Legal Q&A: Unexpected ground conditions

If a project does not "come out of the ground" on time, the consequences in terms of delay and disruption can be disastrous. It is therefore surprising that many construction contracts do not expressly allocate the risk of unexpected ground conditions.

Does the contractor generally take the risk of unexpected ground conditions?

Yes. If the contract is silent on the issue, the contractor impliedly warrants that he can construct the works in accordance with the design provided to him - including having to deal with unexpected ground conditions.

The contractor cannot therefore claim if constructing the works turns out to be more difficult - and therefore more time consuming or costly - in consequence of unexpected ground conditions.

One possible exception is where the ground itself is destroyed by an event such as a flood or landslip - in which case the contract will probably be 'frustrated', thus discharging the parties from further performance.

However, the warranty does not mean that the contractor has accepted that the design of the building itself is 'buildable' - that risk remains with the employer unless it is expressly imposed on the contractor under a D&B contract.

What if the contractor relies on inaccurate information provided by the employer?

The employer will be liable for the consequences of the contractor having to deal with unexpected ground conditions - but only if the employer expressly represents or warrants to the contractor that the information is accurate and/or can be relied on.

The employer will not be liable if he expressly disclaims liability for the accuracy of the information he provides.

If the employer makes no comment as to the accuracy and/or reliability of the information, it is still possible, although unlikely, that he will be liable - but this will depend on all of the circumstances of the case.

For example, there was held by the Court of Appeal in Bacal Construction -v- Northampton Development Corporation to be an implied warranty by the employer that the ground conditions would accord with the assumptions on which the contractor had been instructed to design the foundations.

What is the position under the standard forms of contract?

The JCT contracts (apart from the Major Project Construction Contract) are silent on ground conditions - with the result that the contractor's implied warranty that he can build the works in accordance with the design provided applies.

The Major Project Construction Contract treats unexpected ground conditions as a change - but only if:

• They necessitate the amendment proposed by the contractor to the Employer's Requirements or the Contractor's Proposals
• The employer agrees to the contractor's proposed amendment (such consent not unreasonably to be withheld) and
• An entry is made in the Contract Particulars specifically making this provision applicable.

Both NEC3 and the ICE Form of Contract entitle the contractor to the cost of and time spent in dealing with unexpected 'physical' conditions (which includes ground conditions) - regardless of whether any of the contract documents have to be changed in consequence.

The ICE Form of Contract and the Major Project Construction Contract also expressly cover artificial obstructions in the ground - which means that the cost of diverting existing services cannot be recovered under NEC3.

The JCT contracts, NEC3 and the ICE Form of Contract all require that the unexpected ground conditions (or artificial obstructions) could not reasonably have been foreseen by an experienced and competent contractor.

NEC3 and the Major Project Construction Contract require that the contractor could not have ascertained the actual nature of the ground conditions from:

• An examination of the site
• Any site information provided by the employer or
• Any other publicly available information the contractor had or ought reasonably to have had.

How can a contractor best protect itself against the risk of unexpected ground conditions?

Express provision should be made in the contract as to how the risk is to be allocated - including in particular whether the employer warrants the accuracy of any information provided at tender stage. If a standard form of building contract is to be used, its provisions on ground conditions should be checked for their suitability.

David Weare, partner, Davies Arnold Cooper