Overcoming Government Contractor Release of Claims HurdlesDuring the performance of a federal project, a government contractor release of contract claims statement can blindside contractors. In good faith, they believe that once the agency gets the benefit of services that they will be paid. Cases show that is simply not true.

What is a release of claims agreement?

A release of claims agreement is a declaration from the contractor that it has no future claims against the government. This form has very drastic consequences. Therefore, you want to seek help before signing. Courts tend to read executed contractor release of claims forms in favor of the government.  By signing the document, you essentially waive all present and future claims against the government.  Unfortunately, many appeals at the various boards of contract appeal show that government contractor release of claims language can be a tricky subject. 

Before signing documents that could essentially bar any future rights to a federal contract claim, you should get professional legal help. Too many small and large businesses have lost FAR release of claims cases worth millions on appeal.

General Rule of Law – FAR Release of Claims Language?

When it comes to a federal government contractor release of claims statement, the general rule is that absent applicable exception, an unconditional release bars a contractor from recovering additional compensation based on events occurring before the release was executed. This issue was decided in the case of ToddPacific Shipyards Corp., ASBCA No. 55126, 08-2 BCA 33,891 at 167,759. See Appealing Government Contract Claims and Signs of Being Under Investigation (Federal)

GOVERNMENT’S APPROACH TO DENY PAYMENT

The typical case for government contractors seeking help when the government denies the claim for final payment is that the contracting officer has probably taken the position that there has been an accord and satisfaction because of the signed settlement agreement. Before signing an agreement to settle a government contract claim you should consider the following:

  • Have you preserved parts of the contract where you still expect to be paid?
  • What does “any and all” claims mean when there is an accord and satisfaction?
  • What should you not sign versus what is ok to sign?

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EXCEPTIONS TO ACCORD AND SATISFACTION

  • Courts may refuse to bar a claim based upon the defense of accord and satisfaction where the parties continue to consider the claim after execution of a release. See England v. Sherman R. Smoot Corp., 388 F.3d 844 (2004)
  • A settlement based upon a mutual mistake of material facts may be corrected or set aside. See Morgan v. U.S., 80 Ct.Cl. 81 (1934).  accord and satisfaction entered into and executed through mutual mistake of fact is not binding and may be rescinded.

The facts in every case is different. Therefore, before you sign any release of claims in a federal government contract, seek help from a contract lawyer that understands the rules. Find out about Avoiding the Government’s Defense of Anticipatory Repudiation in Government Contracts.

REAL CASES in UNITED STATES WHERE CONTRACTORS LOST ON APPEAL 

ServiTodo, LLC v. HHS, CBCA 5524 (Mar. 3, 2017) (clear contract release language of bilateral settlement agreement bars current claim)

Perry Bartsch Jr. Construction Co. v. Dept. of Int., CBCA 4865, 5071 (Dec. 8, 2016) (denies Government’s motion for summary judgment because of ambiguities and unresolved factual issues concerning contract release language regarding scope in bilateral modification)

  • Hope for contractors can be revived if the government contractor’s release of claims is conditional.

If a specific contract release is broad in scope, then it is conditional. For example, in the contractor release of claims form, if a government contract bases the release on something that could occur in the future, (such as receiving payment at a future date) then arguably the FAR release of claims statements are conditional.

  • Companies must carefully review their government contractor release of claims language and its legal implications.
  • Businesses can literally lose out on millions in hard-earned money if they make a mistake with a contractor release of claims statement.

The Armed Services Board of Contract Appeals stated in the case of Cox Palmer Construction Corp., ASBCA No. 43438 et al, that in reviewing bilateral modifications involving time extensions, it recognizes that “the action of the contracting parties in agreeing to new performance schedule eliminates from consideration the causes of delay occurring prior to the extension.” If you are planning on appealing the Contracting Officer’s final decision, read about the Contract Disputes Act COFC & Boards Appellate Jurisdiction and Filing Contract Disputes Act Claims at the Civilian Board of Contract Appeals.

But when the modification does not include waiver or contract claims release, “the failure to reserve claim for delay costs is not fatal to later claim when the circumstances do not indicate the parties’ intention to include delay costs.” See information about accord and satisfaction.

ONCE A GOVERNMENT CONTRACTOR RELEASE OF CLAIMS IS WAIVED, HARD TO RECOVER 

As one can see, a general release statement can cost a contractor a substantial amount of money. Always include an experienced government contract claims attorney to proactively assess and overcome costly hurdles in contractor release of claims cases.

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For help with your government FAR release of claims statement and appealing the contracting officer’s final decision, please call our law office at 1-866-601-5518.

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