THE RULES ON DISCLAIMER CLAUSES

The government often disclaims responsibility and shifts risks to contractors through various disclaimer clauses. As a consequence, contractors often find themselves unable to obtain relief when they encounter conditions giving rise to claims for additional compensation.  They lose their case based on the government's defense that the risk of extra costs was shifted to the contractor through a disclaimer clause.  So just what are the rules governing the interpretation and enforcement of so called disclaimer clauses?

First, the government may assign a specific risk to a contractor even if such an assignment is ridiculous and should never be accepted by the contractor.  If clearly stated, a contract may shift the risk to a contractor "to make snowmen in August."  Rixon Electronics, Inc. v. United States, 536 F.2d 1345, 1351 (Ct. Cl. 1976). 

However, when the contract clause merely says information in the solicitation may be inaccurate, the clause does not transfer the risk to the contractor.  Metcalf Construction Co. v. United States, 742 F.3d 984, 988, 995-96 (Fed. Cir. 2014).  If there is not clear language alerting the contractor that it should bear the risk, the disclaimer clause probably will not be enforced.

Second, contractors are responsible for making a reasonable pre-proposal site visit.  The rule is that if a reasonable contractor would have noticed the problem, the risk shifts to the contractor.  However, the duty to make a reasonable inspection of the site does not require the contractor to discover conditions "beyond the limits of an inspection appropriate to the time available."  Foster Constr. C.A, and Williams Bros. Co. v. United States, 435 F.2d 873, 888 (Ct. Cl. 1970). 

The whole idea is that the contractor has only a limited time to prepare its proposal and is bound by the disclaimer clause only to the extent he has a reasonable time to assess the cost of the problem.  The more specific the clause, the more obvious the problem and the more time to assess, the more likely the disclaimer clause will be enforced.

For the rules on interpretation of contract language generally, see our articles on contract interpretation by using the search tool in the upper left hand corner.  Insert these words: contract interpretation.

bill@spriggsconsultingservices.com