A good construction contract prepares for every eventuality, but when you're making a fixed-price bid on a project, unforeseen circumstances can occur. Many contractors run into differing site conditions.
If the subsurface of a construction site is different than anticipated when you signed the contract - say, a chemical tank is discovered or the ground won't bear the weight of construction equipment - then a differing site condition clause in your contract can make sure your interests are covered.
You could bear all costs
But what happens when the bid circumstances aren't normal? When you bid on a fixed-sum contract for an EPC or design-build turnkey project, the best firewall is a thorough property inspection. Sometimes, however, time or location means a suitably thorough inspection can't be done. If your contract isn't specific, then you could bear all costs related to the differing site conditions.
It's important that you have a contract to address such scenarios. Even after signing a contract for a turn-key project, the contract can have a clause specifying a period of time when you can give the site the inspection it deserves and report back to the owner any unusual or unforeseen subsurface conditions that require a change in the contract price.
A judge will look for specifics
The American Bar Association advises that a judge will look to the contractor to show these things:
- What conditions would normally be expected at the site
- What conditions were actually at the site
- How the actual conditions differed from the usual conditions
- How the actual conditions change the cost or time to complete the contract.
The answers to these questions could lead to extra time or money to complete the contract.
Although a judge will take into consideration that the inspection should be conducted not by a geologist or engineer but by a reasonably experienced contractor, he will insist that any condition should not be "readily observable." A judge could find against you if he decides you should have identified the condition during a reasonably thorough inspection.
The judge could also find against you if you don't examine document publicly on file or in soil testing reports.