CONSTRUCTION LAWLETTERS

FOR INDUSTRY PROFESSIONALS, MANAGERS, TRADES & SUPPLIERS

J. NORMAN STARK, ATTORNEY-AT-LAW

JURIS DOCTOR, B. ARCHITECTURE, B.F.A

Vol. 2001-3  March, 2001

SUBSURFACE CONDITIONS RISKS

The risks that subsurface and other conditions encountered at the construction site may not actually be found as the estimator expected, is usually addressed in the construction contract through a changed conditions contract clause and also by a site investigation clause.  Bidders must check it!

Changed Conditions Clauses.  A changed conditions clause will usually describe two types of site conditions that will be considered eligible for contractor relief and defines the rights of the parties should such condition exist.  The clause shifts the risk of encountering an adverse site condition to the owner and encourages the contractor not to include contingency amounts therefor in its bid.  Accordingly, it is to the great advantage of the contractor to include a changed conditions clause in the contract.

AIA Document A-201 provides:  "CONCEALED CONDITIONS – Should concealed conditions encountered in the performance of the work below the surface of the ground or should concealed or unknown condition in an existing structure be at variance with the conditions indicated by the Contract Documents [Type 1], or should unknown physical conditions below the surface of the ground or should concealed or unknown conditions in an existing structure of an unusual nature, differing materially from generally recognized as inherent in work of the character provided for in this Contract [Type 2], be encountered, the Contract Sum shall be equitably adjusted by Change Order upon claim by either party made within twenty days after the first observance of the conditions."
 
To recover under a changed conditions clause for a “Type 1” unanticipated site condition, namely: “…at variance with the conditions indicated by the Contract Documents…” generally a contractor must show: (1) that the site condition as indicated in the plans, specifications, and other contract documents is at variance with the site condition at the actual construction site, and (2) that the contractor gave proper notice of the variance.

Being able to show that the site conditions are, in some way, represented in the contract documents is crucial.  The conditions indicated by the contract, however, need not be explicit or specific.  It is enough that they lead a reasonable person to infer that he would not have encountered the conditions that he actually did encounter at the construction site.  Also, conditions indicated by the contract may be inferred from a reading of the contract documents as a whole.  This may occur where the design or construction procedures in the contract imply that a certain type of condition is, in effect, “indicated”  although that particular condition is not expressly shown or stated in the contract documents.  For example, a “dry excavation” specification implies a specific type of subsurface condition.

A "Type 2" changed condition is an unknown physical condition of an unusual nature, differing materially from those site conditions generally recognized as inherent in work of the type provided for in the contract.  These conditions are those to which the contract documents are silent and of which the contractor neither has knowledge nor could they have been reasonably foreseen.  If the contractor should have reasonably anticipated the actual condition it will not be regarded as an unknown or unusual condition.  These unknown or unusual conditions are much more difficult to prove than those that involve a comparison between contract indications and actual site conditions.

Here, the burden of proof is on the contractor; success or failure of claims made may well depend upon due diligence and preparation, with the guidance of experienced construction legal counsel.

Author:  J. NORMAN STARK is an Attorney-at-Law, a Registered Architect, (AIA, NCARB) Registered Landscape Architect, Interior Designer, Planner and Senior Appraiser (ASA), admitted to practice law before the Bar of Ohio, the US District Courts, Ohio and Illinois (Central Dist.), the US Court of Appeals, and the United States Supreme Court. He has had experience in business, Construction, Real Property, Litigation and Construction-Legal Project and Crisis Management.

 


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