Look Before You Release — ASBCA Enforces Release of Claims to Contractor’s Detriment

A recent Armed Services Board of Contract Appeals decision serves as a timely reminder for contractors to carefully read and consider any release of claims before signing — especially when you may have otherwise-recoverable coronavirus-related cost increases.

The decision, Appeal of Horton Construction Co., Inc., ASBCA No. 61085 (June 2, 2020), concerned Horton Construction’s contract with the Army.  The contract had one CLIN that covered two separate activities — “concrete crushing and erosion control projects.”  Based on language in the contract (among other things), Horton Construction believed that there would be a certain volume of “concrete crushing” and based its pricing on that assumed volume.  During performance, the volume of “concrete crushing” ended up being much lower — which provided ground for a potential claim.

When Horton Construction pursued its claim, however, it ran into an obstacle.  Throughout the performance of the contract, Horton Construction signed several modifications, a “CERTIFICATION OF FINAL PAYMENT,” and a “CONTRACTOR RELEASE OF CLAIMS.”  Each of these contained claims release language, such as:

[T]he contractor, upon payment of the said sum by the United States of America . . . does remise, release, and discharge the Government, its officers, agents, and employees, of and from all liabilities[,] obligations, claims, and demands whatsoever under or arising from the said contract, other than claims in stated amounts as listed below.

Based on those releases, the ASBCA concluded that Horton Construction was barred from seeking any further payment.  As the ASBCA explained:

When a release is clear, unequivocal, and unconditional, the release must be given its plain meaning and effect.  When such a release exists, it bars any and all claims for additional compensation based upon events occurring prior to the execution of the release.  (citations removed.)

Horton also argued that the individual who signed the releases lacked the authority to do so, but the Board rejected this theory based on the facts.  Because the company held out the individual as the offeror, signatory, acting vice president, and an official “point of contact,” the ASBCA concluded that he had actual authority.  The Board also found in the alternative that the individual had apparent authority because the government reasonably interpreted the individual to have the authority based on the company’s actions.  Thus, the individual could bind the company.

What should contractors take away from Horton Construction?  Although the question of whether a contractor has released a claim is a fact-specific one, recent decisions have generally tilted toward reading waivers broadly in favor of the government.  That is particularly true following the Federal Circuit’s decision in Bell BCI Co. v. United States, 570 F.3d 1337 (Fed. Cir. 2009), which held that generic release language in a contract modification could bar a contractor’s claims.

As a result, here are some key takeaways for contractors to consider:

  • Read the Waiver.  Read everything in full before you sign — including any waivers or releases.
  • Understand the Waiver.  Fully understand the scope and breadth of the waiver or release before you sign, and be aware that certain phrases may have nuanced legal meaning.
  • Identify Potential Claims.  Before you sign any release or waiver, identify any potential claims that you may be giving up.
  • Get a Carve-Out.  If there are potential claims that you do not want to waive, consider negotiating a specific reservation in the waiver.

Our series on earlier key decisions on waivers and releases includes Orr; Supply & Service Team and ServiTodo; MBD Maintenance; Ahtna Environmental; and Perry Bartsch.  We will continue to monitor cases in the area.

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