal Claims, seeking damages for what it alleged was the government’s breach of an agreement to deposit in Adia’s checking account an award to it from the Restaurant Revitalization Fund. Congress established this fund during COVID to provide financial assistance to restaurants and similar establishments, especially minority-owned businesses having financial difficulties. Adia qualified, and applied for a grant with the Small Business Administration, which administered the funds. Adia was awarded $169,820.34. The SBA told Adia to expect the funds within three to seven business days after the award.

In reliance on SBA’s representations, Adia incurred $233,596.37 in eligible expenses for the restaurant. But the money never arrived, and the SBA explained that legal challenges to the program prevented the SBA from disbursing the funds. Then the SBA told Adia that the Restaurant Revitalization Fund had been shut down.

As a result, Adia had to shut down its restaurant. Adia sued for a breach of contract in the U.S. Court of Federal Claims and sought to certify a class of similarly situated business owners whose grants were rescinded. The Government moved to dismiss.

In its complaint, Adia alleged the breach of an implied-in-fact contract. To prove an implied-in-fact contract, a plaintiff must prove (1) mutuality of intent to contract; (2) offer and acceptance; (3) consideration; and (4) a government official with actual authority to bind the United States.

The trial court concluded that Adia’s argument failed the first prong of the test, finding that the grant award under the Restaurant Revitalization Fund contained no clear intent to bind the United States contractually. The court explained that “absent some clear indication that a legislature intends to bind itself contractually,” the presumption is that law is “not intended” to create private contract rights.

The court explained that for legislation to create a binding contractual relationship, the legislation must clearly express an intent to create a binding agreement. Here Adia “did not execute a grant agreement with the United States, much less one that contained language reflecting an intent to impose binding obligations on the United States.”

The CFC dismissed Adia’s contract breach claim with prejudice.

Read Judge Kaplan’s full decision here.