Tuesday, April 18, 2023

CONTRACT INTERPRETATION QUOTE FROM THE ASBCA: THE BEST TREATISE AVAILABLE

The issue before us is one of contract interpretation. “Contract interpretation begins with the language of the written agreement.” NOAA Maryland, LLC v. Adm’r of Gen. Servs. Admin., 997 F.3d 1159, 1165-66 (Fed. Cir. 2021) (quoting NVT Techs., Inc. v. United States, 370 F.3d 1153, 1159 (Fed. Cir. 2004)). The plain and unambiguous meaning of a written agreement controls. Id. We must give the contract “that meaning that would be derived from the contract by a reasonably intelligent person acquainted with the contemporaneous circumstances.” TEG-Paradigm Env’t, Inc. v. United States, 465 F.3d 1329, 1338 (Fed. Cir. 2006) (quoting Metric Constructors, Inc. v. Nat’l Aeronautics & Space Admin., 169 F.3d 747, 752 (Fed.Cir.1999)). We interpret contracts “‘in a manner that gives meaning to all of its provisions and makes sense,’” NOAA Maryland, 997 F.3d at 1166 (quoting Langkamp v. United States, 943 F.3d 1346, 1353 (Fed. Cir. 2019)), and we seek to “‘avoid[ ] conflict or surplusage of [the contract’s] provisions,’” Id. (quoting United Int’l Investigative Servs. v. United States, 109 F.3d 734, 737 (Fed. Cir. 1997)).

When the contract language is unambiguous, we give it its “plain and ordinary” meaning and may not look to extrinsic evidence to interpret it. TEG-Paradigm, 465 F.3d at 1338. Although extrinsic evidence may not be used to interpret an unambiguous contract provision, it may be considered for the purpose of confirming that the parties intended for the term to have its plain and ordinary meaning. Id. When a provision in a contract is susceptible to more than one reasonable interpretation, it is ambiguous, and we may consider extrinsic evidence to resolve the ambiguity. Id.; Jemison & Partners, Inc., ASBCA No. 62928, 23-1 BCA ¶ 38,249 at 185,737. The purpose of resorting to extrinsic evidence is to arrive at an interpretation that effectuates the parties’ intent at the time of contracting. TEG-Paradigm, 465 F.3d at 1338. Appropriate extrinsic evidence may include such things as the parties’ negotiating history, their pre-dispute conduct, the circumstances under which they executed the contract and trade practice and custom. Gardiner, Kamya & Assocs., P.C. v. Jackson, 467 F.3d 1348, 1354 (Fed. Cir. 2006); TEG-Paradigm, 465 F.3d at 1338; Metropolitan Area Transit, Inc. v. Nicholson, 463 F.3d 1256, 1260 (Fed. Cir. 2006).

 If the ambiguity is not resolved by consideration of the contract as a whole and extrinsic evidence, then the doctrine of contra proferentem comes into play. Gardiner, 467 F.3d at 1352. Under that doctrine, we resolve ambiguities against the party that drafted the contract. Id. Contra proferentem is a “rule of last resort” that “is applied only where there is a genuine ambiguity and where, after examining the entire contract, the relation of the parties and the circumstances under which they executed the contract, the ambiguity remains unresolved.” Id. (quoting Lewis v. United States, 1982 WL 36718, at *7 (recommended decision adopted as the judgment of the Court of Claims in 231 Ct. Cl. 799, 800 (1982))). The doctrine is inapplicable if the intention of the parties can otherwise be discerned. HPI/GSA 3C, LLC v. Perry, 364 F.3d 1327, 1334 (Fed. Cir. 2004).

 Finally, an exception to contra proferentem applies if the ambiguity is patent, rather than latent. States Roofing Corp. v. Winter, 587 F.3d 1364, 1372 (Fed. Cir. 2009). A “patent ambiguity” is one that is “obvious, gross, glaring, so that plaintiff contractor had a duty to inquire about it at the start.” Id. (quoting H & M Moving, Inc. v. United States, 499 F.2d 660, 671 (Ct. Cl. 1974). Where the ambiguity is patent, the non-drafting party has a duty to inquire and a failure to do so will result in the ambiguity being resolved against it. Id. Where the ambiguity is not glaring or obvious, no patent ambiguity exists. Id. The bar to proving patent ambiguity is necessarily high. Metro Mach. DBA Gen. Dynamics Nassco-Norfolk, ASBCA No. 61817, 20-1 BCA. ¶ 37,633 at 182,717 (quoting LAI Services, Inc. v. Gates, 573 F.3d 1306, 1315-16 (Fed. Cir. 2009). Contractors are not required to seek clarification of “any and all ambiguities, doubts, or possible differences in interpretation.” States Roofing Corp. v. Winter, 587 F.3d 1364,1372 (quoting WPC Enters., Inc. v. United States, 323 F.2d 874, 877 (Ct. Cl. 1963)). Contractors “are not expected to exercise clairvoyance in spotting hidden ambiguities in the bid documents, and they are protected if they innocently construe in their own favor an ambiguity equally susceptible to another construction . . . .” Blount Bros. Const. Co. v. United States, 346 F.2d 962, 973 (Ct. Cl. 1965). “[T]he basic precept is that ambiguities in contracts drawn by the Government are construed against the drafter.” Id. 

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