Must-Have Clauses for Your Construction Contract: Differing Site Conditions

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Contracting isn’t easy—it’s a breeding ground for disputes, delays, and risks to your bottom line. One of the biggest culprits? Differing site conditions.

Let’s be real—site conditions almost never match the plans provided by the project owner. That’s where change orders come into play, adjusting the work to fit actual conditions. But nothing frustrates a project owner more than hearing, “We didn’t see this coming, and now it’ll cost you 30% more.”

From a contractor’s perspective, no matter how carefully you plan, things rarely go off without a hitch. With both sides pulling in different directions, disputes are almost guaranteed. So, how do you avoid the stress, financial losses, and headaches these conflicts bring?

Wally Zimolong, Real Estate and Construction Lawyer, shares insights into contract clauses that can safeguard your bottom line—whether you’re a contractor or a project owner.

If you’re interested in diving deeper into this topic, check out our podcast episode linked here. 

If you want to read the longer-form post, its linked here, but is thats too long, you’ll find a summary of the key insights discussed below. 

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Addressing Different Site Conditions

What is Differing Site Conditions?

Differing Site Conditions refer to unexpected physical conditions encountered during a construction project that differ from what was represented in the contract documents or anticipated during the bidding process. These conditions can significantly impact the project’s scope, cost, and timeline.

For Contractors:

To protect yourself from unexpected costs, include a Change Conditions Clause in your contract. This clause ensures you’re compensated if site conditions differ from the assumptions made during the bidding process. Focus on these two key situations:

1. Material Changes

This covers significant changes to the physical conditions of the project.

Example: The plans show a non-load-bearing wall, but upon inspection, you find it’s actually load-bearing and requires engineering intervention. The added work increases costs, but without a material change clause, you’d be responsible for the extra expense.

2. Unusual/Unanticipated Conditions

This covers unexpected conditions that couldn’t have been anticipated.

Example: On a highway project, you begin excavation and encounter a large underground rock that wasn’t in the initial assessment. Removing it requires additional equipment, labor, and time. This clause ensures compensation for such unanticipated costs.

For Project Owners:

To shield yourself from unexpected cost increases, include a Site Investigation and Disclaimer Clause. This gives contractors a chance to investigate the site beforehand and reduces the risk of later claims for additional charges.

Here’s how it works:

• Site Access: Allow contractors full access for inspection before the project starts, then include a clause stating: “The contractor has had full access to investigate site conditions and accepts them. They cannot later request a 25-30% increase in costs due to unexpected conditions.”

• Plan Disclaimer: Add a disclaimer stating that you’re not guaranteeing the completeness of the plans. This ensures that if there’s an omission or misrepresentation in the drawings, you’re not automatically liable for resulting change orders.
  
  

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Implementing a Change Order Clause

This is especially important for larger, complex projects, where unforeseen conditions, design changes, and scope adjustments are more likely to arise.

What is a Change Order?

A change order is a written agreement to modify the scope of work in a construction contract. It can involve changes to the design, materials, schedule, or cost. Change orders ensure that when unexpected conditions or new requests arise, both parties—contractors and project owners—are aligned on how the work and budget will be adjusted.

For Contractors:

Identify your Authorized Decision-Maker and set a Timeframe for Approvals.

• Single Point of Approval: Ensure your contract specifies who, on the client’s side, is authorized to approve and direct change orders. This keeps the process simple and reduces confusion about who can give binding instructions, minimizing costly misunderstandings.
• Approval Timelines: Avoid delays by stipulating a reasonable timeframe for the client to approve change orders. Include a clause for extensions or additional compensation if this timeframe isn’t met.

Note: If a change order will require additional time or resources, most contracts have a deadline for notifying the client. Missing this deadline can jeopardize your ability to recover costs. Always communicate changes promptly to avoid disputes at project’s end.

For Project Owners:

Set a Fixed Timeline for Change Order Notifications and Approvals.

• Notification Deadline: Include a clause that if a contractor misses the deadline to notify you of a change order, they waive their right to compensation. This holds contractors accountable for timely notifications, helping protect your budget from unplanned costs.

How to be the FF&E Supplier Everyone Wants to Work With

Construction contracts requires more than just a standard agreement; it demands clarity and foresight. By incorporating specific clauses for differing site conditions and change orders, contractors and project owners can significantly reduce the likelihood of disputes and protect their financial interests.

Focus on open communication and precise documentation. With the right strategies in place, you can manage changes effectively, keep projects on schedule, and maintain a healthy bottom line. Use the insights from Wally Zimolong to strengthen your contract practices and create a more resilient framework for your projects.

It’s time to take proactive steps to ensure your contracts truly reflect the realities of construction, allowing you to address challenges head-on.