"Education is when you read the fine print. Experience is what you get if you don't."1
A federal contractor learned this lesson the hard way in a recent case before the Armed Services Board of Contract Appeals, Alistiqama Co., ASBCA Nos. 62501, 62502 (Oct. 28, 2020).
Alistiqama is federal contractor that leased forklifts, trucks, and cranes to the Army's 408th Contract Support Brigade in support of Middle East operations. Under the Blanket Purchase Agreement, the Army issued task orders for the leased equipment. Both of the task orders at issue in this case required the Army to return the equipment to Alistiqama by a certain date.
After submitting an invoice to the Army for an order for over $525,000, the Army sent Alistiqama an email that stated:
Our records shows [sic] that all payments have been made and received for contract W56KGZ17A8010 / W56KGZ18F6016. If this information is accurate, please sign and date attached document in acknowledgment that all payment has been received. Please send a copy of the signed document to me as soon as possible. Thank you very much. We look forward to working with you again.
Alistiqama dutifully responded to the email, "kindly see attached signed copy." The "attached document" contained a release that stated:
- 1. RELEASE OF CLAIMS: I hereby certify that subject Contract W56KGZ17A8010/W56KGZ18F6016 is paid in full. I hereby release the US Government, its officers, agents and employees of and from all liabilities, obligations, claims, appeals and demand which it now has or hereafter may have, whether known or unknown, administrative or judicial, legal or equitable arising under or in any way related to the services provided.
- 2. Payment Amount: $525,502
Alistiqama signed this release even though the Army had not timely returned certain equipment. For example, before Alistiqama signed the release, the Army had been 33 days late returning a 50 ton mobile crane. In other cases, the Army continued to use the equipment for months after the return date specified in the lease. So, instead of paying for the extra time to use the equipment, the Army instead sent Alistiqama the above release, which, by its language, covered all claims Alistiqama had or "may have, whether known or unknown."
After not receiving payment for the extended lease costs, Alistiqama filed a claim. The Contracting Officer denied the claim the based on the release, and Alistiqama appealed.
On appeal, Alistiqama made several arguments to support its entitlement to payment for the extended lease of the equipment:
- 1) The Army continued to use the rented equipment after the contract performance period;
- 2) It sent emails to the Army as the equipment neared the end of the contract performance period, but that the Army replied that the equipment "was still in use and was needed to finish the job in Syria;"
- 3) It requested that the contract be extended or that a new contract be issued for the additional time;
- 4) It signed the releases because "we were directed to by email from the contracting office or failure to sign would automatically close out contract. Alistiqama opted to sign the contracts and collected the money guaranteed by the contract while the equipment remained in operation in Syria."
The Government did not respond to the merits of these arguments. Instead, the Government argued that Alistiqama, failed to support its claim with any evidentiary proof. In its decision denying Alistiqama's claim, the Board considered and rejected at least two theories of potential recovery:
First, it considered whether Alistiqama had been forced to sign the releases under duress. After reviewing the communications in the record, the Board concluded that, in sending the release, the Army was of the belief that all payments had been made and it was just looking for an acknowledgment from the contractor. The Board also concluded that there was no evidence that Alistiqama attempted to reserve its potential claims from the release or that the Contracting Officer was aware that Alistiqama was asserting entitlement to additional compensation.
Second, the Board considered whether the parties had created an implied-in-fact contract, essentially extending the expired contract's period of performance. The Board noted that the only evidence in the record supporting such a claim was an email from Alistiqama asking about the equipment still operating in the field, and asserting that a Chief Johnson had informed Alistiqama that "the Army was still in need of equipment and that the contract will be extended."
The Board viewed this as insufficient to establish an implied-in-fact contract which requires (1) mutuality of intent to contract; (2) consideration; (3) unambiguous offer and acceptance; and (4) actual authority on the part of the Government representative whose conduct is relied upon. The Board also noted that, to the extent Chief Johnson told Alistiqama that the contract would be extended, there was no evidence in the record that Chief Johnson was a contracting officer with authority to bind the Government, or that there was a clear and ambiguous offer and acceptance.
Here, I do not believe that the Army (or the Board) would dispute that the Army benefited from the use of the leased equipment. If true, the outcome does not seem equitable or fair—especially if Alistiqama believed (as the record seemed to indicate) that its contract would be extended based upon the statements of Chief Johnson. And without ascribing any bad intent to the Government for attempting to proverbially pull the wool over the eyes of the contractor, it is not clear to me why the Army would send Alistiqama a final release when it very well must have known that it was using the contractor's equipment after the contract completion date, and all the while without paying for it.
Regardless, such issues will not matter in the courtroom. As this decision makes clear, releases will be interpreted unforgivingly, and contractors relying upon promises from Government representatives without actual authority do so at their peril.
Equally significant, this decision reminds us that contractors shall be held to a standard where they are expected to know the law and enforce their rights. So, if you are presented with any release, and especially a final release: read the language closely, make sure you understand it, reserve your rights and, if you cannot come to an agreement, do not sign.
We welcome your questions and comments.
1 This quote has been around for a while but, as anyone who has attended his classes and lectures can attest, it is nationally recognized Government contracts author, teacher, and attorney James F. Nagle who regularly and always memorably reminds contractors of these important words of warning.