Concealed Conditions

Concealed Conditions - Protecting Yourself

By: Harry Malka, Esquire

Your Construction Law FirmTM

This article is part of a series of articles which are designed to identify several key clauses that every party to a construction contract should carefully review and understand prior to entering into a contract. This article will discuss "Concealed Conditions", which are site conditions that are different from what was anticipated by the parties at the time they entered into the contract.

Often times, the conditions of the construction site are very different from what the contractor expected, this usually occurs with underground work or when working on renovation projects. In the event where the contract does not address hidden or unforeseen conditions, the law will imply that the contractor has agreed to perform work that is reasonably anticipated. Generally, work that cannot be said to be reasonably anticipated may result in a change order for the additional work resulting from the concealed condition.

However, many contracts provide that the contractor has had the opportunity to inspect the site prior to entering into the contract and accepts the site "as is". In those cases, the contractor may not be entitled to a change order to cover the additional costs caused by the concealed conditions. Obviously, a contractor should be very careful before agreeing to such a provision.

In Town of Longboat Key v. Carl E. Widell and Son, 362 So. 2d 719 (Fla. 2d DCA), the Court held that even where the bid instructions required the contractor to conduct a pre-bid site inspection to observe site conditions, the contractor was not required to discover concealed subsurface conditions, or those which would not be discovered by an inspection which is appropriate to the time available. However, where the contract provides that the contractor should visit the site and take whatever steps are necessary to determine the nature and extent of work required; there is a heavier burden on the contractor to establish that it is entitled to a change order due to an unknown or concealed condition.

In contracts with governmental entities, the governmental entity has a duty to disclose to the bidders known facts that have a material impact on the cost or the feasibility of a construction project. The failure to disclose this information may entitle the contractor to an equitable adjustment. This is known as the Government Superior Knowledge Theory. However, where there has been no representation by the governmental owner, there can be no misrepresentation. Thus, no recovery was allowed under a differing site conditions clause where it was determined that the contractor relied on its own investigation of the site, rather than a representation by the owner as to the condition of underground piers.

Generally, in order to be entitled to additional compensation as a result of a concealed condition, the contractor must prove that a subsurface or latent condition is: (1) materially different from the contract indications; and (2) reasonably unforeseeable on the basis of all information available to the contractor at the time of bidding.

Encountering a hidden or concealed condition that materially differs from what was anticipated can mean extra costs for the contractor. It is important to include a clause in the contract that provides for additional compensation in the event that contractor encounters a concealed condition. This is called a "Changed Conditions" or a "Concealed Conditions" clause. Otherwise, the contractor may suffer in having to perform work that was not anticipated without receiving additional compensation.