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Release Applied to Impact and Delay Claims

A Court of Federal Claims' decision granting a construction contractor's cumulative impact and delay claims was reversed and remanded by the Court of Appeals for the Federal Circuit because the contractor released the government from liability for all claims attributable to modifications that contained the release. The dispute arose from a fixed-price contract to construct a laboratory building. After construction began, the government decided to add a floor. The modification revised the completion date, increased the contract price more than $2 million, and provided the contractor released the government from "any and all liability ... for further equitable adjustment attributable to" the modification. Before the CFC, the contractor prevailed on claims for the cumulative impact and delays caused by this modification and 113 additional modifications, some of which contained the same release language. The CFC determined the contractor did not release its impact and delay claims because the modifications did not compensate the contractor for the impact of multiple change orders on unchanged work.

Applying principles of contract interpretation, the Federal Circuit held the CFC had erred. The release unambiguously referred to "any and all liability," and there was no ambiguity about which types of claims were released. At best, there could be ambiguity as to which claims were "attributable to" a particular modification, and on remand the CFC was to determine which of the contractor's claims were attributable to modifications that did not contain the release language. In addition, the contractor's release for the additional floor modification was supported by adequate consideration, but the CFC needed to determine whether the government provided adequate consideration for the other modifications containing the release language.


In a dissenting opinion, Judge Newman contended the release clause referred to performance of the modification and did not produce an accord and satisfaction "of unforeseen claims arising from unforeseen and unintended events." The dissent accused the majority of ignoring the CFC's findings, based on a six-day trial, that the parties did not contemplate and release the cumulative impact and inefficiency claims that arose after the many modifications and 279 extra work orders that followed the modification for the additional floor. (Bell BCI Co. v. U.S., CA-FC, 53 CCF 79,124)

(The news featured above is a selection from the news covered in the Government Contracts Report Letter, which is published weekly and distributed to subscribers of the Government Contracts Reporter. )


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