Will A Duty To Inspect The Site Adversely Affect A Differing Site Conditions Claim?

Last month, we discussed why utility contractors should insist on the inclusion of a differing site (changed) conditions ("DSC") clause in their contracts. A DSC clause allocates to the owner the risk that actual physical conditions at the site are materially different from the expected physical conditions at the site, along with establishing a procedure for adjusting the contract price and time for DSCs. Absent a properly drafted DSC clause, the doctrine of sanctity of contract normally places the risk on the contractor if the work is more difficult, costly, or time consuming than expected due to a DSC.

DSCs fall into two categories: Type I, which are physical conditions encountered during the performance of the work that differ materially from those indicated in the contract documents, and Type II, which are unknown physical conditions encountered during the performance of the work that differ materially from the conditions normally encountered when performing such work.1

An owner is normally not liable to a contractor for a Type I DSC claim unless "the conditions actually encountered were reasonably unforeseeable based on all the information available to the contractor at the time of bidding." An owner is normally not liable to a contractor for a Type II DSC claim unless "the contractor could not reasonably have anticipated the actual condition at the site from inspection or general experience." These standards generally obligate a contractor to conduct a reasonable inspection of the site and other available information at the time of bidding, even if the contract does not expressly require such an inspection.

In addition to the general obligation to conduct a reasonable inspection, most construction contracts expressly require that the contractor represent that it conducted an inspection of the site and other available information before contracting. For instance, a typical site inspection clause represents that "...the Contractor has visited the site, become generally familiar with the local conditions under which the Work is to be performed and correlated personal observations with requirements of the Contract Documents."2

Reasonableness of a site inspection is based upon the scope, level, and amount of inspection that an ordinary, prudent contractor doing the same type of work would conduct under the same or similar circumstances. A contractor is not held to the standard of an expert in any particular discipline, such as a geologist...