Who bears the risk of adverse site conditions? 

Last month, two unexploded ordnance devices were found during a reduced-level dig at the 13,000 square metre construction site at Cheapside, Bridgend. Whilst we do not know the type of construction contract entered into, this recent incident acts as a helpful reminder to revisit who bears the risk of adverse site conditions under both the standard form JCT Design & Build and NEC4 building contracts. 
 

Unamended JCT Design & Build 2016 (JCT DB 2016) – the old position 

Previously, the JCT DB 2016 was silent on site conditions, ground risk and unexploded ordnance devices. Any unforeseen physical conditions of the ground did not constitute a Relevant Event or a Relevant Matter, therefore the contractor had no entitlement to an extension of time, or a claim or additional payment.   

Parties were, however, free to expressly address the risk of adverse site conditions and the discovery of unexploded ordnances by introducing a bespoke schedule of amendments to their JCT DB 2016 contract. Without a bespoke amendment allocating responsibility for such risks, the common law position applied as follows: 

• there would be no implied warranty from the employer that the site is fit for the intended works 

• the contractor is deemed to have taken into account all matters in his calculation of the Contract Sum and programme for the works, and the employer relies on the contractor’s expertise in making these assessments 

• the contractor may have a claim against the employer for misrepresentation if any site information provided by the employer was misleading 

• note that the courts are unlikely to imply terms in favour of the contractor that this risk has been re-allocated.  

Unamended JCT Design & Build 2024 (JCT DB 2024) – the current position 

Like the JCT DB 2016, the JCT DB 2024 remains silent on responsibility for ground conditions. However, the JCT DB 2024 has nevertheless introduced a new clause 3.15 which deals with antiquities, asbestos, contamination material and unexploded ordnance.  

Clause 3.15 sets out a procedure through which the contractor is able to identify such material and notify the employer that it has discovered such material on site (clauses 3.15.1 and 3.15.3). The employer is then required to issue an instruction to the contractor, which may require the contractor to permit the investigation, disposal, and removal of such material by a third party (clauses 3.15.2 and 3.15.4). 

The expansion of this clause provides a simple drafting update to incorporate new Relevant Events (clause 2.26.4) and Relevant Matters (clause 4.21.3) where the employer has issued an instruction to the contractor in complying with the identification and notice requirements, as well as the employer’s instructions for dealing with such matters. As a result, the contractor is at least entitled to apply for an extension to the Date for Completion and to recover loss and expense where such materials are subsequently discovered on site.   

NOTE: the Relevant Matters and Relevant Events do not apply to any asbestos, contamination or unexploded ordnances identified in the contract documents, and the contractor’s ability to actually recover the additional time and loss and expense incurred will be subject to any other pre-conditions and/ or requirements of the contract. And other than those ground conditions listed in 3.15, the risk will remain with the contractor in accordance with the general rule on common law. 

Unamended NEC 4 Engineering and Construction Contract (NEC4 ECC) 

Like the JCT DB 2016, unexploded ordnance is not expressly referred to in the NEC4 ECC contract. However, clause 60.1(12) states that a compensation event occurs when the contractor ‘encounters physical conditions’ which are ‘within the site’, ‘are not weather conditions’ and which an ‘experienced contractor’ would reasonably not have allowed for, on the basis that they would be judged as having a ‘small chance of occurring’. Helpfully, ‘physical conditions’ and ‘small chance of occurring’ are also not defined. 

On this basis, in pricing and programming the works the contractor should take the following into account: 

• any site information and publicly available information  

• carry out a visual inspection of the site 

• information which an experienced contractor could reasonably be expected to have / obtain 

• if the site information is unclear or inconsistent, then clause 60.3 further provides that the contractor is assumed to have considered physical conditions that are more favourable to completing the work 

• the contractor should specify in the tender the extent of allowance made for certain risk for future claims. 

Who is likely responsible? 

Whilst every case will turn on its facts, on the assumptions that:  

• unexploded ordnances were discovered on a part of the site needed to complete the works 

• the underlying contract was unamended 

• any instruction did not change the scope or nature of the works 

• the contract documents / site information did not identify the presence and / or location of the unexploded ordnances and they were judged to have such a small chance of occurring that it would have been unreasonable for the contractor to have allowed for them. 

Prima facie, the position would be as follows:  

• JCT DB 2016: the contractor bears the risk 

• JCT DB 2024: the employer bears the risk and the contractor would, prima facie, be entitled to apply for an extension of time and loss and expense in complying with any instruction issued by the employer under clause 3.15.4 

• NEC 4: the client bears the risk.  

Considerations 

Whilst the amendments to the JCT DB 2024 are helpful in that they now expressly allocate the risk of certain site conditions; parties are often unaware of the common law position relating to responsibility for site conditions. When pricing and programming the works contractors would be best advised to:  

• consider the type of surveys and reports which are required and check what is readily available 

• consider whether anyone else is relying on these reports such as funders or purchasers 

• consider the nature of the works being undertaken, and the processes required to deliver the works  

• establish the historical use of the site, and take steps to ascertain whether there is any evidence of ground risks, such as landslip, subsidence etc 

• consider how close the site is to other buildings, and what is their use 

• ensure consultant appointments (such as the structural engineer) include appropriate wording concerning warranties and letters of reliance (if applicable) 

• discuss the risk profile with the client 

• negotiate a bespoke schedule of amendments to provide clarity and allocate ground risk appropriately.