Differing Site Conditions: What Are They And Are You Protected?

You've contracted to install underground utilities. Once the work begins, you discover soils with inadequate bearing capacity, large amounts of unanticipated rock, groundwater at levels higher than anticipated, buried debris, or hazardous wastes. None of these conditions were expected. As a result, the cost you promised to the owner to install the utilities is no longer feasible. Who bears this risk?

A "differing site condition" (also known as a "changed condition"), which is abbreviated in this article as a "DSC," is an unknown and hidden, concealed, or latent physical condition encountered at a site that differs materially from the reasonably anticipated conditions. Physical conditions are conditions you can actually touch, like soil, rock, and concrete; and not intangible, such as the availability and cost of labor, materials, and equipment.

Some contractors mistakenly believe they are always entitled to more time and money when they discover a DSC. They aren't. Entitlement to more time and money for a DSC usually depends upon whether the applicable contract includes a differing site conditions clause.

Absent a differing site conditions clause, the doctrine of sanctity of contract1 places the risk on the contractor if the work is more difficult, costly, or time-consuming than expected, unless due to the owner's breach of contract, performance is rendered impossible by an Act of God, change in the applicable law, or the facts and circumstances support an equitable defense to this rule.

Differing site condition clauses typically recognize two distinct types of DSCs, aptly called Type 1 and Type 2. A Type 1 DSC is an unknown and hidden, concealed, or latent physical condition, which a contractor encounters at the site that differs materially from the conditions indicated in the contract documents. The existence of a Type 1 condition depends upon whether the drawings, specifications, and other contract documents make representations that either expressly or impliedly indicate the expected conditions. For example, a Type 1 DSC may exist if unsuitable soil is encountered on the site when the drawings and specifications "indicate" that the site contains suitable soil.

A Type 2 DSC is an unknown, unusual, and hidden, concealed or latent physical condition, which the contractor encounters at the site that differs materially from the conditions that an ordinary contractor in the general vicinity of the project would expect to encounter while...