Legal Dig
The same reasoning applies to other types of underground conditions. In Structural Concepts, Inc. v. Kean University, 2009 WL 102969 (App. Div. 2009), the Court focused on the contract language that warned the contractor that the location of known utility structures was “approximate” and that the State was not guaranteeing the “accuracy and completeness” of this information. The contractor’s claim for damages based on differing site conditions was denied. The exact obligations placed on the contractor by the terms of the contract is critical in determining whether it may be entitled to damages for differing site conditions. In a case involving fairly common language involving site investigation, SMC Corp., Inc. v. New Jersey Water Supply Authority, 334 N.J. Super. 429 (App. Div. 2000), the Court found in favor of the contractor’s damages claim. The contract required the contractor to “satisfy himself as to the nature and location of the work . . . the physical conditions of the site . . . and all other matters upon which information is reasonably obtainable. . . and “reasonably ascertainable from an inspection of the site.” The Court found that these terms implied that conditions not know to the Authority or to the contractor and which were not “reasonably obtainable” or “reasonably ascertainable” could be the basis of a claim for extra work. Contractors must also bear in mind that they have obligations to disclose to owners. Contract terms typically require disclosure of known discrepancies or errors in the contract documents. Fail-
10 Utility & Transportation Contractor | february| 2019
ure to adhere to such disclosure requirements may undermine a contractor’s ability to negotiate a fair change order for changed conditions. In Dugan Construction Company, Inc. v. New Jersey Turnpike Authority, 398 N.J. Super. 229 (App. Div. 2008), the bid documents estimated that the project would produce only 55 gallons of wastewater. Dugan wound up charging the NJTA the cost of disposing of 200,000 gallons and, therefore, claimed that it was owed $9.5 million based on the unit price bid. Although the contract required that the contractor advise the owner as soon as facts became known that the field conditions may be different than those reflected in the contract documents, Dugan proceeded to pump out the water without advising the owner that it had already determined that the bid documents had grossly underestimated the quantity to be disposed of. The Court found that the failure to disclose precluded the owner from having an opportunity to issue a change order which would be based on the 25%-overage and negotiated price sections of the contract. Based on this finding, the Court awarded Dugan only $52,330.00 – a far cry from what it likely would have been compensated based on a fair negotiation. TAKEAWAY Both owners and contractors will be held by our courts to operate in good faith in both bidding and performance of the contract. If you see something, say something!