With the economy in decline, construction projects will likely experience an increase in claims as parties attempt to mitigate risk and salvage shrinking profit margins. In such an environment, both owners and contractors should get reacquainted with the law that governs one of the most common disputes between owners and contractors: differing site conditions. Generally, construction professionals accept that traditional site condition clauses control the risk associated with differing site conditions. New York case law, however, calls that conclusion into question.
Over 30 years ago, New York courts issued two rulings which imposed liability on owners for their failure to fully disclose information concerning site conditions. In Public Constructors, Inc. v. State of New York, 55 A.D.2d 368, 390 N.Y.S.2d 481 (3d Dep’t 1977), the State’s bid documents for a highway construction contract represented that the soil was made up of material that had the capacity to shed moisture. During construction, the contractor experienced extensive delays due to wet subsurface soil conditions. Years earlier, the State conducted test borings and investigations of the soil at the project site. Some of these test results, which indicated problems with the soil conditions due to excessive moisture, were not disclosed by the State.