Adverse ground conditions – who bears the risk?

Under most construction contracts, the contractor takes on the ground conditions risk.

The most regularly used standard form construction contracts reflect this; for example, the unamended Joint Contracts Tribunal (JCT) Design and Build Contract 2016 does not name adverse ground conditions as something that entitles a contractor to extra money or extra time. Well-drafted Schedules of Amendments specifically name the contractor as the party that takes the risk.

However, a recent case¹ has demonstrated that technical documents appended to a contract, such as a scope of works, can tip the risk back over to the employer.

In the case, E.ON had engaged Clancy Docwra Limited (CDL) to install some pipework. The scope of works, which was contained within the tender documents and appended to the contract², showed a clear pathway on the site through which the pipes could be installed. It later transpired that some underground brick rubble blocked the pathway.

CDL argued that the scope of works did require them to remove the rubble and that it was entitled to extra money to complete this task. E.ON argued that the contract (as amended by a Schedule of Amendments) contained clauses that specifically put the ground conditions risk on to CDL. E.ON also pointed to a priorities clause within the contract which stated that, in the event of inconsistencies between the Schedule of Amendments and other appended documents (including the scope of works), the Schedule of Amendments would prevail.

The Court decided that the ground conditions clauses in the contract only applied to CDL’s agreed scope of works but were not worded to extend the scope of works. As the scope document had expressly displayed a clear pathway for the pipework, the Court held that removing rubble from the pathway fell outside the scope and that CDL were entitled to extra money as a consequence.

The case highlights the importance of ensuring that all contract documents are consistent in terms of how they allocate the ground conditions risk.

Employer’s Requirements should be carefully drafted to ensure as far as possible that the scope of works includes dealing with adverse site conditions and that nothing negates or weakens the contractor’s obligation to do so without extra money or time.

For more information

If you would like to discuss this briefing further, please contact Carl Latham or Alistair Smith.

Citations

1. Clancy Docwra Limited v E.ON Energy Solutions Limited
2. JCT Standard Building Sub-contract with sub-contractor’s design, 2011