Dissecting Your Construction Contract: The Differing Site Conditions Clause

In general, where a construction contract contains a differing site conditions clause, a contractor can rely on the representations in the contract documents and is not required to perform expensive pre-bid investigations and testing.  Such clauses typically allow a contractor to receive an equitable adjustment in time or cost of performance if the actual site conditions differ materially from the contract or reasonable expectations.

A typical differing site conditions clause requires a contractor that encounters differing site conditions to provide the owner with notice of the alleged differing site conditions before disrupting the affected area.  This notice requirement is meant to give the owner an opportunity to investigate whether the conditions are indeed differing, and if so, the best course of action going forward.  Keep in mind that an owner’s unreasonably slow response to the contractor’s notice of differing site conditions claim may be deemed a compensable delay.  Although most differing site conditions clauses require that notice be given in writing, regardless of what the contract calls for, it is a good practice to always put such notices in writing.  Drill this concept home with your project managers.  While a detailed notice is best, we know things get hectic at a worksite, so even a brief email (use the subject line “Notice of Differing Site Conditions”)  is better than nothing.

Some contracts break differing site conditions into two types:  Type I for site conditions that differ from what was indicated on the contract documents; and Type II for unknown conditions that differ from what was inherent or normal in the type of work.  Regardless of the type of differing site condition, to recover on a differing site condition claim, the claimant must prove that the condition encountered was materially different from reasonable expectations, and you can bet that the owner is going to argue that it wasn’t.  There is no bright-line rule to determine what constitutes a material difference.  Thus, contractors have to come up with evidence to prove that the conditions they encountered are either materially different from the conditions they could have reasonably expected based upon the contract documents or are materially different from what the contractor would typically expect to encounter when performing such work in a given geographic location.  Proving materiality may prove challenging.

Moreover even though a differing site conditions clause affords a contractor some additional protection in the event that an unknown condition is encounter, it’s not a free pass.  In order to succeed on a differing site conditions claim, contractors usually still need to show that: (1) the site inspection was adequate; (2) they made proper use of available data; (3) disclaimers were taken seriously; (4) they gave proper notice of the differing site conditions;  and (5) the differing site conditions were not weather-induced.

Lessons for Contractors:  Contractors who have the bargaining power to negotiate the insertion of a differing site conditions clause into a contract should try to do so.  For those contractors fortunate enough to receive a contract with a differing site conditions provision, avoid doing anything that could decrease your chances of succeeding on a differing site conditions claim by adequately inspecting the site, making proper use of data, taking disclaimers seriously, and giving proper notice should you encounter differing site conditions.  Also, be particularly careful not to commingle claims involving inclement weather with differing site conditions claims as doing so may weaken your differing site conditions claim.

This article is authored by attorney Shannon O. Young and is intended for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice. Any particular questions should be directed to your legal counsel or, if you do not have one, please feel free to contact us.

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