Government Contract Release & Accord and Satisfaction Defense

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.

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 was made to a contract.  It is then up to the court or board hearing the claim to decide whether or not the defense exists.

 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 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.

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.