Government Contract Affirmative Defense Release & Accord and Satisfaction

Government contracting agencies will often have you sign a release of all claims under the contract. Contractors must be careful in understanding what exactly signing a waiver of claims means.  Avoid Costly legal mistakes when signing government contract changes that contain release of claims clauses.

When bringing a contract claim against the federal government, it is important to know if the claim you wish to assert is barred by the accord and satisfaction defense.  If it is, then you do not want to waste both time and money. 

The government can raise various affirmative defenses that can lead to a finding of a barred claim.  This article will focus on two of those defenses: release and accord and satisfaction affirmative defense.

What is the Affirmative Defense of Accord and Satisfaction in Government Contracts?

Accord and satisfaction is an affirmative defense to any claims under a government contract. It allows parties to settle their disputes without going through the lengthy process of litigation. The doctrine recognizes that after a dispute arises, it may be more efficient for the parties to reach an agreement rather than drag out their disagreements in court. However, the end result is not always that simple.

Oftentimes when there is a change to the contract or a claim submitted under the Contract Disputes Act, the government will make the change but then attempt to have you then sign a contract release. You should read the exact language and find a contract disputes lawyer that can prove legal advice about your rights or whether you are waiving your rights to future claims by signing.

Government contracts typically contain clauses that state that after a dispute has been resolved by way of settlement, either party can still pursue legal. The affirmative defense of accord and satisfaction can be used by both parties when disputes arise. This means that if the government agrees to change certain terms in the contract, but you have signed a contract release, then the government is unable to take legal action against you even though they may still have claims under the contract. In essence, this means that any settlement or agreement reached between two parties is binding and cannot later be challenged in court.

It is important for contracting officers and government contractors to understand how the affirmative defense of accord and satisfaction works within government contracts. More importantly, it is essential that all parties involved seek legal advice in order to ensure no rights are waived or violated during a dispute resolution process. A qualified government contract claims lawyer can provide invaluable advice and assistance in this regard. By working with a lawyer who is knowledgeable about the affirmative defense of accord and satisfaction, parties can resolve disputes quickly and efficiently while protecting their rights under the law.

When these defenses are used successfully, the contract claim is regarded as barred and damages cannot be recovered.  Release and accord and satisfaction are two separate and distinct affirmative defenses to breach of contract, however, an agreement may constitute both, and either defense can bar future claims.  Release and accord satisfaction language is often argued by the government when a modification is made to a contract.  It is then up to the court or board hearing the claim to decide whether or not the defense exists.

What are the Elements of Accord and Satisfaction?

The elements of the affirmative defense of accord and satisfaction include: (1) an agreement to settle a dispute by compromising claims; (2) consideration that is given in exchange for the promise to settle; (3) intent to extinguish liabilities under the agreement; and (4) fulfillment of obligations under the agreement.

Do You Have to Sign a Release of Claims for Contracting Officer?

Tip – DO NOT sign a contractor release of claims without speaking to an attorney.

No, a contractor does not have to sign a release of claims if presented by the government. The contractor can instead negotiate for better terms or may ultimately decide to the matter to court. The contractor should always consult with an experienced government contract claims lawyer prior to signing any documents or entering into any agreements with the government. A qualified federal procurement attorney will be able to advise on the best course of action and guide you through each step of the process.

What is the Government’s Use of the Release Affirmative Defense in Federal Government Contracting?

The Release Affirmative Defense is an affirmative defense in federal government contracting that allows the government to successfully contest a claim or breach of contract. This defense can be used when the government has released the contractor from all obligations or liabilities arising out of its performance under the contract. To rely on this defense, the government must demonstrate that the contractor was well aware of the release and precluded all past and future claims – known and unknown with it. The U.S Court of Federal Claims has identified four elements necessary for establishing a Release Affirmative Defense: (1) there must have been a valid release; (2) the defendant must have had knowledge of such release; (3) the defendant must not have waived rights under such release; and (4) any damages claimed by the contractor.

How Can a Government Contractor’s Case be Dismissed When the Government Invokes the Release Affirmative Defense?

When the government invokes the Release Affirmative Defense, it is an affirmative defense, which means that the government must prove that the release was valid, that it had proper knowledge of it, and that any damages claimed by the contractor are within its scope. If these elements are proven to be true, then a court may dismiss the case entirely or reduce any claims made by the contractor. Additionally, a court may also find in favor of the defense if it finds that there has been an equitable remedy awarded under contract law.

The best way for government contractors to protect themselves from being released from liability is to consult with experienced government contracts lawyers prior to signing any contract release with the agency. A knowledgeable attorney can review all contractual agreements between parties and ensure that all parties are aware of the release affirmative defense. Furthermore, a government contracts lawyer can help contractors determine whether or not they should pursue legal action if the Release Affirmative Defense is invoked by the government.

If you have been served with a Release Affirmative Defense in federal government contracting, it is essential to seek guidance from an experienced government contracts lawyer as soon as possible. A qualified attorney can review your case, advise you on your legal rights and options, and provide invaluable assistance in navigating the complexities of federal contract law.

Standards Governing Accord and Satisfaction and Releases in Government Contracts

Accord and satisfaction occur “when some performance different from that which was claimed as due is rendered and such substituted performance is accepted by the claimant as full satisfaction of his claim.” Bell BCI Co. v. United States, 570 F.3d 1337, 1340-41 (Fed. Cir. 2009) (quoting Cmty. Heating & Plumbing Co. v. Kelso, 987 F.2d 1575, 1581 (Fed. Cir. 1993)). When asserting the affirmative defense of accord and satisfaction the government must demonstrate: “(1) proper subject matter; (2) competent parties; (3) a meeting of the minds of the parties; and (4) consideration.” Id. at 1341 (quoting O’Connor v. United States, 308 F.3d 1233, 1240 (Fed. Cir. 2002)).

Can You Reserve Your Right to Future Claims When the Government Gives You a Release to Sign?

As a  government contractor, you may want to seriously consider whether or not you should sign the release. Many government contract claim appellate cases are dismissed because the contractor signed a general release. You should seek legal counsel before signing. If you do not agree with the general release language, then you should negotiate with the contracting officer to include a more limited release.

What is Your Legal Defense to the Government’s Affirmative Defense of Release / Accord and Satisfaction?

In this case, like in Bell BCI, there is no dispute regarding proper subject matter or competent parties. KFJV contends, however, that there was no meeting of the minds with respect to releasing NCI’s delay claim. It also contends that there was no consideration for KFJV’s release.

A release is contractual in nature and must be interpreted in the same manner as any other contract term or provision. Bell BCI, 570 F.3d at 1341 (citing Metric Constructors, Inc. v. United States, 314 F.3d 578, 579 (Fed. Cir. 2002)). To resolve this dispute we must first examine whether the modification is ambiguous; if the terms are unambiguous, we cannot consider extrinsic evidence. McAbee Constr., Inc. v. United States, 97 F.3d 1431, 1435 (Fed. Cir. 1996). If the modification is ambiguous, requiring the weighing of extrinsic evidence, the matter generally is not amenable to summary resolution. Beta Sys., Inc. v. United States, 838 F.2d 1179, 1183 (Fed. Cir. 1988).

When the Government Presents the Contractor With Release of Claims Does the Contractor Have to Sign It?

No, a contractor does not have to sign a release of claims if presented by the government. The contractor can instead negotiate for better terms or may ultimately decide to the matter to court. The contractor should always consult with an experienced government contract claims lawyer prior to signing any documents or entering into any agreements with the government. A qualified federal procurement attorney will be able to advise on the best course of action and guide you through each step of the process.

When Does the Government Usually Invoke the Affirmative Defense of Accord and Satisfaction?

The government will normally raise the affirmative defense of release and accord and satisfaction when the contracting denies your claim and you decide to appeal the contracting officer’s final decision to the Board of Contract Appeals or the US Court of Appeals for the Federal Circuit.

Oftentimes, the government’s attorney will file a motion to dismiss or a motion for summary judgment. Finding an experienced ASBCA or CBCA appellate attorney can make a huge difference in the outcome of your case.

 Avoid Costly Mistakes With Accord and Satisfaction Agreements 

The affirmative defense release of liability is “a contract [or modification] whereby a party abandons a claim or relinquishes a right that could be asserted against another.”  Holland v. United States.

In analyzing an accord and satisfaction agreement, the focus will be on the intent of the parties at the time the release was executed.  Intent can be ascertained by looking at the modification language.  If the intent is ambiguous and unclear, courts and boards can then determine intent by examining the parties’ conduct leading up to the modification.  If this is still not enough, the contract will be interpreted for the party that did not draft it.

Even if a release is found, the scope of the release plays an important role.  A release can be applied to past claims and limited in other ways.  Release scope and intent can be inferred from parties’ conduct after the modification has been signed.

An accord and satisfaction occur when a “claim is discharged because some performance other than that which was claimed to be due is accepted as full accord and satisfaction of the claim.”  Accord means agreement and satisfaction refer to the execution or performance.

Four elements must be proven by the party asserting the accord and satisfaction affirmative defense:

• Proper subject matter
• Competent parties
• A meeting of the minds between the parties, and
• Consideration

Where most disputes occur is the meeting of the minds element.  There must be a mutual agreement between the parties with the intention clearly stated and known to the contractor. Be aware of the government’s payment affirmative defense.

Courts and boards have held that where the three other elements are met and the modification includes unambiguous accord and satisfaction language (such as: “acceptance of this modification by the contractor constitutes an accord and satisfaction [of any and all costs or all claims and potential claims]…”), which the complainant accepted, the defense has been met, and future claims will be barred.

Boards of Contract Appeals have also held that when the federal government and a contractor continue to consider a contractor’s claim after the contractor has signed a release, their conduct demonstrates that they did not consider the release to constitute an accord and satisfaction of the claim. Under such circumstances, the affirmative defense of release is not a bar to prosecution of the claim. See John T. Jones Constr. Co., ASBCA Nos. 48303, 48593, 1998-2 B.C.A. (CCH) ¶ 29,892 at 147,975 (Nov. 10, 1997) (citing Winn-Senter Constr. Co. v. United States, 75 F. Supp. 255, 260 (Ct. Cl. 1948)).

Where there is no accord and satisfaction language in the modification, future claims will likely be found not to be barred.  Additionally, in one recent case, Optex Systems, Inc., language in the modification stated that the modification was intended to apply to past costs and issues on the contract; this was not sufficient to constitute an accord and satisfaction affirmative defense, and thus, the contractor’s claim made two years after the modification was not barred.

Both Release of Claims and Accord and Satisfaction are Voidable

Even if a release of claims or accord and satisfaction affirmative defense are found, the defense may be voided if the contractor’s acceptance to the modification was induced by a fraudulent or material misrepresentation upon which the contractor was justified in relying.  The contractor must prove that the government made an inaccurate representation of an important fact that the contractor honestly and reasonably relied on.

Conclusion

When presented with a government contractor release that essentially attempts to have you waive all past present and future claims under a federal government contract, be careful. Consult with your legal counsel before signing.

If you have any questions regarding release defenses, accord and satisfaction defense or any claim you wish to bring against the federal government, please call a Federal Government Contracts Lawyer at 1-866-601-5518 for a free consultation.