The devil's in the detail: ground conditions clauses trumped by tender documentation
By Laura Frogley & Louis Peacock-Young
A recent TCC decision highlights the risks of appending pre-contractual documentation to construction contracts. Despite the use of a priorities clause and the insertion of general provisions allocating the risk of ground conditions to the contractor, exclusions contained in tender documentation appended to the contract were found to remain operative.
Clancy Docwra Limited v E.ON Energy Solutions Limited E.ON engaged Clancy Docwra Limited (“CDL”) as a sub-contractor to excavate trenches and install heat network pipework at the Barts Square development in London. E.ON were contracted to install an underground district heat network using the by-product heat of its locally based Combined Heat and Power Plant. During the work, CDL encountered adverse ground conditions (consisting of underground brick walls and brick rubble) and, later, a concrete heading which obstructed the proposed route for the pipework. E.ON instructed CDL to investigate the heading and to identify its contents and/or a route around it. A dispute subsequently arose as to whether CDL bore the risk of adverse ground conditions and whether it was entitled to be paid additional sums by E.ON for the work required to overcome such conditions. The sub-contract between the parties was based on the JCT Standard Building Sub-contract with sub-contractor’s design, 2011 edition. E.ON relied on bespoke amendments to the sub-contract which sought to pass the risk of ground conditions to CDL as follows: “2.1.7 The Sub-Contractor shall be deemed to have inspected and examined the site and its surroundings and to have satisfied himself before the date of the Sub-Contract as to the nature of the ground, the sub-surface and sub-soil; the form and nature of the site; the extent, nature and difficulty of the Sub-Contract Works; …. and in general to have obtained for himself all necessary information as to risks, contingencies and all other circumstances influencing of (sic) affecting the Sub-Contract Works. 2.1.8 Notwithstanding any other provision of this Sub-Contract, the Sub-Contractor shall not be entitled to any extension of time or to any additional payment, damages, or direct loss and/or expense on the grounds of any misunderstanding or misinterpretation of any matter set out in clause 2.1.7, or his failure to discover or foresee any risk, contingency or other circumstance (including, without limitation, the existence of any adverse physical conditions or artificial obstructions) influencing or affecting the Sub-Contract Works.” CDL relied on tender documentation which had been appended to the sub-contract as “Numbered Documents” and which showed that the tender had been based on a clear corridor for the pipework and did not allow for the breaking out of rock or dealing with obstructions. The “Sub-Contract Works” were defined in the sub-contract as “the works referred to in the Sub-Contract Agreement and described in the Numbered Documents”. E.ON in turn relied on a priorities clause in the