Unforeseen Ground Conditions

When we talk about traditional building contracts, which party is best placed to accept the risk of any unforeseen ground conditions?

• Is it the employer who owns (and one assumes knows) the ground and can have it surveyed at any time he likes?
• Is it his design team, who design a building that one assumes can be built in the prevailing environment?
• Or is it the contractor, who generally prices the design information that he is given (perhaps including the employer’s survey) and who is very unlikely to start taking core samples to investigate the ground before he tenders?

The common law, which is the law that applies in the absence of any express contractual provisions, has divided matters into two schools of thought:

• If the unforeseen ground conditions merely alter the method of working, the change in method is found to be at the contractor’s risk since he is after all responsible for using whatever method he sees fit to construct the given design; &
• But if the design itself must change, it is inherent that this is a variation to the design that the contractor must build, which means that this is (at least potentially) a variation for which the employer should pay.

Of course, in the latter scenario, if the employer considers that his design team were negligent in failing to take stock of the prevailing ground conditions, he may wish to pursue his rights against those parties; for example the surveyor who did not find the detrimental ground conditions.

But this ignores the realities of life on site; the survey almost certainly was not all-encompassing. A common scenario is that the survey takes limited samples and correctly comments upon those samples. During the works, however, the problem ground is found somewhere other than where those few samples were taken.

So what express wording do we wish to provide? Certainly the employer might say he is happy with the common law position; he has given a survey that is correct only in so far as it goes, the contractor takes the risk of any changes to his methods and the employer may have to take the risk if the design changes.

The express contractual situation often turns upon how the survey is given to the contractor:

• The employer may expressly warrant that the report is both accurate and complete. The employer appears to be expressly accepting liability, if the ground conditions differ from those in the report;
• The employer may give an express disclaimer that he is not liable as to whether the report is accurate and complete and that it is for information only (often adding that the contractor must verify such data for himself before tender). The employer appears to be expressly denying liability; &
• The employer may in fact hand over the report but give no warranty as to whether the report is accurate and complete (i.e. not expressly accepting liability) or any disclaimer that he is not to be held liable for its content (i.e. not expressly denying liability). Is this therefore arguable both ways?

Of course an express term, saying that it takes priority over any other conflicting part of the contract, declaring exactly where liability lies should resolve this issue altogether.

But then again, what if the contractor is expressly made liable, the employer hands over a survey with his disclaimer, but the survey has been negligently prepared and the contractor decides to rely upon it as the only data to hand at tender? Can the contractor pursue the surveyor, declaring himself to be a party that was likely to rely upon the survey and thus that the surveyor owed him a duty of care?

The key elements of this issue are whether:

• The surveyor owed any duty of care to that potential (future) contractor as he was preparing his survey. The answer often relies upon an exclusion of liability made by the surveyor in his appointment and report that only the employer may rely upon it; &
• The contractor was actually entitled to rely upon it.

In short, the parties need to be explicit as to which party assumes which risk. That assumption of risk can then be priced accordingly and one must hope that the priced risk pays off.

If we can assist you in any way, or if you simply want to discuss the needs of your construction and engineering project, we would be delighted to meet with you either in our office or at your office to discuss your issues. Please contact us at any time.