LATENT CONDITIONS AND THE EXPERIENCED CONTRACTOR TEST
Barrister & Solicitor*
Independent, Chartered Arbitrator
“Determining whether a condition could ‘reasonably’ have been foreseen habitually gives rise to the greatest difficulty of interpretation in civil engineering arbitration. The words of the sub-clause seem to defy precise analysis and it is thought that little is to be gained from analysing the works in terms of probability … It is indeed unfortunate that there is virtually no authority on the application of this difficult test.” 1
Latent conditions are those physical conditions on or underlying the site that could not be identified by the contractor by reasonable observations or investigations of the site or site information. 2 Encountering latent conditions in major civil engineering projects can give rise to challenging technical and commercial consequences. In the absence of contract provisions to the contrary, contractors are responsible for all ground conditions actually encountered, 3 with the rationale being that the principal selects the contractor for its expertise and experience, and the contractor is, therefore, more likely to be able to assess and make allowance for ground conditions likely to be encountered, by means of a price contingency or other measures. 4
In modern tenders for major civil engineering works, contractors have little or no opportunity to carry out site investigations, and may not have included any price contingency for latent conditions, which if encountered,
* As noted by Judge Bowsher in Ceredigion County Council v Thyssen Construction Ltd (1999, unreported) in relation to clause 12 of the ICE Conditions.
1 Dr John Uff QC, commentary on the ICE Form of Contract, 7th Edition, September 1999, Keating on Construction Contracts (Sweet & Maxwell, 9th Edition, 2012), [21-069].
2 In the absence of a definition of “ latent conditions ”, the courts have assisted in defining a “ latent defect ” in terms of a “ defect which could not be discovered by a person of competent skill and using ordinary care ”, The Dimitrios N Rallias (CA) (1922) 13 Ll.Rep 363 at p366, per Lord Atkin.
3 Thorn v London Corporation (1876) 1 App Cas 120 and Worksop Tarmacadam Co Ltd v Hannaby (CA) (1995) 66 Con LR 105, a principle recently confirmed in Australia in Thiess Services Pty Ltd v Mirvac Queensland Pty Ltd (2006) 22 BCL 437.
4 In the United States Court of Claims’ decision in Ruff v United States 96 Ct Cl 148, 164 (1952), the court stated that the alternative to a latent condition clause is that “ the bidders must, in order to be safe, set their estimates on the basis of the worst possible conditions that might be encountered .”
Pt 4] Latent Conditions and the Experienced Contractor Test
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