Owners may argue that a contractor’s delay claim is barred because the contractor signed a release during construction of the project. Owners may also argue that a delay claim is barred because there was an accord and satisfaction regarding such a claim.

While the defenses of release and accord and satisfaction are often lumped together, there are nuances to both defenses. A tribunal recently considered both defenses in a decision that ultimately resulted in the denial of an owner’s motion for summary judgment based on a release a contractor signed during construction.

In Appeal of The Haskell Company, a contractor was awarded a $19 million design-build project for the construction of a reserve center for the United States Navy. Before construction of the project started, the Navy made design changes to the project that caused the contractor to incur additional costs.

As a result, the Navy issued a $485,000 modification to the contractor that contained the following language:

Acceptance of this modification by the contractor constitutes an accord and satisfaction and represents payment in full for both time and money and for any and all costs, impact effect, and for delays and disruptions arising out of, or incidental to, the work as herein revised. 

Subsequent adverse weather impacts the contractor’s work at the project.
Subsequently, unusually severe weather impacted the contractor’s ability to timely complete the project. The parties entered into another modification that included the above-noted language. But the modification also included the following reservation of rights language:

The [contractor] agrees that the acceptance included in this modification A00007 dated August 30, 2019 for the specific [contractor] delay noted that is specifically related to the delay in the completion of the Front Gate. Haskell reserves and retains all rights arising from or related to previous Requests for Equitable Adjustment (REA) and/or other notices provided to NAVFAC related to initial design review delays and subsequent releases for construction, delays to design completion in an effort to mitigate steel and metals materials costs escalation that was caused by the U.S. Government, further delays caused by extreme weather in the summer of 2018 and the winter of 2018 and 2019. These items include both monetary damages and impacts requiring extensions of time incurred by [contractor] and are outside the scope of this Contract Modification. [Contractor]’s impacts and damages noted above include only those items which can presently be determined. 

The contractor submits a $2.6 million delay claim, which the Navy rejected.
The contractor submitted a $2.6 million claim for costs associated with the Navy’s delay in approving the design for the project. The Navy denied the claim because it found the the contractor failed to show that the Navy had unduly delayed the approval of the contractor’s design.

The contractor appeals the denied claim.
The contractor appealed the Navy’s rejection of the claim to the Armed Services Board of Contract Appeals. The Navy filed a motion for summary judgment and argued that the contractor’s claim was barred because the contractor signed the first modification which contained the above-noted release language. The contractor argued that its claim was not barred because the parties did not have a meeting of the minds as to whether the release included the contractor’s claims or future costs incurred due to unusually severe weather resulting from the Navy’s project design changes.

The defenses of release and accord and satisfaction.
The Board considered both of the Navy’s two specific arguments–accord and satisfaction and release. The Board wrote that “[a]n accord and satisfaction occurs when ‘some performance other than that which was claimed to be due is accepted as full satisfaction of the claim.’” And “[t]o prove accord and satisfaction, the [Navy] must show ‘(1) proper subject matter; (2) competent parties; (3) a meeting of the minds of the parties; and (4) consideration.’” 

The Board also noted that “[a] release is a contractual defense where a party abandons a claim or relinquishes a right that could be asserted against another].” And release should be interpreted the same as any other contract term with a “focus on the intent of the parties at the time the release is executed[,] and this intent should be sought from the whole and every part of the instrument.” 

The Board finds there was no meeting of the minds as to the scope of the release. 
The Board found that there was no meeting of the minds on the scope of the release. Based on the language of the release, the Board found “[t]he parties’ focus appears to have been on the estimated costs and effort necessary to implement the various design changes and not future costs that could result from further delays during the construction phase.”

The Board also noted that before the parties signed the first modification, the contractor notified the Navy that the contractor intended to submit a request for equitable adjustment due to the weather delays. Thus, the Board concluded the Navy “failed to establish that a meeting of the minds occurred regarding whether the parties intended the release to include [the contractor]’s current claim.”

The Navy’s subsequent actions also show there was no meeting of the minds. 
The Board also concluded that the parties subsequent actions indicated there was no meeting of the minds. For example, during construction, the contractor submitted several requests for weather impact claims. The Board noted that the Navy “presented no evidence that in responding to these claims it asserted [the contractor] had waived its right to assert the claims due to the release in [the first modification].”

Since the parties continued to consider and negotiate a claim after the signing of the release, that “may indicate an accord and satisfaction was not intended to cover that claim.” In other words, the Navy’s post-claim actions could be construed as agreement that the contractor “retained its rights to assert its claim for adverse weather impacts resulting from the design review claim.”

The Board denies the Navy’s motion for summary judgment.
In short, the Board concluded that the Navy did not establish “that there was a meeting of the minds between the parties that ‘the delays and disruptions arising out of . . . the work as herein revised’ in Mod 1 included [the contractor]’s costs incurred due to unusually severe weather and seasonal differences allegedly resulting form the [Navy] project design changes that pushed construction into adverse weather periods.” Thus, the Board denied the Navy’s motion or summary judgment.