David Adelstein | Florida Construction Legal Updates
A federal government contractor in Jackson Construction Co., Inc. v. U.S., 62 Fed.Cl. 84 (Fed.Cl. 2024) sought delay damages against the government. It lost. The reason for the loss is a crucial reminder that documents parties sign ALWAYS matter. ALWAYS!!
In Jackson Construction Co., the contractor’s delay claim was premised on relocating a waterline. The contractor, however, received additional money for relocating the waterline, but no additional time, and this was memorialized in a modification to the contract (i.e., a change order). In executing the modification for the additional work, the contractor did NOT reserve rights for time or money. Indeed, the modification reflected that the monetary adjustment constitutes full compensation for the additional work including delay, namely:
The contract period of performance remains the same. It is further understood and agreed that this adjustment constitutes compensation in full on behalf of the contractor and his subcontractors and suppliers for all costs and markup directly or indirectly, including extended overhead, attributable to the change order, for all delays related thereto, and for performance of the change within the time frame stated.
Jackson Construction Co., supra, at 90.
The contractor made a few arguments to try to overcome the modification it agreed to. All failed.
An “executed bilateral modification with a release provision usually constitutes an accord and satisfaction unless that release is either ambiguous or limited in scope.” Jackson Construction Co., supra, at 92.
An ‘accord’ is a contract under which both parties agree that one party will render additional or alternative performance in order to settle an existing claim made by the other party, and ‘satisfaction’ is the actual performance of the accord. The party asserting an accord and satisfaction defense must establish four elements: (1) proper subject matter; (2) competent parties; (3) a meeting of the minds; and (4) consideration.
Id. (internal citation omitted).
The contractor could reserve rights in a modification to avoid the accord and satisfaction defense. Without the reservation of rights, “the Court must focus on whether or not the parties’ objective manifestations of intent demonstrate that they reached a meeting of the minds with respect of additional claims.” Id. at 93.
Here, the contractor did not reserve its rights in the modification it executed. Thus, the contractor did not preserve its delay claim for the additional waterline relocation. To this point, there was no evidence that the contractor intended to reserve rights to assert a delay claim at the time it executed the modification.
While the contractor looked to avoid the accord and satisfaction defense by arguing the release in the modification was ambiguous and procured through government misrepresentation, the court was having none of this. There was no evidence of any misrepresentation or ambiguity.
The contractor further argued that it signed the modification due to economic duress.
A party asserting economic duress must show more than economic tension or financial harm. Jackson Construction Co., supra, at 95. “A party asserting economic duress must prove that: (1) its acceptance of the other party’s terms was involuntary; (2) the circumstances permitted no alternative but to accept the terms; and (3) the acceptance resulted from the coercive acts of the other party.” Id. The contractor could not prove any of those elements.
The key takeaway is that parties need to appreciate what they execute and that there are consequences to executing documents. The contractor could have reserved rights. It did not. As a result, the contractor had to rely on weak arguments that it had no evidence to support…all because of the consequences of the modification the contractor signed.
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