When Adverse Physical Conditions and Artificial Obstructions Encountered!

Key words : Differing site conditions, site investigation, disclaimer clause, foreseeability, experienced contractor, timely notices Abstract If the Contractor encounters adverse physical conditions which he considers to have been unforeseeable, the Contractor shall give notice to the Engineer as soon as practicable. But it is essential to have the physical conditions clearly described in the notice so that they can be inspected by the Engineer, and shall set out the reasons why the Contractor considers them to be unforeseeable. Construction contracts set forth the rights and obligations of the parties when conditions encountered during the performance of the work differ from those which were envisaged at the time the parties had entered into the contract. The three most common contractual provisions we often come across are the "differing site conditions" clause, which creates a right to claim; the "site investigation" clause which limits the right to claim; and the "disclaimer clause" which attempts to prevent any claims. Typically, in FIDIC, the Contractor is entitled to additional costs for expenses and time extension for delays resulting from physical obstructions or conditions, except climatic conditions, not reasonably foreseeable by an experienced contractor. JCT 80 and 81 in remeasurement forms effectively place much of the ground condition risks on the employer. In contrast, some standard forms place the risk of unforeseen and unforeseeable sub-surface conditions on the contractor regardless of whether the contractor was misled by insufficient or inaccurate information given him by the employer. Thus, the contractor must bear the financial consequences (including liquidated damages for consequent delay) of discovering the unexpected, whether it be natural (e.g., quicksand, rock vice soil, voids, material prone to settlement, peaks and valleys in rock profile); or manmade (e.g., utilities, pilings, artifacts, antiquities, out-ofspecification embedment in reclamation areas). A provision in FIDIC exists that the contractor shall propose alternative measures to overcome the obstacles and their cost implications together with any intention to claim cost and/or time overrun. Keeping the engineer informed of such occurrence is usually a condition precedence imposed on the contractors right to claim additional cost or extension of time. Further, the contractor is to comply with any instruction issued by the engineer to overcome the obstacles or to take reasonable measures. Also, the contractor shall not cover, bury or remove such obstacle until so instructed by the engineer except in urgency to reduce risk of injuries or damages to persons or property. Differing site conditions is yet another phrase often seen in many contracts. A differing site condition is a physical condition other than weather, climate, or act of God affecting a construction site and differing in some material way from what was reasonably anticipated. The condition must be physical so that the changes in political conditions,

economic conditions, or labour issues are not differing site conditions. The differing site conditions clause expressly recognizes the possibility of a claim for the costs which arise from such conditions, addresses the question of who pays for the extra inputs and also sets forth the procedures for resolution of any disputes. As a general matter, under the common law, a mere unanticipated condition which renders contract performance more difficult, burdensome, or more expensive provides no excuse for non-performance. It provides no basis for modification of the contract. Where one agrees to do, for a fixed sum, a thing possible to be performed, he will not be excused because unforeseen difficulties are encountered. Thus, one who undertakes to erect a structure upon a particular site assumes ordinarily the risk of subsidence of the soil. In absence of a differing site conditions or changed conditions clause, contractors may increase the amount of their bids or proposals to cover the contingency of encountering unexpected difficulties, make their own subsurface investigation, bear the risk of unknown conditions without price contingencies, or choose not to bid at all. Some courts take into account the contractors dilemma in undertaking tremendous[ly] expensive core boring tests not knowing whether or not he [will] get the contract. Courts have recognized some exceptions to this general rule, however. For instance, the subcontractor at the bid time had asked the general contractors project manager if there was a soils report. The project manager indicated there was no soils report, but advised that his opinion is that the soils are excellent, and only on-site material would be needed for the project. When work started, the characteristics of the native soil made it impossible to meet the compaction specifications that made the subcontractor bring material off site. The subcontractor then learned that the general contractor possessed a soils report identifying the precise conditions that had been encountered by the subcontractor. The subcontractor completed the work and sued for delay and intentional misrepresentation of the site conditions (the subcontract did not contain a differing site condition clause). The court held that since the project manager had made affirmative, unequivocal representations on which the subcontractor relied and had wilfully withheld material information of which it had superior knowledge, the subcontractor was entitled to recover the increased costs incurred as a result of those misrepresentations. The employer in most cases impliedly warrants the adequacy and sufficiency of plans and specifications. Where the plans and specifications do not adequately depict the actual conditions on site, courts may employ the breach of the implied warranty to allow a contractor to recover additional expenses in overcoming a site condition. To recover on a breach of warranty theory the contractor must be able to show reliance on the employers warranty. As per the doctrine of superior knowledge (found in US), the employer must disclose vital information in its possession not otherwise available to the contractor at the time of bidding. The employers failure to disclose superior knowledge constitutes a breach of contract. Where the differing site condition dramatically and cardinally changes the scope of the work, the contractor may treat the contract as having been abandoned and recovered in

quantum meruit. This is dangerous particularly in lump sum contracts, where the risks have been taken to be whole-sale by the contractor. A prudent contractor would include a contingency in its bid to protect itself from such potential disasters. Where the reason for the contingency did not occur, the employer incurred an unnecessary expense by paying more than actually necessary for the contract work. On the other hand, if the contingency was insufficient to cover the contractor's costs, the construction of the project might be disrupted or halted work for lack of funds. A site investigation clause provides that the contractor has investigated the site and has familiarized with the site conditions. It does not however negate a differing site conditions clause in the contract. Instead, it merely narrows the field of differing site conditions to which a reasonable investigation would not reveal. It is effective insofar as it may prevent a contractor from contending that actual conditions differed from what he anticipated if the actual conditions are the ones which a reasonable investigation would have disclosed. A reasonable investigation does not require the contractor to be a trained geologist or other specialized expert, nor does it require that a contractor hire such experts or conduct technical investigations. However, the contractor will not be able to make a claim for what it should have discovered acting as an experienced contractor viewing the site. A contractor's failure to investigate does not preclude a claim under the differing site conditions clause. Rather, a contractor who fails to inspect or perform an inadequate inspection bears the risk of any condition that could have been discovered by a reasonable site investigation. Both public and private owners have succumbed at times to the temptation to retrieve that which they have given to a contractor through a differing site conditions clause by including disclaimers in the contract as to site condition information supplied in the bidding documents. These might be specific statements that "no claims for differing site conditions will be recognized regarding the absence or presence of subsurface rock, unstable rock conditions, etc." or general statements that "the contractors should not rely upon any contract indications or owner-furnished information, but should make their own soils analysis." The effectiveness of these disclaimers depends upon the specific language employed and the jurisdiction where the attempt is being made to enforce the disclaimer. The test is the reasonable opportunity and foreseeability to procure site details/risks in advance and who is in the best position to deal with them. The concept of "foreseeability" has been used for over a century as a legal test for liability. It is "a concept used in various areas of the law to limit the liability of a party for the consequences of his/her acts to consequences that are within the scope of a foreseeable risk (Gifis, 1991). Critics of changed conditions entitlement point out that the usual contract clauses are difficult to administer because they embody a subjective standard, ie the way the engineer decides. The test of entitlement is foreseeability, i.e., that which is foreseeable by an experienced bidder does not qualify whereas that which is not, and which was not actually foreseen, does. Under circumstances, the most important thing is to make sure the tendering contractors have adequate opportunity to make a visual inspection of the site and consider all

available geological and exploratory information. This means that the engineer should also take equal initiative to gather such information and give it to the contractors with explicit warnings of indicators of difficult conditions. Those who adhere to the foreseeability standard have no difficulty concluding that this risk should not be transferred to the contractor. Those who prefer the management standard argue that this risk belongs to the employer because the employer has the best opportunity to control and avoid the risk through pre-tender site exploration. It cannot seriously be argued that the contractor has similar opportunity, and anyway employers do not want multiple tenderers performing site explorations for a whole host of practical reasons. As such, if the Contractor encounters adverse physical conditions which he considers to have been unforeseeable, the Contractor shall give notice to the Engineer as soon as practicable. But it is essential to have the physical conditions clearly described in the notice so that they can be inspected by the Engineer, and shall set out the reasons why the Contractor considers them to be unforeseeable. The Contractor shall continue executing the Works, using such proper and reasonable measures as are appropriate for the physical conditions, and shall comply with any instructions which the Engineer may give. If an instruction constitutes a Variation, the clause related to variation shall generally apply. Differing site conditions clause requires the contractor to give notice of the differing subsurface condition. The notice is to be given promptly before conditions are disturbed. Typical change order clauses in many standard forms provide that a contractor's failure to obtain a written change order before proceeding with the changed work may jeopardize or entirely foreclose recovery of the extra costs. The purpose of the requirement that the extra or changed work not proceed without a written change order is to avoid later disputes wherein the employer claims that the alleged extra work was part of the original contract and, further, that had the owner known that the contractor believed otherwise, the employer would not have ordered the performance of the alleged change, or would have ordered that the work be performed in a different or less expensive manner. The purpose behind the requirement of prompt notice is to give the engineer the opportunity to investigate and verify the existence of the differing site condition, and to possibly alter the work so as to avoid excessive cost increases.