A change in site conditions can be unusual and unexpected, and in some cases, even worse. In one instance, a contractor was hired to clean air-conditioning ducts in a military barracks. He found women’s underwear, beer cans and live ammunition in the ducts. As you can imagine, these obstructions increased the cost of performance and none of them had been noted in the plans and specifications.
Under the old standard of common law, still used today, a contract involves an absolute promise to perform. No matter what difficulties arise during construction (for example, subsurface water, abandoned or live electrical cables), the contractor remains liable to handle those unexpected conditions at no extra charge.
Many rationales have been given for this somewhat harsh standard. Perhaps the contractor knew or should have known of the concealed condition and took the job expecting to later submit a change order. In addition, the courts don’t want to get involved in a “What did you know/when did you know it?” debate.
Why is this concept a potential problem for the electrical contractor? Let’s say that part of your contract requires you to trench for an underground duct bank and you encounter broken rock, subsurface water or unstable soil conditions. Or worse, what if part of the contract tells you to remove any disconnected wires and cable during your tear-out, without telling you how much or where?
Particularly with rehabilitation of an existing structure, it is not uncommon for the owner’s documents to state: “The data provided is for information only and may not be fully accurate.” Under common law, the contractor takes the risk of coming across these unknowns.
The differing conditions clause
This type of clause changes the common law, making contract obligations less Draconian. However, the differing conditions clause is not an easy one to understand or apply, and it has generated massive amounts of litigation.
The federal government version, which is similar to that used in the standard form contracts of the American Institute of Architects, divides “concealed or unknown conditions” into two categories, each with subparts.
Type I addresses the circumstance where something is “indicated” in the contract documents, meaning expressly shown or reasonably implied from what is shown. It must be a physical condition at the site, so it does not apply to the effects of weather, labor, etc. The concealed condition discovered must differ materially from what the contract indicated.
Type II applies when the contract documents do not “indicate.” Again, it must be an unknown physical condition, but it also must be of an unusual nature, and it also must differ materially from those ordinarily found. That is a tough standard.
An example: The contractor excavated for an underground garage in advance of constructing a courthouse. The contract documents included some information about underground utilities, but the building was in an old city, and the owner expressly disclaimed knowledge of what might be encountered. During excavation, more than 100 stormwater and sewer pipes were cut. The contract required the contractor to plug them all. Even with the differing site conditions clause, the resulting claim faced some difficult legal hurdles.
How can you protect yourself from the unknown? Here are some suggestions:
• Itemize any undefined areas of your contract.
• Look for exculpatory clauses that state, for example, that the owner’s site surveys are for “information only.”
• For a rehab, ask for the old as-builts and make them a part of your contract.
• Tell the owner, in writing, of any assumptions you have made (e.g., “our estimate is based on drawings showing a number of cables to be removed”).
• Make sure you have a differing conditions clause in your contract.
• Notify the owner, in writing, immediately upon coming across an unexpected condition.
• Consider a unit price alternate when the contract is vague on quantities.
• Perform your own site inspection.
With these considerations in mind, think about whether you should or can modify the agreement before signing it.
Proving your claim
With smaller-value contracts not employing extensive contract terms and conditions, you can protect yourself by listing your exclusions. For example: “The company is not responsible for subsurface conditions.”
Where there is a differing site conditions clause, first you need sufficient reporting to detect the condition. Next, check the contract’s notice and record-keeping requirements. A justified claim can be lost by sloppiness in your records. Last is everything else: Take photographs, keep additional records of the affected area (labor, supervision, equipment, etc.). Often proof of the concealed condition can be supplemented by your comparing planned vs. actual types and amounts of equipment.
When you have accomplished the above, check for other clauses which may apply (changes, time extensions, etc.). Encountering a differing condition can also mean a “suspension” of part of your work or a “resequencing” of the schedule.
When you have one of these problems, consult with a construction attorney to confirm your rights and remedies. EC