You are reviewing a contract modification and notice a paragraph titled “Release of Claims.”  Do you know what claims will be released by this language?  Or worse, the contracting officer just issued a final decision rejecting your claim (under the Contract Disputes Act) because the release in a contract modification constituted an accord and satisfaction.  Did you sign that release and realize its impact?

The Civilian Board of Contract Appeals’ (CBCA) recent decision in Perry Bartsch Jr., Constr. Co. v. Dept. of the Int., CBCA 4865, 5071 (December 8, 2016) helps contractors answer these questions and understand the scope and contours of a release.  Generally, this case offers  important guidance about how to draft a release in an effective and narrow way, and the types of factors that the CBCA will consider when interpreting a release.  Specifically, this decision addresses the issue of whether an apparent global release of claims, contained in just one of many contract modifications, can extinguish all potential claims against the Government.

For a more complete review of Bartsch and its implications, please continue reading.

The Bartsch Decision

In 2009, the Federal Circuit held in Bell BCI v. U.S. that generic release language in a contract modification barred the contractor’s delay and cumulative impact claims. 570 F.3d 1337 (Fed. Cir. 2009).  After this decision was issued, many in the Government contracts bar expressed concern about the Federal Circuit’s interpretation of that release and the potential ramifications of such a broad interpretation.

The CBCA acknowledged Bell BCI in its Bartsch decision, but reached a very different conclusion, finding that a somewhat similarly worded broad release was ambiguous.  In this case, Bartsch Construction Company was awarded a contract to renovate the visitor center complex at Mammoth Cave National Park in Kentucky.  Id. at 1.  In the course of performance fifteen different modifications were issued and bilaterally executed.  Id. at 2.  Six of those modifications contained release language releasing “all claims or demands whatsoever arising out of or from this Modification” with exceptions for “potential time impacts based on changes included in this modification.”  Id. at 3 (emphasis added).  But a subsequent modification contained broader language:

“the contractor hereby remises, releases and forever discharges the United States, its officers, agents, and employees, of and from all manner of debts, dues, liabilities, obligations, accounts, claims and demands whatsoever, in law and in equity, under or by virtue of the said contract with no exceptions.”

Id. at 5.  After completing performance, Bartsch filed a certified claim for changes and government caused delays. Id. at 6.  The contracting officer denied Bartsch’s claim on the basis of accord and satisfaction and release; Bartsch appealed.  Relying on the language in the global release, the United States filed a motion for summary relief from all of Bartash’s claims. Id.

The Board analyzed the release language and found it ambiguous for three main reasons.  First, the Board was concerned that the “whereas . . . now therefore”  language in the release suggested that all work under the contract was substantially complete when, in fact, some of the work was not completed until after the release was signed.  Id. at 9.  Second, the Board found the release required the contractor to provide a separate release of claims, which the contractor later submitted and which was rejected by the agency.  Id.  Third, the Board found that “[i]n light of the numerous documented exceptions to releases taken by [Bartsch] in earlier modifications, as well as [Bartsch’s] stated intention to claim additional time in a future modification, clear and manifest intent to waive these claims is not evident in the release, particularly when it is tied to forty-four pages of unrelated technical changes and makes no mention of the earlier exceptions.”  Id.

Accordingly, the release could not be understood to create a clear and unambiguous release of all claims. Id.  Compare with Jose Gustavo Zeno v. Department of State, CBCA 4867 (May 6, 2016) (holding a broadly worded release only released monetary claims, not the contractor’s ability to challenge a default termination claim) and Douglas P. Fleming, LLC v. Dept. of Vet. Affairs, CBCA 3655, 3666 (Sep. 27, 2016) (finding release language in a supplemental contract unambiguous, thereby prohibiting contractor from recovering certain contract administration costs).

The Board then considered whether extrinsic evidence clarified the meaning of the release.  It first considered other provisions in the modification and the contracting officer’s memorandum about the release.  Id. at 10.  The Board found that the purpose of the modification did not mention a global release and that the structure of the modification suggested the release only applied to one section of the contract.  Id.  The Board also considered that the parties’ “continued to negotiate a release of claims long after [the modification] was drafted and executed.”  Id. at 11.  As a result, the Board found the language of the modification and the parol evidence failed to establish a meeting of the minds between the parties.  Id.

Key Takeaways

Bartsch demonstrates that a Board likely will be hesitant to interpret a release as waiving all potential future claims under a contract unless the text of that release clearly demonstrates the contrary (though it is unclear what those magic words may be).  This decision also demonstrates that the entire contract and all modifications, and not just the specific release paragraph, may be relevant when interpreting the release.  In other words, context matters.

In light of Bartsch, contractors should consider the following when negotiating and interpreting release language:

  1. Carefully read the release – Is the release language limited to the modification or does it apply to all potential future claims?  Is the release contingent on any events?  Is there anything confusing in the release that requires you to review it several times before understanding it?
  1. Consider the release in the context of the entire contract – Where is the release located in the contract modification? Were releases provided in other contract modifications?  What was the scope of those releases?  Were certain potential claims excluded?
  1. Consider the release in the context of the performance and negotiation – If a release is deemed to be ambiguous, will extrinsic evidence support your interpretation? Do you have a process in place for maintaining records that may support your interpretation?

By considering these three points, contractors can help ensure that they are entering into a release that reflects their intention.