By: Alexander A. Miuccio Thomas H. Welby Published: July 2008

Contractor's Pre-Bid Failure to Inspect Site Dooms Extra Work Claim

Construction contracts often contain a much-litigated provision that bidders satisfy themselves by personal examination of the location, conditions and requirements of the work and the accuracy of the information furnished for bidding purposes. Under this exculpatory clause, the contractor generally assumes the risk of unforeseen conditions which may be encountered. The contractor will be excused from unforeseen conditions if it can be shown that the nature of the unanticipated condition is so well hidden as to prevent discovery by reasonable prebid site investigation and examination of available contract information.

In the recent case of Rapid Demolition Company, Inc. v. State of New York, the court applied this exculpatory language in the contract to the contractor’s claim for extra work.

Background

Rapid Demolition Company, Inc. contracted with the State of New York to demolish a bridge. The work included the removal of the bridge’s concrete deck. Once demolition was commenced, the contractor determined that the concrete deck was substantially thicker than what was represented by the State in the plans provided to bidders. When the State refused to pay for the additional costs incurred, the contractor sued the State for breach of contract.

The State argued that the parties’ contract relieved it of liability for the increased thickness. The State relied on numerous contract clauses under which the contractor represented that its bid information was secured by personal investigation and research and not from the estimates, records, tests or representations of the State. The State also relied on contract language which stated that the dimensions shown on the project plans may vary from the actual field dimensions. In addition, the State provided testimony at trial that even a visual inspection of the concrete overlay would have revealed its true thickness.

The trial court awarded the contractor $772,250 on account of the contractor’s additional costs relating to the increased deck thickness. Both the State and the contractor appealed. On appeal, the State argued that the trial court ignored the plain exculpatory contract language. The contractor argued that the damages awarded were inadequate.

Decision

The appellate court reversed the trial court’s decision. In so doing, the appellate court strictly construed the parties’ contract, which assigned responsibility for the increased deck thickness to the contractor, not the State. In its ruling, the court relied heavily on prior case law, stating that “the ultimate guide in determining whether or not the contractor is to be paid for extra work is the contract itself.” The court also stated, “if the parties intended the contractor to rely upon its own investigation, no recovery for extra work may be had, absent a showing of fraud or misrepresentation as to existing conditions.”

Given the law, the court turned to the contract, which it found to be clear. The court noted that the contract stated that the contractor had carefully examined the site and was fully informed of all conditions affecting the work to be done and labor and materials to be furnished. The contract also stated that the contractor would make no claim against the State by reason of estimates, tests, or representations provided by the State. Lastly, the court noted that the contract clearly stated that the bid documents were not prepared based upon actual field conditions and that the dimensions shown on the plans may vary from the actual field dimensions. Given the contract language, the appellate court ruled that the contractor could not recover any additional compensation for unanticipated costs related to the thickness of the concrete deck.

Comment

The inclusion of exculpatory language in a contract relieving the owner of liability and requiring the contractor to inspect the site should warn the contractor that he must determine for himself what conditions he can reasonably expect to encounter. In light of such express cautionary language, the contractor would be well-advised to undertake an adequate pre-bid site inspection to ascertain the actual site conditions and to thoroughly familiarize himself with all available information regarding site conditions.

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