## Facts

- The government awarded Mil-Spec’s predecessor a contract to insulate buildings at Norton Air Force Base, funded from an Air Force energy-conservation appropriation set to expire on September 30, 1983.
- The contract included a small contingency amount (about $6,000–$7,000) available for modifications while funds remained available.
- After completing performance, Mil-Spec submitted escalating claims for additional compensation, eventually seeking roughly $70,956 beyond the contract amount.
- In late August/early September 1983, Mil-Spec’s principal (Barnes) discussed possible settlement by telephone with a government negotiator (Barker); the resident contracting officer (Hooppaw) was the official with contracting authority.
- Barker’s notes stated Barnes agreed to drop the larger claim and accept the government’s estimate of $6,367.
- Hooppaw prepared and signed a written bilateral modification reflecting $6,367 and sent it to Mil-Spec for signature.
- Mil-Spec refused to sign the modification and informed the government it was rejecting the settlement.
- The government nevertheless processed payment of $6,367, applying it to an IRS tax lien against Mil-Spec.
- The ASBCA dismissed Mil-Spec’s additional-compensation claim, holding an oral accord and satisfaction barred further recovery, and Mil-Spec appealed.

## Issues

1. Whether the evidence showed a binding settlement creating an accord and satisfaction that extinguished Mil-Spec’s larger claim.
2. Whether an alleged oral agreement reached with a government negotiator lacking contracting authority, followed by the contractor’s refusal to sign a written modification, could bind the United States.
3. Whether the government’s unilateral payment (applied to a tax lien) could establish consideration or acceptance sufficient to prove accord and satisfaction.

## Decision

- The Federal Circuit reversed the ASBCA and remanded.
- The court held there was no enforceable settlement agreement and therefore no accord and satisfaction barring Mil-Spec’s claim.
- The court concluded the record did not support a finding of a final meeting of the minds on settling the claim for $6,367.
- The court emphasized that the negotiator lacked authority to bind the government, and there was insufficient proof that the contracting officer entered into or ratified a binding oral settlement before Mil-Spec rejected the written modification.
- The court held the unilateral payment to the IRS could not substitute for mutual assent or create an accord and satisfaction absent a valid underlying agreement.

## Legal Principles

- Accord and satisfaction requires proper subject matter, competent parties, mutual assent (meeting of the minds), and consideration; the party asserting it must prove a definite agreement to settle on the asserted terms.
- The United States is bound in contract only by officials with actual contracting authority; a negotiator’s statements or notes do not bind the government without authorized action or ratification.
- Mutual assent is determined by objective manifestations; refusal to sign a contemplated written modification and continued pursuit of the original claim are strong evidence against a final settlement.
- Government payment, including payment to a third party on the contractor’s behalf, does not by itself establish acceptance, consideration, or a release of claims without proof of an agreed settlement.

## Conclusion

The Federal Circuit set aside the Board’s accord-and-satisfaction dismissal because the record did not show an authorized, mutually assented settlement of Mil-Spec’s claim; the case was returned for consideration of the contractor’s entitlement on the merits.


Mil-Spec Contractors, Inc. v. United States, 835 F.2d 865 (Fed. Cir. 1987)