Contractor’s entitlement to compensation for encountering unforeseen ground conditions (“UGC”) – is it possible?

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The answer is no, maybe or yes.

Construction contracts typically identify the scope of works, the timescale in which they are to be performed and the price the contractor is to be paid for carrying them out. In the absence of any express provisions to the contrary, contractors are required by most legal systems to carry out that which they have contracted to do, and bear all associated burdens of doing so.

Under English law, for example, an employer does not impliedly warrant that the works undertaken by the contractor are possible (legally or physically). The employer is entitled to rely upon the contract, and the expertise of the contractor to carry out the works, and the contractor will not be entitled to be compensated (time and or money) in dealing with the more onerous conditions.

Some contracts seek to share the risk of encountering UGCs.  FIDIC clause 4.12, for example, entitles a contractor to claim an extension of time for delay to completion and payment of cost for adverse UGCs that were not reasonably foreseeable by an experienced contractor, subject to giving appropriately timed notices and meeting other criteria.  However, English case law shows that it can be difficult for contractors to satisfy the necessary tests, particularly the test of foreseeability.

In Obrascon Huarte Laine SA v Her Majesty’s Attorney General for Gibraltar (2015), the Court of Appeal rejected the contractor’s claim for UGC where the ground conditions were not expressly identified in the geotechnical information, with the court holding that “an experienced contractor at tender stage would not simply limit itself to an analysis of the geotechnical information contained in the pre-contract site investigation report and sampling exercise”.

Likewise in Van Oord UK Limited and others v Allseas UK Limited (2015), the court held that the contractor failed to prove that subsurface conditions were different from those described in the contract or were unforeseeable.

Compensation may therefore depend upon proving foreseeability, which extends beyond the boundaries of the contract and documents upon which it is formed.

UGC was discussed in our Twenty Brilliant Construction Questions and Answers webinar of 26 August 2021.  To view the webinar and detailed notes click here.

To find out how Barton Legal can help you, please click here.