Opinion ID: 450360
Heading Depth: 2
Heading Rank: 2

Heading: Impact and Delay Costs Caused by the Modifications

Text: 14 The more difficult question is the status of the costs in the second category--the delay and disruption costs attributable to the five modifications. NRM asserts, as it did before the District Court, that the parties' intentions--specifically, whether they intended to include impact costs within the scope of the modification agreements--present a genuine and material issue of fact, thus rendering summary disposition improper. In particular, NRM contends that under the Federal law of Government contracts, the body of law contractually selected by the parties for resolving disputes growing out of the agreement, 12 the mere existence of a fixed price modification does not preclude subsequent claims for impact costs unless the parties intended that the agreement have that effect. 15 While we will, of course, honor the contractual choice of law clause, 13 in most respects relevant to this controversy the Federal law of Government contracts dovetails precisely with general principles of contract law. Thus, under both bodies of law, the judicial task in construing a contract is to give effect to the mutual intentions of the parties. 14 Hodges v. Evans Financial Corp., 707 F.2d 1566, 1568 (D.C.Cir.1983); Firestone Tire & Rubber Co. v. United States, 444 F.2d 547, 550, 195 Ct.Cl. 21 (1971). Where the language of a contract is clear and unambiguous on its face, a court will assume that the meaning ordinarily ascribed to those words reflects the intentions of the parties. E.P. Hinkel & Co. v. Manhattan Co., 506 F.2d 201, 204 (D.C.Cir.1974); Appeal of McGrew Machine Co., WDBCA 892, 3 CCF 551 (1945). Only if the court determines as a matter of law that the agreement is ambiguous will it look to extrinsic evidence of intent to guide the interpretive process. 15 E.P. Hinkel & Co. v. Manhattan Co., supra, 506 F.2d at 204; WMATA v. Mergentime Corp., 626 F.2d 959, 961 (D.C.Cir.1980). See also 1 J. & B. MCBRIDE & T. TOUHEY, GOVERNMENT CONTRACTS Sec. 2.10 (1978) (hereinafter MCBRIDE & TOUHEY). 16 Whether an agreement is clear on its face or ambiguous has a direct bearing on the appropriateness of summary judgment in contract disputes. Generally, interpretation of a facially clear contract is considered a question of law and is for the court. Pennsylvania Ave. Development Corp. v. One Parcel of Land in D.C., 670 F.2d 289, 292 (D.C.Cir.1981); WMATA v. Mergentime Corp., supra. 16 Thus, when the parties' intent is wholly unambiguous on the face of the agreement, disposition on a motion for summary judgment may be appropriate. Heyman v. Commerce & Industry Ins. Co., 524 F.2d 1317, 1320 (2d Cir.1975); see Davis v. Chevy Chase Financial Ltd., 667 F.2d 160, 161, 169 (D.C.Cir.1981); 10A C. WRIGHT, A. MILLER & M. KANE, FEDERAL PRACTICE AND PROCEDURE Sec. 2730.1 at 279-280 (2d ed. 1983) (hereinafter WRIGHT & MILLER). When, however, the language is unclear and the search for intent extends beyond the four corners of the agreement, the intended meaning of the contract is a disputed and, necessarily, material question of fact and summary judgment is improper. See Davis v. Chevy Chase Financial Ltd., supra, 667 F.2d at 169; Grand Union Co. v. Cord Meyer Development Corp., 735 F.2d 714, 717 (2d Cir.1984). See generally J. CALAMARI & J. PERILLO, CONTRACTS 124 (2d ed. 1977); WRIGHT & MILLER Sec. 2730.1. 17 Application of this legal framework to the case at hand convinces us that the District Court's decision to dismiss the case on a motion for summary judgment was incorrect. The court apparently considered the words and conduct that culminated in each of the five modifications to be so unambiguous that they were susceptible of only a single construction. Thus, finding it unnecessary to go outside the agreements to explore the factual and hotly disputed question of intent, it held as a matter of law that the modification agreements themselves 17 clearly reveal a mutual understanding that all costs, including those for delay and disruption, were incorporated into the fixed price for the changes. Although courts applying the Federal law of Government contracts have not taken a wholly consistent position on this question, our examination of the relevant case law has led us to conclude that the modification agreements in this controversy are not so wholly unambiguous 18 that they preclude inquiry into the factual question of their intended scope. 18 Courts construing federal contracts generally have not considered modification agreements independent, conclusive evidence that the parties intended that the agreement include impact costs. Instead such courts consistently have examined all the circumstances surrounding the negotiations to determine the intent of the parties. Even strong language in the modification agreement that it constitutes the entire adjustment due the contractor ordinarily is not considered independently dispositive. In the typical case that language serves an important evidentiary function, but the focus of the analysis remains on the ultimate question of the intent of the parties. 19 19 Thus in Chantilly Construction Corp., supra, 81-1 BCA p 14,863 at 73397, the Armed Services Board of Contract Appeals (ASBCA) noted that the modification agreement stated that it constitute[d] a full and complete price adjustment. Nonetheless, it upheld the contractor's claims for delay damages. It reasoned: 20 We are not persuaded that the quoted language recited in a record silent as to what respondent intended when it employed the language can have the meaning respondent now urges upon us. The language simply states that the price agreed to constitutes a full and complete price adjustment for all work required by the modification. On its face, therefore, the modification covers only the additional work recited in the modification itself. To conclude that it also encompasses the claim herein asserted would require a showing that both parties understood the language to accomplish that purpose. Such evidence is completely lacking in the record. 21 Id. Similarly, in Merritt-Chapman & Scott Corp. v. United States, 458 F.2d 42, 43-45 (Ct.Cl.1972), the Court of Claims, focusing on whether the contractor had reserved the right to make a subsequent claim for impact costs, examined not only the language of the agreement but, in addition, extrinsic testimony to determine the intent of the parties. 20 See also Carl J. Bonidie, Inc., 82-2 BCA p 15,818 at 78396 (ASBCA No. 25769) (1982) (disclaiming reliance on preprinted language appearing on the agreement and instead evaluating the context in which [the] supplemental agreement [was] arrived at to determine whether it operate[d] as a full settlement). 21 22 Absent some express reservation at or before the moment of actually entering into a modification agreement, the party seeking to assert a subsequent claim for delay damages carries a heavy burden. Yet even in this circumstance courts construing government contracts have consistently considered extrinsic evidence in their efforts to determine whether the parties intended that the modification agreement incorporate impact costs. Thus, for example, in both Fraass Surgical Mfg. Co. v. United States, 505 F.2d 707, 711-712, 205 Ct.Cl. 585 (1974), and Cannon Construction Co. v. United States, 319 F.2d 173, 176, 162 Ct.Cl. 94 (1963), the court looked to the conduct of the parties to determine the intended scope of the modification agreements. Even in Seeds v. United States, 92 Ct.Cl. 97 (1940), cert. denied, 312 U.S. 697, 61 S.Ct. 731, 85 L.Ed. 1131 (1941), the case primarily relied on by the District Court, the Court of Claims looked at subsequent developments as evidence that the contractor's claim was an afterthought and that the parties intended that an earlier agreement dispose of all claims growing out of the contract. 22 23 We do not suggest that when the signatory to a modification agreement later seeks impact costs the court must always treat the intent of the parties as a question of fact. Although not the usual case for courts applying the Federal law of Government contracts, there may well be instances when the clarity of the agreement renders it independently conclusive as a matter of law. 23 See Brock & Blevins Co. v. United States, 343 F.2d 951 (Ct.Cl.1965). We conclude, however, that the present controversy is not such a case. Examining the record, as we must, in the light most favorable to the nonmoving party, we cannot agree with the District Court's implicit determination that the modification agreements are so wholly unambiguous, Davis v. Chevy Chase Financial Ltd., supra, 667 F.2d at 169, that NRM's claim may be dismissed as a matter of law. While at first blush the suggestion in each of the purchase orders that the adjusted price constituted the Total Revised Commitment appears clear, NRM alleges that it never signed the forms, much less agreed to that language. It contends that Hercules sent the purchase orders to it after the price for additional work and material had been fully resolved. In any event, as we have shown, courts construing similar language in federal government contracts typically have looked beyond the four corners of the agreement to determine whether the parties intended to include delay and impact costs in their negotiations. Especially in light of NRM's alleged efforts to reserve negotiation of delay costs for later consideration, itself a material issue of fact, Merritt-Chapman & Scott Corp. v. United States, supra, 458 F.2d at 42, NRM should have an opportunity to present evidence bearing on the material question of the intended scope of the agreements to modify the original contract. 24 Accordingly, we reverse and remand for proceedings consistent with this opinion. 25 So ordered.