Contracts typically have a bunch of prefatory “whereas” clauses. Given their prominence, you’d think whereas clauses would be an important part of a contract. But as this decision illustrates, that is not the case. The contractor argued that clauses in a settlement agreement with the government limited the scope of a general release and preserved one of the contractor’s claims. The court rejected that argument, reasoning that whereas clauses are not contractual. They just provide background and are not binding.
T.H.R. Enterprises, Inc. v. United States, COFC No. 20-558C
Background
T.H.R. Enterprises had an IDIQ contract for renovations on an Air Force base. The Air Force awarded T.H.R. mulitple task orders. T.H.R submitted claims to the Air Force arising out of three task orders. The Air Force denied two of the claims, and T.H.R appealed to the ASBCA. The parties entered an agreement settling those two claims. The settlement agreement contained a general release, which covered “any and all claims . . . including without limitation those arising out of or in any way related to the Appeal."
As to T.H.R.'s third claim, the government never issued a final decision. T.H.R. appealed the deemed denial of its third claim to the Court of Federal Claims. The government moved for judgment on the pleadings arguing that the third claim was barred by the release in the agreement that settled the two other claims.
Legal Analysis
The settlement agreement contained a general release. General language indicates an intent to make an ending of every matter arising under or by virtue of the contact. If the parties intend to leave something opened and unsettled, they should specifically indicate that in the release. A general release bars claims based on events occurring prior to the release, and there is no exception for claims known before the release.
Here. T.H.R knew about its third claim at the time it entered the settlement agreement. If it wanted to preserve the claim, it needed to expressly do so.
T.H.R. argued that the whereas clause in the settlement agreement agreement limited the scope of the release. The whereas clauses merely referred to the other two claims, not to the third, which indicated to T.H.R. that the settlement and release only applied to those two claims.
But the court reasoned that whereas clauses are not contractual. Instead, they are recitations of the background laying out the pirates’ understanding. The whereas clauses had no effect on the body of the release.
T.H.R. is represented by William Hunter Old of Heath, Old, & Verser, PLC. The government is represented by Jimmy S. McBirney of the Department of Justice