Who is at risk for basic conditions?

Construction of new buildings or facilities requires ground work. Often, the basic conditions present unexpected challenges, and this can have major consequences for both the progress of the project and the costs. Typical challenges are that contaminated masses must be uncovered that must be deposited, land that must be blasted and major mass replacements that must be made. Since the parties can never know all the circumstances of the ground, it must be clarified who will be at risk. The question is whether it is the builder or the contractor who is responsible for such preconditions.

Risk distribution by NS 8407

The starting point is that the builder bears the risk of the conditions at the site, unless the basic conditions were such as the contractor had reason to expect when preparing the tender. As a general rule, therefore, basic conditions that entail additional work, costs or delays in the project should go beyond the client.

What does the contractor have “reason to expect”?

What the general contractor has reason to expect depends on what information the general contractor has received, typically in the competitive basis, and the knowledge the general contractor himself was obliged to obtain.

According to NS 8407, the builder has a duty to provide information about the land, the building area and its surroundings that he knew or had to know, and which it was obvious to assume that the contractor had an interest in getting. If the developer has failed to provide information or provided information to the contractor which is incorrect, the developer is at risk of the consequences thereof.

On the other hand, the contractor has a duty to conduct a careful inspection of the building area and to obtain information on conditions on the land. If, on due diligence, the general contractor would have discovered that the basic conditions were different than he had assumed, the general contractor shall bear the consequences for the “unforeseen” basic conditions.

An assessment shall be made of the information the contractor has received, and the information that the contractor himself should have obtained. Whoever bears the risk when the developer has breached his disclosure obligation and the contractor has failed to fulfill the survey obligation (parallel failure) is dealt with in a separate article.

Agreement on risk transfer

The parties are initially free to agree to this normal distribution of functions in NS8407. It may be agreed that the contractor shall be at risk for all or part of the land. Such a transfer is valid if the agreement is clear and clear. There are several advantages and disadvantages to agreeing on such a risk transfer. Further details on the access to agree such a transfer of risk to the basic conditions, and why such regulation may be profitable, are discussed in a separate article.