5.3.1.7.2 Type II Conditions

• Jurisdiction: Arizona

A Type II changed condition does not require a comparison between the indications in the contract documents with the actual site conditions. Essentially, a Type II changed condition occurs when the actual site conditions encountered differ materially from those ordinarily expected and recognized as inherent in the character of the contract work. In other words, a Type II condition compares the actual site conditions to those site conditions reasonably expected to be encountered by the contractor. To successfully recover on a Type II claim, a contractor must establish the following elements:

1. The contractor must establish the known, recognized, and usual conditions at the site.

2. The physical condition encountered must be unknown and not foreseeable at the time of contracting.

3. This physical condition is not customarily expected, could not have been anticipated from a reasonable site inspection, and is materially different from the known, recognized, or usual conditions.

4. The physical condition is the sole cause of the increased costs of the contractor.

Due to the obviously subjective nature of a Type II claim, a contractor will generally find it to be more difficult to ascertain and prove than a Type I claim. Proof of a Type II claim is therefore more easily derived from expert testimony.

There is no garden-variety differing site condition clause. Changed condition clauses found in various standard contracts offer a variety of accommodations of Type I/Type II conditions, disclaimers and notice provisions. For example, Article 3.7.4 of AIA Document A201 (2007) provides:

Concealed or Unknown Conditions. If the Contractor encounters conditions at the site that are (1) subsurface or otherwise concealed physical conditions that differ materially from those indicated in the Contract Documents or (2) unknown physical conditions of an unusual nature, that differ materially from those ordinarily found to exist and generally recognized as inherent in construction activities of the character provided for in the Contract Documents, the Contractor shall promptly provide notice to the Owner and the Architect before conditions are disturbed and in no event later than 21 days after first observance of the conditions. The Architect will promptly investigate such conditions and, if the Architect determines that they differ materially and cause an increase or decrease in the Contractor’s cost of, or time required for, performance of any part of the Work, will recommend an equitable adjustment in the Contract Sum or Contract Time, or both. If the Architect determines that the conditions at the site are not materially different from those indicated in the Contract Documents and that no change in the terms of the Contract is justified, the Architect shall promptly notify the Owner and Contractor in writing, stating the reasons. If either party disputes the Architect’s determination or recommendation, that party may proceed as provided in Article 15.^[161]

This AIA Document A201 (2007) provision covers both Type I and Type II conditions.

Provided that the differing site conditions clause does not clearly and expressly limit the contractor’s remedy to only those rights, obligations and duties arising under the provisions of the contract documents, the differing site conditions clause may not preclude a contractor from pursuing other available common law remedies.^[162] For example, AIA Document A201, Article 13.4.1 (2007) expressly states that rights, duties and obligations contained in the standard form “shall be in addition to and not a limitation of duties, obligations, rights and remedies otherwise imposed or available by law.” However, in stark contrast, § 13.7 of the ConsensusDOCS 200 (2007) provides:

The Parties’ rights, liabilities, responsibilities and remedies with respect to this Agreement, whether in contract, tort, negligence or otherwise, shall be exclusively those set forth in this Agreement. (Emphasis added).

Depending on the circumstances (including the controlling contract provisions), the practitioner should consider various other common law theories for recovering on differing site condition claims, including fraud, misrepresentation, impossibility, breach of warranty, mutual mistake, unjust enrichment, quantum meruit, and negligence.

^[161] See also, ConsensusDOCS 200 § 3.16.2 (2007).

^[162] D. Dobbs, Handbook on the Law of Remedies § 12.5 (1973).

Cases

1800 Ocotillo, LLC v. WLB Group, Inc., 219 Ariz. 200, 196 P.3d 222 (2008).............................. 5.3-28

A.H.A. General Constr. v. New York Housing Authority, 699 N.E.2d 368 (N.Y. 1998)............... 5.3-18

Absher Constr. Co. v. Kent School Dist., 890 P.2d 1071 (Wash. 1995)........................................ 5.3-17, 19

Aero Serv. Corp., ASBCA No. 4249, 58-1 BCA ¶ 1683 (1958)....................................................... 5.3-14

Air-A-Plane Corp. v. United States, 408 F.2d 1030 (Ct. Cl. 1969)..................................................... 5.3-11

Alexander v. O’Neil, 77 Ariz. 91, 267 P.2d 730 (1954).......................................................................... 5.3-1

Allgood Elec. Co. v. Martin K. Eby Constr. Co., 959 F. Supp. 1573 (M.D. Ga. 1997).................... 5.3-16

Apac-Carolina, Inc. v. Greensboro-High Point Airport Auth., 431 S.E.2d 508 (N.C. Ct. App. 1993) 5.3-30

Aragona Constr. Co. v. United States, 165 Ct. Cl. 382 (1964)............................................................... 5.3-11

Arizona Bd. of Regents v. Arizona York Refrig. Co., 115 Ariz. 338, 565 P.2d 518 (1977).............. 5.3-12

Ashton Co. Contractors and Engineers v. State, 9 Ariz. App. 564, 454 P.2d 1004 (1969)............... 5.3-44

Associated Mech. Contractors. v. Martin K. Eby Constr. Co., 271 F.3d 1309 (11th Cir. 2001)........ 5.3-16

Atlantic Dry Dock Corp. v. United States, 773 F. Supp. 335 (M.D. Fla. 1991)............................... 5.3-11

B & C Elec., Inc. v. Pullman Bank & Trust Co., 421 N.E.2d 206 (Ill. Ct. App. 1981).................. 5.3-7

Barclay White Skanska, Inc. v. Battelle Mem. Inst., 2006 U.S. Dis. Lexis 18947 (D. Md. 2006). 5.3-19

Beltrone Constr. Co. v. State, 682 N.Y.S. 2d 299 (Ct. App. 1998)...................................................... 5.3-29

Bentivegna v. Powers Steel & Wire Products, Inc., 206 Ariz. 581, 81 P.3d 1040 (Ct. App. 2003).. 5.3-12

Blecick v. School Dist. No. 18, 2 Ariz. App. 115, 406 P.2d 750 (1965)............................................. 5.3-21

Blue Ridge Sewer Imp. Dist. v. Lowry & Assocs., 149 Ariz. 373, 718 P.2d 1026 (Ct. App. 1986) 5.3-13

Brant Constr. Co. v. Metro. Water Reclamation Dist., 967 F.2d 244 (7th Cir. 1992)......................... 5.3-44

Brinderson Corp. v. Hampton Roads Sanitation Dist., 825 F.2d 41 (4th Cir. 1987)........................... 5.3-15

Broome Constr., Inc. v. United States, 492 F.2d 829 (Ct. Cl. 1974)...................................................... 5.3-33

Buckley & Co., Inc. v. State, 356 A.2d 56 (N.J. Super. Ct. Law Div. 1975)...