THE LAW AND CIVIL ENGINEERING – FEBRUARY 2017 NEWSLETTER
The Public Entity Owner’s Disclaimer of Subsurface Information Does Not Always Work
by Eugene Bass
The specifications for a project involving below ground construction should include whatever information the owner has about subsurface conditions so that the bidding contractors all have the same access to knowledge of conditions that will affect the cost of the work and the bids. The specifications may also include some disclaimer provisions seeking to place the entire responsibility for determining the actual conditions on the contractor. Often the specifications will seek to tell the contractor that notwithstanding the information given in the plans and specifications about subsurface conditions, the contractor should not rely on what was shown and that he should be free to go to the site and perform as much pre-bid subsurface investigation as is necessary to determine the actual conditions that will be encountered. Finally, since the contractor could be made responsible for pre-knowledge of all subsurface conditions, the contract may state that no additional payment arising from subsurface conditions differing from the contractor’s expectations will be allowed.
In a case where a contractor was required to constructed a series of drilled piers to stabilize a hillside, a public entity owner sought to avoid any responsibility for subsurface conditions that were different from that which was anticipated based upon information provided to the bidders by the owner. The contract provided that it was the sole responsibility of the contractor to evaluate the job site and make his own technical assessment of subsurface soil conditions for determining the proposed drilling process, equipment and make his own financial impact assessment prior to bidding. The contract further provided that the owner made no guarantees for the accuracy of the soil report, findings or recommendations and that the owner would make no additional compensation or payments, nor would it accept any claims if the subsurface soil conditions were different than that assumed by the Contractor.
The contract stated that it provided the soil boring information for the “purpose of determining what type of rock may be encountered” and so that the bidders may be supplied with the information for the purpose of assessing the costs of the project. The clear meaning of the contract language was that the very purpose of the information provided was to assist the contractor in making a bid.
Substantially harder rock was encountered that indicated in the information supplied by the owner. The contractor requested additional money and the owner refused, citing the disclaimer language of the contract A lawsuit resulted.
The owners position in the lawsuit was that because of the disclaimer language in the contract, the contractor was fully responsible for whatever conditions that were encountered. The Appellate Court disagreed and held that the contractor should be paid the added costs. In it’s decision the Court noted that the Legislature in passing the Public Contract Code, used the word “indications” as referring to information “from which deductions might be drawn as to actual conditions” and that the law established as the public policy of California, that a contractor may draw reasonable deductions from the “indications” in a contract of the subsurface conditions that might be found at the site. The information provided to the bidders clearly qualified as sufficient “indications” under the California Public Contract Code and the contractor was compensated.
Special care must be taken if the soils information provided is not intended to be relied upon by bidders and and there is disclaimer language in contract.