Academic journal article Defense Counsel Journal

Differing Site Conditions: Liability Precautions for Design Professionals

Academic journal article Defense Counsel Journal

Differing Site Conditions: Liability Precautions for Design Professionals

Article excerpt

CONCEALED and differing site conditions encountered both above and below ground during the construction process pose liability concerns and precautions for design professionals. These concerns and the need for adequate and effective precautions usually arise in the context of claims by owners, contractors, subcontractors and construction lenders. Although a substantial amount has been written on the subject of differing site conditions, there has not been the same focus on the potential liability concerns of design professionals. This topic is of current importance because of the increasing number of these claims, especially in difficult economic times when owners tend to establish inadequate project construction budgets and contractors tend to carry insufficient cost contingencies.

DIFFERING SITE CONDITIONS

A. In General

By definition, genuine concealed or differing site conditions, referred to generically as "differing site conditions," are occurrences or events that, when encountered, were not actually or reasonably anticipated by one or more parties involved in the construction process. Generally speaking, they are physical conditions on the site that either are not indicated in the contract documents for a construction project or in varying degrees are different from conditions normally encountered on a project of the character under construction. They usually are subsurface physical conditions, such as a ledge or other unsuitable soils materials, but they may arise above ground as well.

Typically, when differing site conditions are encountered, additional (read, unanticipated) time and cost for completion of the construction project results. Even if a contractor is entitled to additional time or money, or both, on the basis of a valid differing site conditions claim, owners often have a difficult time accepting any obligation to pay or grant a time extension.

Owners react this way because the payment of a differing site conditions claim usually increases the cost and time of performance of the construction contract, but it will rarely, if ever, increase or add to the value of the project. In addition, contractors may seize on alleged differing site conditions claims as an opportunity to make up for profitability deficiencies arising from a low-ball bid.

But whether a differing site conditions claim is valid or not, economic tensions arise between owners and their lenders, on the one hand, and contractors and subcontractors, on the other, when these claims are made. Those tensions, increasingly pronounced during times of difficult economic conditions, may manifest themselves in a widening of the liability net in an attempt to reach design professionals. While the risk of liability for design professionals cannot be entirely eliminated, there are contractual and professional practice precautions that can reduce the risk or mitigate the consequences of liability.

B. Meeting the Claim

The primary issue whenever a differing site condition is encountered is whether the owner or contractor, at least in the first instance, bears the economic and temporal performance risks.

1. Common Law Rule

Under the so-called common law rule, the contractor bears the risk that performance of its obligations may be more time consuming or costly than it had anticipated, even reasonably, when it submitted its bid. In Eastern Tunneling Corp. v. Southgate Sanitation District the Colorado federal district court, citing Colorado precedent,(2) stated the common law rule:

It is conceded that, under the common-law

rule, a contractor who undertakes an entire contract

for erecting a building is presumed, in the

absence of an expressed provision to the contrary,

to have assumed the risk of unforeseen

contingencies arising during the course of the

work, unless performance is rendered impossible

by the act of God. …

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