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.
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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.