Disclosure of Property Conditions

When entering into a contract to do work, it is generally the obligation of the property owner to disclose to the contractor any conditions that may affect the completion of the project.  A later finding of unexpected property conditions could lead to change orders, extra time needed on the project, or possibly even render the project impossible to complete.  Such negative impacts on the delay of the completion of the project could then come back to the property owner in the form of a lawsuit.  However, the ultimate guide in determining whether or not the contractor is to be paid for extra work or other damages is the terms of the contract between the parties.

In Rapid Demolition Co., Inc. v. State, 54 A.D.3d 921, 864 N.Y.S.2d 503 (2d Dept. 2008), for example, after contracting with the state to demolish a bridge, the claimant brought suit for breach of contract.  The basis of the lawsuit was additional costs allegedly incurred because the thickness of the concrete deck overlay on the subject bridge differed substantially from that represented by the defendant in the plans provided to bidders on the project.

In a construction contract between the State of New York and the individual contractor, however, the contract documents contained numerous clauses relieving the defendant of liability and requiring personal inspection of the contract site by the contractor. The contract stated that “the Contractor agrees that … his information was secured by personal investigation and research and not from the estimates or records of the Department of Transportation, and that he will make no claim against the State by reason of estimates, tests, or representations of any officer or agent of the State, except as provided for in this Specification.” In addition, the contract stated that “the Contractor agrees that before making his proposal he carefully examined the contract documents, together with the site of the proposed work, as well as its surrounding territory, and is fully informed regarding all of the conditions affecting the work to be done and labor and materials to be furnished for the completion of this contract.” The contract further provided that it was not prepared based upon actual field conditions, and that the dimensions shown on the plans may vary from the actual field dimensions.  Therefore the court found for the state since the contractor had essentially signed away any right to pursue additional costs from the state due to potential extra work based on property conditions.

Similarly, in All County Paving Corp. v. Suffolk County Water Authority, 20 A.D.3d 438, 798 N.Y.S.2d 523 (2d Dept. 2005), the court found defendant established its entitlement to summary judgment by producing the documents it supplied to prospective bidders on the contract, which provided that each bidder was responsible for inspecting the soil at the construction site and that no extra compensation would be paid pursuant to the contract for unexpected soil conditions.  In that case, the plaintiff contractor entered into a contract with the defendant public authority for the installation of a water main.  During its performance of the contract, the plaintiff encountered unforeseen subterranean obstacles, which damaged its equipment, interrupted and delayed the project, and required additional labor and material.

And while ordinarily, the property owner is responsible for notifying the contractor of soil conditions prior the beginning of work, the court found that the results of test borings previously performed and furnished by the defendant as part of the contract specifications, did not constitute a representation as to the condition of the soil at the construction site.  The specifications stated that there was “no guarantee that unknown, adverse, conditions did not exist underground in the vicinity of the drill site.” Thus, under the terms of the parties’ contract, the contractor bore the risk of encountering unexpected subsurface soil conditions, and since the property owner made no misrepresentations and withheld no information, the contractor was not entitled to compensation for the damages he incurred as he assumed the risk of such by taking on the project.

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