June 1, 2011
General Conditions of the Home Improvement Contract: Concealed Site Conditions
By Bob Incollingo
You may have a working understanding of what a contract is, but do you understand what a contract does? A contract functions to apportion risk in a transaction. In plain English, you and the other guy divvy up who will be responsible for what, both in terms of what is supposed to happen (e.g., you work for me, I pay you), and in terms of what might go wrong (e.g., you run late, I collect liquidated damages for delay).
If you don’t make your deal plain, differing expectations will lead to disagreement when some unforeseen problem increases the cost of the job. You shouldn’t worry, though, because the law will imply the missing parts, and your contract can be fleshed out after a very nice lawsuit sets things right.
Star in your own lawsuit, or spell it out. Here is a specimen clause to apportion liability for unforeseen circumstances due to concealed site conditions:
11. Changes in the Work Due To Concealed Site Conditions. The parties acknowledge and agree that residential construction sometimes requires extra work due to concealed or differing site conditions not foreseen at the time of the making of the contract. For example, termite and other wood-boring insect damage, substandard prior work by others which must be upgraded to code, concealed trash, and unforeseen subsurface soil conditions are some of the problems which Contractor and Owner may face in the completion of the Work. Under this Contract, Owner bears the risk of such concealed conditions. The parties agree to try to negotiate an equitable adjustment to the Contract Price and Contract Time in the form of a Change Order in the event an unforeseen condition is encountered, but if no equitable adjustment can be had in the form of a signed Change Order, either the Owner or Contractor may terminate this Contract by written notice served on the other, and the balance due to Contractor for the reasonable value of the labor and material furnished since the last progress payment made shall be agreed and paid, or if in dispute, submitted for determination by any court of competent jurisdiction in the State of New Jersey.
Robert J. Incollingo is a former chair of the NJSBA Construction Law Section whose practice focuses on representing private owners, architects, general contractors and trade contractors in all stages of the construction process.