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    Government Contracting Database

    Accord and Satisfaction

    As a general rule, a modification adjusting the price and other contract provisions constitutes an accord and satisfaction barring subsequently asserted claims where the modification contains language of release. Co-op Construction Co., ASBCA 18663, 74-2 BCA 10,917 (1974). “To prove accord and satisfaction, the government must show ‘(1) proper subject matter; (2) competent parties; (3) a meeting of the minds of the parties; and (4) consideration.”’ Appeal of Whiting-Turner Contracting Co., ASBCA No. 56319, 10-1 B.C.A. (CCH) ¶ 34436 (May 6, 2010) (quoting Bell BCI Co. v. United States, 570 F.3d 1337, 1341 (Fed. Cir. 2009)). “To reach an accord and satisfaction there must be mutual agreement between the parties with the intention clearly stated and known to the contractor.” Appeal of Whiting-Turner Contracting Co., ASBCA No. 56319, 10-1 B.C.A. (CCH) ¶ 34436 (May 6, 2010) (quoting Coastal Government Services, Inc., ASBCA No. 50283, 99-1 BCA ¶ 30,348 at 150,088).

    In the absence of clear release language, however, such modifications are narrowly construed with regard to costs that were not considered when the modification was negotiated. See D & L Const. Co., Inc., AGBCA No. 97-205-1, 00-2 B.C.A. (CCH) ¶ 31001 (July 3, 2000); Appeal of Gardner Zemke Co., 90-3 B.C.A. (CCH) ¶ 23064 (June 19, 1990). Before an accord and satisfaction are found to bar a subsequent claim, the government must prove that the parties agreed to waive or release the claim when they executed the contract modification. Chantilly Construction Corp., ASBCA 24138, 81-1 BCA 14,863 (1980). As the Board noted in Baifield Industries, ASBCA 18057, 77-1 BCA 12,348 (1977); “When parties discharge a claim by accord and satisfaction there must be a clear and specific agreement and understanding of exactly what terms have been negotiated.” Although the government carries the burden of proof in this respect, the presence of general language of release operates to shift the burden to the contractor to show that the parties never agreed to settle the disputed claim. Appeals of Cmty. Heating & Plumbing Co., Inc., ASBCA No. 37981, 92-2 B.C.A. (CCH) ¶ 24870 (Feb. 24, 1992) (citing W.M. Schlosser, Inc., ASBCA 24645, 83-2 BCA 16,827 (1983)). This determination necessarily turns on the intent of the parties. Thus, where the subsequent claim was not considered by the parties during negotiations, and the modification does not contain language clearly indicating that it constitutes a complete settlement of all claims arising from the subject change, the modification will not constitute a waiver of that claim. Chantilly Construction, supra; see also Dawson Construction Co., GSBCA 5611, 83-1 BCA 16,160 (1983); Vic Lane Construction, Inc., ASBCA 30305, 85-2 BCA 18,156 (1985).

    Applying this analysis, the “Board has held contract adjustments increasing contract time not to bar subsequent claims for price adjustments based on the same circumstances where the parties did not consider the additional compensation claims when negotiating the time extension amendment.” Vic Lane Construction, 85-2 BCA 18,156 at p. 91,145. (citing Comdata Systems, Inc., ASBCA 19893, 77-1 BCA 12,463; and Kurz and Root Co., ASBCA 17146, 74-1 BCA 10,543).

    The Board also has addressed the issue of whether a modification granting a time extension may be construed as releasing all claims which arose during a concurrent time period. In R.C. Hedreen Co., ASBCA 20599, 77-1 BCA 12,328 (1977), the government changed the testing and material requirements for ductile pipe, and the contractor negotiated a modification providing for unrelated additional work which extended the contract completion date to November 4. The modification provided that the contractor waived any claims “arising out of or related to this contract modification” and that it constituted an accord and satisfaction of all related claims.

    Because of delays occasioned by the new testing requirements for the ductile pipe, the contractor incurred extended overhead costs during the period from October 24, the date of scheduled pipe work completion, through November 19, the date its subcontractor completed work. In response to the contractor’s claim for this twenty-six days of extended overhead, Respondent argued that execution of the other modification without a reservation of overhead claims waived the contractor’s claim for those costs incurred during the overlapping period, i.e., from October 24, through November 4.

    Despite the applicability of a Waiver & Release clause, the Board rejected the government’s argument, holding that the language of the modification was not broad enough to encompass the overhead claim:

    In addition, we hold that the language of the modification is not broad enough to cover the claims resulting in this appeal. If the intent of the [government] was to include the present claim it should have drafted a more persuasive “boilerplate” provision that would clearly have manifested its intent and put the contractor on notice.

    Appeal of R.C. Hedreen Co., ASBCA No. 20599, 77-1 B.C.A. (CCH) ¶ 12328 (Jan. 7, 1977).

    Updated: May 23, 2018

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