BENESCH ADSC West Coast Chapter Annual Meeting Recovering for Unforeseen Conditions May 20, 2016 Richard D. Kalson, Esq. rkalson@beneschlaw.com 614.223.5380 (W) 412.417.4209 (C)
Field Changes Things to Consider: Understand what your soil conditions are: • – How do you know if you have a change of ground conditions? – Everyone on team must know expected conditions AND notice requirements. Recommended Summary Sheet. Critical to properly document underground conditions for potential differing • geotechnical information with consistent and correct Drill Logs and Daily Diaries. Owner/GC should provide on-site geotechnical representative to confirm the • ground conditions. Documenting potential differing geotechnical information –keys are drill logs • and daily diaries. Field journals are a subcontractors “best friend” when tracking a change of • condition.
Keys to Success: Daily Journals Daily Journals Objective record of what occurred on site completed daily • Uniform company policy regarding content and format • Uniform company policy regarding review of daily logs • Not your personal diary! • Language to avoid • Sexually explicit, racially offensive comments – Foul language – Personal information – Admissions of liability – Opinions – Electronic submissions • – Easier review – Easier maintenance – Location/Retention issues – Easier to complete daily
Daily Reports • List all equipment including tooling • List all production activities with commentary as needed • Note any changes to work or DSC • Objective, not subjective, comments
Changes to Scope of Work • Addition or deduction in quantities of work • Providing surveying or performing continuous spoils removal when previously excluded by subcontract (your proposal is critical) • Additional demobilization and mobilization • Careful review: compare subcontract to bid. • Do not accept an expanded scope of work beyond your proposal. • Your proposal should be incorporated in full and should take precedence, especially as concerns scope of work.
Field Changes Key Points • Teamwork • Documentation • Notice…Notice…and NOTICE
Unforeseen Conditions/Spearin • Owner Contractual Disclaimers • Reliance on Geotechnical Reports and other Owner Disclosures • Superior Knowledge Doctrine • Constructive Fraud
Change of Conditions Driller’s Definition: When subsurface conditions are materially different than as advertised in the contract documents.
Unforeseen Conditions/Spearin • What is the Spearin Doctrine? • Implied warranty of specifications • Cause of failure to perform • Compensation • Duty to investigate
Unforeseen Conditions/Spearin • “Type I” Differing Site Conditions • “Type II” Differing Site • Constructive Fraud
Differing Site Conditions • Type 1: DSC arises where the actual site conditions encountered during performance of the work differ materially from the conditions described in the contract documents. • Type 2: DSC is present when the actual conditions are unusual and unforeseen, and differ from conditions usually encountered in the type of work specified in that area. Determination of fault is not a requirement.
Compliance with Contractual Notice Clauses • Notice clauses are no longer overrated and overly relied upon by owners and contractors. • Negotiate a reasonable number of days. • Notice clauses are very strictly enforced in some states, while courts in other states find exceptions to the general rule that contract provisions requiring written notice of a claim will not be strictly enforced if some other notice is provided. • Giving proper notice is especially critical in regards to differing site condition claims. • Reviewing the notice clause must be a priority during the review and negotiation of your contract.
Differing Site Conditions: Examples • Encountered higher groundwater than indicated in contract documents. • Encountered significantly more cobbles and boulders than indicated in the contract documents, perhaps at unexpected elevations. • Encountered significantly higher strength rock than indicated in the contract documents.
Superior Knowledge • When a public agency withholds material information, documents or knowledge from prospective bidders and such information would have educated a contractor regarding an existing underground condition, a contractor may recover additional costs as a result of the condition. • Fraudulent intent of this withholding is normally not required to establish such recovery.
Notice Clauses • Failure to comply with prompt written notice requirements may waive claim. • Actual notice or substantial compliance may act as a waiver of formal notice requirements in some states where there is constructive notice, a waiver of notice provisions, a lack of prejudice despite the lack of formal written notice, contractor may not be immediately aware of the scope of the differing site condition. • Subcontractor after providing proper notice, must be careful not to waive the claim by executing a serious of unambiguous releases barring suits or causes of action arising on or prior to date of execution, released claims for extra work where subcontractor did not show on releases that extra additional amounts were owed to it. Must reserve claim on lien waivers.
Notice Clauses • Absher Construction Co. v. Kent School District No. 415, 77 Wn. App. 137, 890 P.2d 1071 (1995) – The owner had no notice of the contractor's additional work until it was already completed.The owner did not have an opportunity to investigate the differing site conditionsand make a determination of how to accommodate them. – Rather , the contractor went ahead and completed the work and then presented the bill. – The contract notice provisions had not been met or waived
Arizona • Jonovich Cos. V. City of Coolidge, 2011 Ariz. App. Unpub. Lexis 1332, Arizona project owners impliedly warrant the adequacy of their plans and specifications. • Contractor must adhere to plans and specifications to receive Spearin protection. • Need for written change order for deviation. • Spearin does not apply to performance specifications.
California • California allows for a third type of differing site condition for local public entity projects: “material that is hazardous waste. . . [and] that is required to be removed to [certain classes of] disposal site. . .” This third type ensures that the owner takes responsibility for the proper disposal of hazardous wastes. • California Public Contract Code section 7104 was amended in 2006 to define a type 1 differing site condition as: “Subsurface or latent physical conditions at the site differing from those indicated by information about the site made available to bidders prior to the deadline for submitting bids”.
California Key 2007 California Case • – “Since the disclaimers wholly denied responsibility for the subsurface conditions indicated, in violation of [the statute mandating the differing site conditions clause], they were properly excluded from jury consideration. . . . [¶] . . . . [E]ven under the law preceding [that statute], a general disclaimer could not overcome positive assertions of fact regarding subsurface conditions upon which the contractor was entitled to rely. (See E. H. Morrill Co. v. State of California, 65 Cal.2d at 793.) Adjusting the Morrill analysis to substitute the required statutory standard of “indicated” for positive assertions of fact, the disclaimer in this case is precisely the kind of general disclaimer condemned in the Morrill case.”). – California courts have rejected efforts to circumvent the differing site conditions clause with disclaimers – The contractor must prove (1) a subsurface or latent physical condition at the site, (2) differing materially (3) from what was indicated in the bidding information. What was “indicated” can be either a positive statement about the condition in the bidding information, or an inference about the condition arising from that information “Determining whether the contract and related documents indicated the – subsurface conditions at the jobsite . . . is a matter of contract interpretation . . .”
UTAH In L. A. Young Sons Constr. Co. v. Cty. of Tooele, 575 P .2d 1034 (Utah Sup.Ct. • 1978), at the contractor's request, the county gave the contractor a chart showing the water table of the project area. The contractor argued that the chart was false and misleading because the water was located much closer to the surface than was indicated by the chart. The contractor claimed that the high water table resulted in extra costs. The county claimed that the contractor's negligence and omissions caused the problems with the runway. At trial, the evidence established that the water table chart was accurate, that • there was a fluctuating water table in the project area, and that neither party was aware of such fact. The court affirmed the judgment for the owner. When there was no • misrepresentation of factual matters within the state's knowledge or withholding of material information, and when both parties had equal access to information as to the nature of the tests which resulted in the state's findings, a contractor could not claim in the face of a pertinent disclaimer that the state's presentation of the information amounted to a warranty of the conditions that would actually be found.
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