Adverse Ruling on Differing Site Condition Claim

On December 20, 2005, the Court of Appeals issued an opinion in Triangle Excavating Company, Inc. v. Covert Township, rejecting a DSC claim due to lack of written notice and refusing to consider constructive notice. The opinion, thankfully, was unpublished and thus is merely “persuasive authority” which a trial court is not bound to follow. Nonetheless, the case highlights what could happen if you do NOT follow the procedures in the differing site conditions clause. The Association fought a long and hard battle to get the differing site condition legislation passed for your benefit. However, if you do not follow the simple two-step procedures of “stop and give notice” then you may be throwing away a compensable claim, or be forced to litigate and possibly suffer the same consequences as fellow member Triangle Excavating did in Covert Township.

In 2002, Triangle Excavating entered into a contract with Covert Township to install approximately seven miles of water main. During the excavation, Triangle Excavating encountered unmarked telephone lines and fiber optic cables meandering through the jobsite. Triangle Excavating had to move the excavation to the opposite side of the street because of these obstructions, and thus suffered delays and additional expenses. The general conditions contained a differing site conditions (DSC) clause. As in all such provisions, the DSC clause required the contractor to provide notice if it believed the conditions at or contiguous to the work site are of an unusual nature and differ “materially from conditions ordinarily encountered and generally recognized as inherent in work of the character provided for in the Contract Documents.” If such conditions were found, the general conditions required the contractor to notify the owner and engineer in writing about such conditions “promptly after becoming aware thereof and before further disturbing the subsurface or physical conditions or performing any work in connection therewith (except in an emergency …).”

This contractual provision added two additional provisions which are not contained in the DSC legislation. The general conditions prohibited the contractor from performing any work in connection with the differing site condition until receipt of written order to resume working. The contract also warned that failure to comply with the written notice procedure would be fatal to any DSC claim.

Triangle Excavating did not stop its work upon discovering the unforeseen conditions and only gave Covert Township’s engineer oral notice of the existence of the unmarked cables. Although it eventually made a written request for additional compensation, Triangle Excavating did not do so until thirteen days after it first encountered the conditions. The on-site inspector admitted he knew that Triangle Excavating encountered the unforeseen conditions and had given him notice of its intent to request additional compensation. Nevertheless, the township denied the claim, relying upon Triangle Excavating’s failure to comply with the notice provisions.

In January of 2003, Triangle Excavating filed a complaint seeking, among other things, additional compensation because it encountered unforeseen difficulties during the excavation. Covert Township moved for summary disposition, and the trial court dismissed the DSC claim. Triangle Excavating appealed the dismissal.

Triangle Excavating argued that the trial court erred in dismissing the DSC claim because a question of material fact existed as to whether Covert Township had constructive notice of Triangle Excavating’s claims for damages due to unforeseen site conditions. The Court of Appeals disagreed, ruling that Triangle Excavating did not comply with the terms of its contract with Covert Township and therefore, was not entitled to any adjustment of the contract price. The Appellate Court concluded the unambiguous terms of the contract required Triangle Excavating to immediately stop work and give written notice of the DSC if it wanted to receive compensation for the additional expenses it incurred. Summary disposition for Covert Township was affirmed.

As noted, this decision is not binding on trial courts and there is more persuasive authority that supports Triangle Excavating’s arguments. However, you can – and should – avoid the entire argument and the expense associated with litigating that issue. When you encounter a differing site condition:

• Stop working; and
• Give written notice

Failing to follow that two-step procedure could land you in front of a “rogue” judge who myopically looks only at the four corners of the contract and ignores the public policy arguments that support “constructive notice.” Avoid the headache, the heartache, and the expense – stop and give written notice. It is that easy.