Project manager and contractors on jobsite

Securing your rights when it comes to payment on construction projects is crucial. No one accepts a job expecting trouble, but prudent contractors will be proactive and secure their rights as a safety net. So whenever faced with a “waiver” or “release” of claims and rights, it is important to review them carefully. Seems simple, but what happens when someone else at your company signs the documents?

A recent case heard by the Armed Services Board of Contract Appeals held that the project manager of a construction company had the authority to sign a waiver and release of claims.

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Contractor’s project manager waives claim rights

The case in question is the Appeal of Horton Construction Co., Inc.

Project Snapshot:

  • Owner/Public Entity: US Army (Army)
  • General Contractor: Horton Construction Co., Inc. (Horton Constr.)

Army had awarded Horton a contract to crush and relocate an estimated 69,000 tons of concrete for “erosion purposes” in Georgia. Upon completion, there were only 30,000 tons of concrete to be crushed. Due to the significant reduction, Horton filed a claim for compensation.

But there was a snag. Horton had apparently already waived their rights.

Final payment & release of claims provisions

During the course of the project, there were several modifications to the construction contract. Two in particular were entitled “Certification of Final Payment” and “Contractor Release of Claims,” which both contained the following provision:

“The contractor, upon payment of said sum by the United States of America… does remise, release, and discharge the Government, its officers, agents, and employees, of and from all liabilities, obligations, claims, and demands whatsoever under or arising from said contract, other than claims in stated amounts as listed below.”

Furthermore, there was no reservation of rights added to the provisions, which is expressly allowed under FAR §43.204(c)(2).

Project manager had apparent and actual authority to sign the release

Horton attempted to counter these arguments by stating the individual who signed the release wasn’t authorized to do so. The individual at issue was Chauncy Horton, who was acting as the “project manager” for the job. However, Army argued that Chauncy had not only “actual authority,” but “apparent authority” to execute these documents on behalf of the company.

The investigation as to whether Chauncy had authority to do so was very fact-intensive. To sum it up, Chauncy:

  • Signed the original contract documents as “the offeror”
  • Signed the notice to proceed as “Signature of Authorized Official”
  • Was listed as a point of contact on the Federal Contractor Registry
  • Executed additional separate contract modifications

Given all of these facts, the court determined that Chauncy indeed had authority to sign documents on behalf of Horton, and the claim was dismissed.

Review waiver & releases carefully

Preserving your rights is a critical step to ensuring you get paid what you’ve earned. Whenever faced with a waiver of rights, you need to take your time. First and foremost, read and review the terms of the waiver and release. Once you understand the waiver and release, take a step back and note if there are any lingering issues or potential claims you may have regarding the project.

If there are, a contractor can refuse to sign the document, or be sure to add any exceptions or reservation of rights regarding those claims. Lastly, construction companies should have clear indications of who can sign documents on the company’s behalf. Any document executed by someone who has actual or apparent authority will be legally bind your company, for better or for worse.