CBCA Addresses How To Avoid Release Language in an Executed Contract Modification

Contractors frequently execute modifications for extra work without considering the impact the boilerplate broad release language in the modification may have on future claims. Government agencies often seek dismissal of a contractor's claims before hearing on the basis of broad form release language that arguably encompasses the contractor's claim.

In Appeal of Fortis Industries, Inc., CBCA 7967 (September 18, 2024), the Civilian Board of Contract Appeals ("CBCA") addressed two arguments contractors frequently make to avoid the impact of broad release language in a modification. The CBCA began its discussion by reciting the standard rules of contract interpretation, i.e., "Because a release is contractual in nature, it is interpreted in the same manner as any other contract term or provision"; "the Board will look to the plain language of the release, and if the provisions are clear and unambiguous, they must be given their plain and ordinary meaning"; and "extrinsic or parol evidence may only be examined if the language is ambiguous."

To avoid the broad release language, the contractor pointed to several emails exchanged between the parties to show that the parties did not intend the release to apply to the claims the contractor was presently making. The board was persuaded that the emails raised a question of fact regarding the scope of the release and refused to dismiss the contractor's case before the hearing.

The contractor also argued that the modification should not be enforced because it was signed under duress. Duress requires a showing (1) that the contractor involuntarily accepted the terms of the modification, (2) that circumstances permitted no alternative, and (3) that such circumstances were the result of the government's coercive acts. To demonstrate coerciveness, the contractor must show proof of a wrongful action by the government that was illegal, a breach of an express provision of the contract without a good-faith belief that the action was permissible under the contract, or a breach of the implied covenant of good faith and fair dealing.

In this case, the contractor pointed to internal emails complaining about the negotiations. The board found this insufficient. The board found that the government's discussion with the contractor of its options of a "no cost" convenience termination or a default termination was consistent with the contract and the contracting officer's consideration of what was in the best interests of the government.

Takeaways

Some thoughts on this decision:

1. Make sure you have thoroughly reviewed and understand the release language in a modification.
2. If you don't like the language, insist that it be revised. For example, limit the scope of the release or the time period covered by the release.
3. If the government will not agree to your language, then ask the government to issue a unilateral modification so that you do not release your rights.
4. When transmitting the modification to the government, clearly express your understanding of the scope of the release in a written document. Note that this is not an alternative to modifying the language; the modification of the release language to conform to your understanding should always be paramount.
5. If you feel you have no choice but to sign the modification, return the release with a clear written statement that you are signing the modification involuntarily, that the circumstances permitted no alternative, and with a detailed elaboration of the facts demonstrating that the government has coerced you to sign this release, ideally pointing to illegality, breach of express contract terms, or breach of the implied covenant of good faith and fair dealing.

Please contact DWT's construction and government contracts team with questions or comments.