Defining Changed Conditions in a Contract
It is prudent for parties to a contract to include a clause that addresses “changed conditions.” A provision in a contract discussing changed conditions should broadly identify altered circumstances from the time the contract was signed and how these new circumstances will be addressed.
A changed conditions clause is frequently found in construction contracts. This is because construction projects rely on so many variables, including weather, labor, and materials, that can be subject to unpredictable changes. Sometimes certain conditions of a construction site may go undetected prior to construction, which will necessitate new plans, supplies, or timelines. Sometimes a contractor will run into unanticipated snags after construction commences, such as the discovery of hazardous materials in the soil. These changes can impact the cost and scheduled completion of a project, which is otherwise outlined in the construction contract. It is therefore important to have a provision that dictates how costs and schedules will be moved when changed conditions arise.
Generally, a changed condition clause in a construction contract will detail a contractor’s liability in bearing any additional cost that stem from unforeseen changes in the condition of the construction site. The provision will usually also outline the process to be followed when changed conditions are noticed, including scheduling consults with an engineer and whether contract changes will have to be made.
One of the most important terms in a changed conditions clause is the requirement and meaning of “notice.” A changed conditions clause may give a fixed amount of time, such as fourteen days, in which the contractor is given a window to notify the owner of a changed condition. If an owner is not notified within that contractual window, the contractor may be stuck with extra costs associated with the changed condition, and perhaps even penalties if the project will not be completed on time as a result.