Should military contractors put conditions on the use of their weapons? Here's our tank, but you can't invade Iran with it? We think your invasion of Venezuela is illegal, we're activating the kill switch on your jets. That's a real dangerous proposition.

They can, but the government can always just not buy their stuff.

That's not what the government is doing here.

If the T&C is agreed to up front, why shouldn't they be able to? If their client or potential client doesn't like the T&C, they can find another vendor.