Two Sides to Every Story: When Is Extrinsic Evidence Relevant to Interpreting the Scope of a Contractor Release?
When is it appropriate to consider “extrinsic evidence” of the parties’ intent when interpreting a contractor’s release of claims? A new decision out of the Armed Services Board of Contract Appeals (“ASBCA”), Sonabend Company (ASBCA No. 63359), sheds new light on this important question, denying the government’s motion for summary judgment because the release language it relied on was ambiguous and thus raised an issue of fact.
Signing Releases—An Area Fraught with Risk
Releases are typically presented to the contractor as routine. Simply sign the modification and new work scope or new funding will be added to your contract! But when a contractor signs a modification, it might waive its ability to later pursue a cost claim, even for prior changes not impacted by the modification itself. Thus, it is important to identify modification language that may bar a future claim.
The government typically seeks to bar recovery based on at least one of two legal theories: (1) a release and (2) accord and satisfaction.
- Release—a unilateral act by which one party disclaims a contract right or obligation.
- Accord and Satisfaction—a bilateral agreement or an accord, where the parties agree to altered performance and the acceptance of such altered performance is satisfaction of the accord, which discharges the claim.
In practice, these theories may apply even though a modification does not announce itself as a release or an accord and satisfaction or a bar to a future claim.
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