A Texas court has rejected a pipeline contractor’s $25 million claim for additional costs based on broad release language include in an executed change order (see Wood Group, USA v. Targa NGL Pipeline Company, LLC, No. 01-21-00542, 2023 WL 5280249 (Tex. Ct. App. Aug. 17, 2023)). The change order at issue increased the contract price by $1.3 million to cover additional costs resulting from a specific change to the contractor’s scope of work (i.e., an increase in the number of horizontal directional drilled bores). Included in the change order was broad release language whereby the contractor waived and released any claim based upon information the contractor knew or should have known prior to the date of the change order. The contractor argued that the release should only apply to claims related to the specific change addressed by the change order. The trial court disagreed and applied the release as written to bar over $25 million in claims that it held were known or should have been known as of the date of the change order.
In affirming the trial court’s, the Texas Court of Appeals provided this helpful overview of how releases are interpreted and enforced under Texas law:
A release is a written agreement that discharges a duty or obligation owed to one party to the release and operates to extinguish the claim and is an absolute bar to any right of action on the released matter. A release is a contract subject to the rules of contract construction. Thus, we read the contract as a whole and must examine the entire contract to harmonize and give effect to all its provisions. We give the release’s language its plain grammatical meaning unless doing so would defeat the intent of the parties. To effectively release a claim, the releasing instrument must mention the claim to be released and claims that are not clearly within the subject matter of the release are not discharged, even if they exist when the release is executed. Although releases generally contemplate claims existing at the time of execution, a valid release may also encompass unknown claims and future damages.
Wood Group is a good reminder to pay close attention to the fine print before signing any legal document like a change order. The contractor may have thought it was only giving up claims related to the particular change at hand, but the wording of the release went much broader than that. By signing the $1.3 million change order, the contractor agreed to the broad release and gave up over $25 million in claims.