Government Contracts Latent Ambiguity Construed Against the Government
Tuesday, June 18, 2019

Latent Ambiguity Construed Against the Government

By Government Contracts Editorial Staff

A construction contractor was entitled to additional compensation, according to the Armed Services Board of Contract Appeals, because a wallboard finishing specification contained a latent ambiguity, and the contractor proved reliance on the latent defect, so the general rule of contra proferentem applied against the government. The contractor, engaged under a contract to construct a strategic command complex, sought to recover for the government’s direction to apply “a high level of drywall finish above the ceilings and below the raised floors.” The parties disputed the interpretation of a specification for the placement of wall finish in exposed and concealed areas, which was stated as “[a]ll remaining locations, unless otherwise noted.” Examining the contract’s plain language, the board found the specification was ambiguous and each party’s interpretation fell within the “zone of reasonableness.” The record contained ample evidence supporting the contractor’s interpretation that only fire-taping, which was a lower level finish, was required for concealed areas. This evidence included the specifications; trade practice, as evidenced by subcontract bid prices; the parties’ agreement at a pre-construction meeting; and a course of dealing during the year and a half when the government and contractor interpreted wall finish requirements the same. During this period, government inspectors accepted fire-taping above ceilings and below floors. The government’s interpretation of “all remaining locations” as requiring a higher level finish for any location, whether exposed or concealed, was also reasonable.

Patent or Latent.Concluding the specification was ambiguous, the board determined the only extrinsic evidence regarding the intended interpretation of the requirement was the government architect’s testimony that “[a]ll remaining locations” required a higher level of finish everywhere, including concealed locations. However, his interpretation was never communicated to the contractor and could not resolve the ambiguity. The ambiguity was latent, and the contractor had no duty to inquire, because the parties applied the same interpretation for a year and a half. Under the general rule of contra proferentem, a latent ambiguity is construed against the government as the drafter if the contractor can demonstrate reliance on the latent defect. Given the government accepted the contractor’s finishing work for a year and a half, the contractor proved it relied on its interpretation of the ambiguous language. (KiewitPhelps, ASBCA, ¶95,753)

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