California’s reputation is not just for being on the leading edge of trends in popular culture; often it is on the leading edge of legal trends as well. Strict liability for defective products and comparative negligence are important tort law concepts with California origins. I thought it might be interesting, then, to see how California courts handle certain aspects of differing site conditions claims.
The most surprising thing is that the State of California has codified, in its state statutes, important differing site conditions concepts, at least for public construction projects. California Public Contract Code § 7104 does two important things:
It interjects as a matter of public policy a differing site conditions clause into all public contracts where excavation exceeds four feet in depth, by requiring owners to issue change orders for a contractor’s additional costs attributable to material differences between the subsurface and conditions indicated in the contract.
The Code also states that a contractor may draw reasonable deductions from a contract’s indications of the subsurface conditions that may be found at the site.
What about owners who disclaim the accuracy or completeness of subsurface information? As demonstrated by a recent appeals court opinion, California courts have taken their cue from § 7104 and have established case law prohibiting an owner’s general disclaimer of subsurface information from overcoming positive assertions of fact regarding subsurface conditions. The case, Condon-Johnson Associates, Inc. v. Ramento Municipal Utility District (2007 Cal. App. LEXIS 610), involved the construction of 13 concrete pier foundations for a large retaining wall, where the bedrock was harder than what was indicated in the contract documents.
The contract included boring logs from an area near where the piers were to be constructed. At the prebid meeting, the owner made available for inspection several core samples from the owner’s borings. At the request of the bidders, the owner later analyzed two of the samples for compressive strength, and in a bid addendum reported values of 3,600 and 7,300 psi.
But the contract also included several provisions disclaiming the accuracy of the owner’s boring reports and other subsurface data, and requiring the contractor to “evaluate the jobsite and make his own technical assessment of subsurface soil conditions.”
When the work started, the contractor discovered that the actual bedrock strength was over 13,000 psi, greatly increasing its costs of constructing the piers. The contractor made a differing site conditions claim that the owner promptly denied, arguing that the contract’s disclaimer and provision making the contractor responsible for evaluating the jobsite negated the claim.
At the trial, the contractor successfully argued that the disclaimers should be excluded from the evidence based on § 7104 and won a verdict for over $1.6 million. On appeal, the court held that the contractor was justified in inferring that the subsurface data was representative of actual conditions and that the general disclaimer could not overcome the positive assertions regarding the subsurface. Looking at the language in § 7104 that expressly allowed the contractor to rely upon conditions “indicated” by the owner, the court decided that once such an indication is made, it cannot be taken back or “unindicated” by a general disclaimer.
So the law is clear in California (unlike many other jurisdictions)—a public owner cannot disclaim indications of subsurface conditions made in materials furnished to bidders. Perhaps someday this idea may make its way east, but probably not before pop culture’s next big thing.