Rock Clause

 “I need a rock clause.”

I got that request earlier this month. I think you need a rock clause too. Here’s why.

The name ”rock clause” comes from a common construction problem – rock where no one expected rock. If you do much excavation, you understand the problem: a ledge of rock or hard pan, or boulders, or a high water table, or unstable soil. All can increase your costs.

But a rock clause can cover more than excavation. It sets up recovery for site conditions not anticipated by the owner and the contractor. A rock clause is protection from any type of unforeseen site condition. And it makes good sense -- a benefit to both the contractor and the owner. You can bid jobs based on what’s known and expected, not on the worst possible contingency. If site conditions are different from what was expected, you get paid for work actually done. The owner gets more competitive bids with smaller contingency allowances.

Here's a typical rock clause (from Construction Contract Writer):

Contractor shall promptly, and before the conditions are disturbed, give a written notice to owners on encountering unforeseeable conditions adversely affecting the work. Owners shall investigate the site conditions promptly after receiving notice. If the conditions cause an increase in cost to contractor or the time required for performing any part of the work and were not reasonably foreseeable by an experienced contractor, an equitable adjustment shall be made under this clause and the contract modified in writing accordingly.

This clause is essentially the same as Federal Acquisition Regulation § 52.236-2, used routinely on federal construction projects.

Courts in some states recognize two types of unforeseen site conditions. Type I is any hidden condition materially different from what the contractor is entitled to rely on. Type II is a hidden physical condition consistent with the contract documents but very different from anything normally encountered. For example, in an excavation contract, Type II differing site conditions may exist if the rock is much more extensive and much denser than expected.

Both Type I and II conditions are harder to substantiate if:

(1) The owner offers no information about site conditions or disclaims the accuracy of any information offered; and

(2) The contractor doesn't visit the site or doesn’t investigate all information available; and,

(3) A reasonably prudent contractor would have anticipated the conditions actually found; and

(4) The contract specifically makes the contractor responsible for unexpected site conditions.

In home improvement work, “unexpected site conditions” cover far more than excavation. Nearly any surprise found on site can be covered by a rock clause: wiring or venting where not expected, substandard framing, foundation, plumbing or electrical work -- anything unanticipated that’s found after construction begins.

Collecting under a rock clause is always a matter of proof (and negotiation): Would a reasonably experienced contractor have expected a problem like this? Still, you’ve got a leg up and more leverage if your contracts include a rock clause. For better protection against the unexpected, have a look at Construction Contract Writer. The trial version is free.

 

Collect for Mandated Changes

I had an interesting question last week from Bryan, a Tennessee contractor.

Bryan wondered why any contract needs to say that changes require mutual agreement. Isn’t that the law? Better to keep contracts short and sweet. Anything in a contract about changes requiring mutual agreement is surplus. Right?

Bryan acknowledged that some owners can’t resist changing the scope of work. “I definitely do not want to agree to that in my contracts.” Owners need to understand: They can’t make changes any time they want. That goes without saying. So why say it?

“If I leave it out, the law will be on my side if an owner tries to force me into a change in scope, correct?”

Good Question.

Changes are an important issue on any job. Few jobs are completed without at least a couple of changes. Construction is too permanent and too expensive to ignore opportunities for improvement as they become obvious.

I did a blog post on discretionary changes a few years ago. 

Here are some good rules to follow on all changes, discretionary or otherwise: 

To answer Bryan’s question:

The "mutual agreement" language wouldn't be needed in contracts if all changes were discretionary. But many changes aren't -- such as changes required by the inspector or an emergency or a shortage of labor or materials or a mistake in the plans or unexpected site conditions.

The issue in mandated changes isn’t, "Will extra work be part of the job?" The work has to be done, with or without mutual agreement. The issue will be, "Who pays?" An owner might say, "It's not my fault. You're the professional. You should have known! It's your problem. Deal with it."

The "mutual agreement" language in a contract strengthens your hand when the only issue is price. Your reply could be, "OK. The change is required. We can agree on that. It’s extra work, not part of our contract. Here's my price. Do we have mutual agreement?"

You know the job and the owner. If required changes are likely and if the owner can be expected to play hardball on changes, I recommend including language on required changes in your contract:

• Any change required to conform to laws, codes or ordinances is extra work.
• Any change required due to defects in the plans or specs is extra work.
• Any act or omission by the owner which increases cost or delays completion is extra work.

If problems are likely on mandated changes, write a little extra leverage into your contract:

• Failure to agree on changes won’t delay payment for any other part of the job.
• Charges for extra work will be the contractor’s normal selling price on similar jobs.

Construction Contract Writer makes it easy to draft letter-perfect contracts that anticipate problems and resolve disputes in your favor. The trial version is free.