§12.2 Differing Site Conditions

• Jurisdiction: Washington

§12.2 DIFFERING SITE CONDITIONS

A differing site condition is a physical condition, other than weather, climate, or other act of God, discovered on or affecting a construction site and differing in some material respect from what reasonably was anticipated. Turnkey Enters., Inc. v. United States,597 F.2d 750, 754, 220 Ct. Cl. 179,186 (1979); Foster Constr. & Williams Bros. Co. v. United States,435 F.2d 873, 193 Ct. Cl. 587, 613-14 (1970). The condition must be physical; changes in political conditions, Hallman Bros. v. United States,68 F. Supp. 204, 107 Ct. Cl. 555, 556 (1946); economic conditions, W. Contracting Corp. v. State Bd. of Equalization,39 Cal. App.3d 341, 114 Cal. Rptr. 227 (1974); or labor issues, Appeal of Cross Constr. Co., ENGBCA No. 3676, 79-1 BCA (CCH) ¶13, 707 (1979), are not differing site conditions.

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In the absence of a contract clause providing otherwise, the risk of any cost or difficulty associated with unexpected subsurface site conditions is generally borne by the construction contractor.

(1) Common-law general rule

Under common law, the general rule is that the risk of unforeseen difficulties during performance falls upon the contractor.

As a general matter, under the common law, a mere unanticipated condition that renders contract performance more difficult, burdensome, or expensive provides no excuse for nonperformance and no basis for modification of the contract. United States v. Spearin,248 U.S. 132, 136, 39 S. Ct. 59, 63 L. Ed. 166 (1918).

Where one agrees to do, for a fixed sum, a thing possible to be performed, he will not be excused or become entitled to additional compensation, because unforeseen difficulties are encountered. Thus one who undertakes to erect a structure upon a particular site, assumes ordinarily the risk of subsidence of the soil.

Dravo Corp. v. Muni. of Metro. Seattle,79 Wn.2d 214, 218, 484 P.2d 399 (1971) (internal citations omitted); see also Md. Cas. Co. v. City of Seattle,9 Wn.2d 666, 676, 116 P.2d 280 (1941); S.L. Rowland Constr. Co. v. Beall Pipe & Tank Corp.,14 Wn. App. 297, 310, 540 P.2d 912 (1975) (citations omitted).

Thus, absent a differing site conditions or changed conditions clause, contractors must (1) increase the amount of their bids or proposals to cover the contingency of encountering unexpected difficulties; (2) make their own subsurface investigations; (3) bear the risk of uninvestigated, unknown conditions without price contingencies; or (4) choose not to bid at all. Some courts take into account the contractor's dilemma, for example, in undertaking "tremendously expensive core boring tests not knowing whether or not [the contractor will] get the contract[.]" Condon-Cunningham, Inc. v. Day,22 Ohio Misc. 71, 258 N.E.2d 264 (Ohio Com. Pl. 1969).

Courts have recognized some exceptions to the general rule when the contractor is able to prove any of the circumstances discussed below.

(a) Fraud or negligent misrepresentation of conditions

In Douglas Northwest, Inc. v. Bill O'Brien & Sons Construction, Inc.,64 Wn. App. 661, 828 P.2d 565 (1992), the Washington Court of Appeals ruled that a subcontractor reasonably relied upon a general

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contractor's representation of soil conditions, notwithstanding the subcontractor's familiarity with the general area. The subcontractor at bid time had asked the general contractor's project manager if there was a soils report. The project manager indicated there was no soils report but advised that he (the project manager, who had an ownership interest in the property) had owned the property for years, the soils were "excellent," and only on-site material would be needed for the project. Id. at 665. When work started, the characteristics of the native soil made it impossible to meet the compaction specifications. The subcontractor was forced to bring material from off site. The subcontractor then learned that the general contractor possessed a soils report identifying the precise conditions that had been encountered by the subcontractor. The subcontractor completed the work and sued for delay and intentional misrepresentation of the site conditions (the subcontract did not contain a differing site condition clause). The court held that because the project manager had made affirmative, unequivocal representations on which the subcontractor relied and had willfully withheld material information of which it had superior knowledge, the subcontractor was entitled to recover the increased costs incurred as a result of those misrepresentations. Id. Similar holdings are found in other jurisdictions.

(b) Breach of implied warranty of the sufficiency and adequacy of the plans and specifications

An alternative theory to a differing site condition is the breach of implied warranty of the sufficiency and adequacy of the plans and specifications. The owner of a construction project impliedly warrants the adequacy and sufficiency of project plans and specifications. Weston v. New Bethel Missionary Baptist Church,23 Wn. App. 747, 753, 598 P.2d 411 (1978); Prier v. Refrig. Eng'g Co.,74 Wn.2d 25, 29, 442 P.2d 621 (1968). When the plans and specifications do not adequately depict the actual conditions on the site, courts may employ the breach of the implied warranty theory to allow a contractor to recover additional expenses in overcoming a site condition. To recover on a breach of warranty theory the contractor must be able to show reliance on the owner's warranty. The burden of showing a breach of the implied warranty is less stringent than the proof required to maintain an action based on misrepresentation. See also Souza & McCue Constr. Co. v. Superior Court of San Benito Cnty., 57 Cal. 2d 508, 511, 370 P.2d 338, 339-40 (1962).

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(c) Constructive change

When, as a result of government misinterpretation of a contract provision, a contractor is required to perform more or different work, or work to higher standards, not called for by the contract's terms, the contractor may be entitled to an equitable adjustment under the changes article. Appeal of Emerson-Sack-Warner Corp., ASBCA No. 6004, 61-2 BCA (CCH) ¶3,248 (Dec. 14, 1961). The constructive change theory has been used to establish compensation when the contract lacked a differing site conditions clause. Appeal of J.W. Hurst & Son Awnings, Inc., ASBCA No. 4167, 59-1 BCA (CCH) ¶2,095 (Feb. 20, 1959); Green Constr. Co. v. Kan. Power & Light Co.,1 F.3d 1005, 1009 (10th Cir. 1993); Uhlir v. Golden Triangle Dev. Corp.,763 S.W.2d 512 (Tex. App. 1988); Acquisition Corp. of Am. v. Am. Cast Iron Pipe Co.,543 So. 2d 878 (Fla. App. 1989).

(d) Failure to disclose superior information

The United States Court of Claims (predecessor to the United States Court of Federal Claims), in interpreting federal construction contracts, developed what is commonly referred to as...