Unforeseen ground conditions usually refer to physical conditions at a construction site which were not known (and not reasonably foreseeable) by the parties at the time of tender or contracting. Such conditions might include soil composition, geological features, hydrological conditions and man-made obstacles. The discovery of these conditions can impact the cost, programme, and even feasibility of a project.
Site investigations
Before commencing a project, employers often engage specialists such as surveyors and engineers to conduct ground investigations, with the resulting reports forming part of the tender package. However, these investigations may not necessarily provide a complete or accurate picture of the site due to, for example, incomplete excavation, changes in ground conditions, or sampling limitations.
Disputes can also arise where adverse physical conditions not previously identified in the employer’s site investigation reports are discovered which then impact the contractor’s progress. Some construction contracts address the extent to which the contractor can rely on reports, but the interpretation and contractual status of these documents can nevertheless be disputed.
Common law position and foreseeability
A contractor with design or engineering responsibility will usually be under a general duty to examine the site to determine whether it is suitable for the work to be undertaken, including ensuring the suitability of ground conditions (Obrascon Huarte Lain SA v Gibraltar [2014] EWHC 1028 (TCC)). This is notwithstanding any site investigation reports that may have been provided by the employer.
A contractor may be entitled to additional time and/or money where, for example, physical conditions could not reasonably have been foreseen by an experienced contractor (Humber Oil Terminals Trustee Ltd v Harbour and General Works [1991] 59 B.L.R. 1). However, the general position is that the contractor bears the risk of adverse ground conditions encountered during the execution of the works.
Contractual risk allocation
Parties often address the risk of unforeseen ground conditions in their construction contracts, with risk allocation often influenced by factors such as the parties’ respective bargaining power as well as market conditions. Allocation of risk will therefore vary from contract to contract.
Some contracts might entitle the contractor to claim additional time and/or money, provided the claim is notified to the employer within a specific timeframe and properly substantiated. Other contracts might limit claims for relief if diligent investigations would have revealed any adverse conditions – in this regard, the contract may apply a foreseeability test to determine a contractor’s entitlement to relief, typically by reference to what an experienced contractor should have anticipated to find and the investigations it would reasonably have been expected to undertake. In other cases, the contract may fully transfer the risk of adverse physical conditions to the contractor, although contractors will usually reflect this risk in their tender price and programme.
The approach to unforeseen ground conditions also varies significantly across standard form construction contracts. For example, whilst the FIDIC 2017 Yellow and Red Books permit the contractor to claim time/money for “unforeseeable physical conditions” adversely affecting the progress or cost of the works, the Silver Book places all risk for unforeseen ground conditions on the contractor
Isabella Salame
Herbert Smith Freehills LLP