Tag Archives: modification

THINK BEFORE YOU EXECUTE THAT RELEASE – THE LANGUAGE IN THE RELEASE MATTERS!

Posted on by

If you execute a release in exchange for payment or other consideration, remember the language in the release means something.  THE RELEASE LANGUAGE MATTERS! And the meaning in the release may be way more than you intended so please make sure you truly digest and consider release language before executing.

This sentiment could not be truer than in the 2009 decision Bell BCI Company v. United States, 570 F.3d 1337 (Fed. Cir. 2009). In this case, a contractor entered into a modification (change order) with the government.  The modification included the following language:

increase the contract amount by $2,296,963 … as full and equitable adjustment for the remaining direct and indirect costs of the Floor 4 Fit-out (EWO 240–R1) and full and equitable adjustment for all delays resulting from any and all Government changes transmitted to the Contractor on or before August 31, 2000.

***

The modification agreed to herein is a fair and equitable adjustment for the Contractor’s direct and indirect costs. This modification provides full compensation for the changed work, including both Contract cost and Contract time. The Contractor hereby releases the Government from any and all liability under the Contract for further equitable adjustment attributable to the Modification.

Bell BCI, supra, at 1339.

The release language was also included in subsequent modifications.

Thereafter, the government issued 113 additional modifications to the contractor, and there were numerous unresolved extra work orders that were not turned into a modification. After the contractor completed the project, it submitted a request for equitable adjustment to the contracting officer.  The contracting officer denied the request for equitable adjustment and asserted liquidated damages against the contractor for delays to the project. The contractor filed a lawsuit against the government claiming inefficiencies and delays caused by the cumulative impact and disruption from all the modifications issued by the government. The trial court found in favor of the contractor.  The government appealed and the finding was much different. This is why.

Regardless of the cumulative impact claim, the contractor signed a modification that “‘provides full compensation for the changed work’” and that [the contractor] “‘hereby releases the Government from any and all liability under this Contract for further equitable adjustment attributable to the Modification.’”  Bell BCI, supra, at 1340.   Under the modification and release language, the appellate court held the issue was not whether the contractor sustained a cumulative impact, but whether the contractor released the government for the impact through the language in the executed modification.

The appellate court maintained that a release is interpreted no different than any other contract and parol evidence will be reviewed only in the event of an ambiguity.  Bell BCI, supra, at 1341. If there is no ambiguity, the plan language in the release will control. Id.

We hold that the language in paragraph 8 of Mod 93 is unambiguous, and the [trial] court clearly erred in holding that [the contractor] did not release its cumulative impact claims attributable to that modification. The language plainly states that [the contractor] released the government from any and all liability for equitable adjustments attributable to Mod 93. At best, there may be ambiguity as to which claims are “attributable to” a given modification, but we cannot glean any ambiguity about which types of claims are released-Mod 93 clearly, unambiguously releases the government from “any and all” liability. As the Supreme Court stated in United States v. William Cramp & Sons Ship & Engine Building Co., “[i]f parties intend to leave some things open and unsettled, their intent so to do should be made manifest.” 206 U.S. 118, 128, 42 Ct.Cl. 532, 27 S.Ct. 676, 51 L.Ed. 983 (1907). Further, the government’s payment of over $2,000,000 in Mod 93 constitutes adequate consideration for [the contractor’s] release.

In the absence of an ambiguity, we decline to examine the parties’ extrinsic evidence [i.e., parol evidence].

Bell BCI, supra, at 1341-42.

Is this the right ruling? Did the contractor intend to release cumulative impacts such that the ruling from the trial court, that entertained the evidence, should control? Unfortunately for the contractor, the intent did not matter to the appellate court because the plain language of the unambiguous release eliminated the need to hear parol evidence on intent.  Hence, the overarching takeaway – think before you execute that release!

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

QUICK NOTE: PURCHASE-AND-SALE CONTRACTS AND THREE POINTERS

Posted on by

When you enter into a purchase-and-sale contract for real estate, keep in mind that you can modify the contract to include terms particular to the transaction.  These modifications can be important if an issue arises such as if closing does not timely occur.  In a new case, discussed here, three noteworthy pointers can be found below:

 

 

 

  1. Including an addendum with a drop-dead closing date can be valuable to a buyer and seller because it prevents any excuse to the closing date. For example, if the seller cannot deliver marketable title by this drop-dead date, the buyer has the option to terminate the contract.  However, the addendum can include any modification or provision important to you for purposes of the transaction.
  2. The arguments of waiver and estoppel are very difficult arguments to raise when it comes to real estate contracts. This is because: (a) the contract will provide that modifications to it must be in writing and signed by the parties, and (b) the statute of frauds requires contracts relating to real estate transactions to be in writing and signed by the party to be charged.   In other words, if the objective is to modify the contract, that modification needs to be in writing and signed otherwise the statute of frauds and the contract itself can bar that argument.
  3. A lis pendens does create a cloud on title. Thus, if you purchase a property with a lis pendens, this prevents the seller from delivering marketable title to you as the buyer.  A lis pendens remains a cloud on title until the appellate time period expires as it pertains to any order to discharge the lis pendens.

 

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

DIFFERENCE BETWEEN A NOVATION AND A MODIFICATION TO A CONTRACT

Posted on by

In contract law, there are two doctrines that have similarities but are indeed different. These doctrines are known as novation and modification.   There are times you may want to make arguments relative to these doctrines because they are important for your theory of the dispute.  Thus, you want to make sure you understand them so you can properly plead and prove the required elements to substantiate the basis of the theories.  Understanding the elements will help you understand the evidence you will need to best prove your factual theories.

A novation is essentially substituting a new contract for an old contract.

“‘A novation is a mutual agreement between the parties for the discharge of a valid existing obligation by the substitution of a new valid obligation.’” Thompson v. Jared Kane Co., Inc., 872 So.2d 356, 361 (Fla. 2d DCA 2004) (citation omitted).   To prove a novation, a party must prove four elements: “(1) the existence of a previously valid contract; (2) the agreement of the parties to cancel the first contract; (3) the agreement of the parties that the second contract replace the first; and (4) the validity of the second contract.”  Id. at 61.  Whether the parties consented to the substitute contract can be implied from the factual circumstances.  Id.

Parties are more familiar with a modification because it is not uncommon that parties may agree to modify contractual terms. The contract remains in effect but certain terms or obligations are modified.  For example, a change order to a contract is a modification.

A modification, unlike a novation, “merely replaces some of the terms of a valid and existing agreement while keeping those not abrogated by the modification in effect.”  Bornstein v. Marcus, 275 So.3d 636, 639 (Fla. 3d DCA 2019).

When determining the scope of a modification to a contract, the following principles control: (1) “individual terms of a contract are not to be considered in isolation, but as a whole and in relation to one another”; (2) “the proper resolution of any inconsistency … is best determined by the manner in which the parties actually perform under it”; and (3) “an amendment to an agreement is designed to serve some useful function, and its existence is strong evidence, therefore, that the contract was changed from what the parties believed and intended was provided before.”

Marcus, supra, at 640 (citations omitted).

Remember, there is a difference between a modification and a novation.  Understanding this distinction may come into play in a dispute you have relative to a contract you entered into.

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.