Construction Site Disclaimers: Navigating Risk Allocation For Differing, Concealed And Unknown Conditions In Heavy-Civil, Excavation, And Infrastructure Work

• Published date: 25 October 2021
• Subject Matter: Corporate/Commercial Law, Real Estate and Construction, Contracts and Commercial Law, Construction & Planning
• Law Firm: Seyfarth Shaw LLP
• Author: Mr Michael E. Wagner, Jr.

In heavy-civil, excavation, and infrastructure work, the risk of encountering differing, unknown, or concealed conditions is significant, as it is nearly impossible to document or predict everything that the contractor will encounter below the surface when performing its operations. Although standard pre-bid site surveys, including soil and geotechnical reports, are good resources to evaluate potential concerns, they will almost never be all encompassing as to what a contractor will face when its work is in progress. Given these unique, complicated, and costly risks, some project owners will seek to pass liability for such risk onto the those performing the work. Indeed, owners may seek to transfer these unknown risks, including unforeseen conditions, to contractors making the financial burden significant for those bidding the work. Accordingly, it is imperative that the contractor balance the desire to submit a competitive price to win the work with the need to ensure that it has some type of remedy or recovery should it encounter such concealed or differing conditions. Faced with this balancing act, contractors performing excavation and foundation work should be intimately familiar with the site disclaimer, exculpatory, and risk-transferring clauses present in their agreements and the effect that such provisions may have on their ability to recover additional costs and time should they encounter differing conditions.

What type of site disclaimer clauses are used on public and private construction projects?

Site disclaimers are a form of exculpatory clause, which seek to limit a party's liability for its actions or inactions and resulting damages and/or shift risk to the other contracting party. In the construction context, a disclaimer or exculpatory clause seeks to limit the owner's liability in situations that might otherwise entitle the contractor to additional costs or time, such as differing site conditions. In the United States, courts and boards will usually enforce exculpatory clauses even though the result may be unfair to the contractor.¹ However, to be enforceable, site disclaimer clauses must generally be clear, specific, and unambiguous, must not conflict with another contract provision intending to allocate risks for site conditions (i.e., the differing site condition clause),² and the contractor must have knowingly accepted the risk. Although the enforceability of such provisions will vary from jurisdiction to jurisdiction, State and Federal Courts, as well as Boards of Contract Appeals, are less likely to enforce broad form site disclaimers.

Typically, site disclaimers will be found in the request for proposal or solicitation, the general conditions to the contract, or on the plans or drawings. But disclaimers could also be found in any of the contract documents, and therefore the contractor should carefully review all documents, including notes on the drawings, to discern the scope and application of the disclaimer. Most construction contracts...