Unforeseeable Events

Blog / 1 Oct, 2023

In the complex world of construction contracts, encountering unforeseeable challenges is a common occurrence. These challenges can disrupt project timelines and budgets, making it essential to have clear provisions in place to address such situations. Sub-Clause 4.12 is a key component that outlines the procedures and entitlements when dealing with unforeseeable physical conditions during project execution.

To set the stage, this Sub-Clause offers a comprehensive definition of "physical conditions." It encompasses a wide spectrum, including natural physical conditions, man-made obstructions, and pollutants. Additionally, it encompasses sub-surface and hydrological conditions, while explicitly excluding climatic conditions from its purview.

When a Contractor encounters adverse physical conditions that they believe were unforeseeable at the time of project commencement, this Sub-Clause imposes a clear obligation – notify the Engineer without delay. This notification must be detailed, providing a description of the conditions to facilitate inspection, and outlining the rationale behind considering them as unforeseeable.

Importantly, the Sub-Clause expects the Contractor to keep the project moving forward. This involves the continued execution of the Works using suitable and reasonable measures appropriate for the encountered conditions. Furthermore, the Contractor is obligated to comply with any instructions issued by the Engineer, even if such instructions result in Variations as per Clause 13 [Variations and Adjustments].

When the Contractor properly notifies the Engineer and subsequently experiences delays or incurs additional costs due to these unforeseeable conditions, they are entitled, subject to Sub-Clause 20.1 [Contractor’s Claims], to specific benefits. These include time extensions in cases where project completion is impacted, as outlined in Sub-Clause 8.4 [Extension of Time for Completion], and reimbursement of associated costs, which will be incorporated into the Contract Price.

The Sub-Clause entrusts the Engineer with a pivotal role in the resolution process. After receiving the Contractor's notice and conducting necessary inspections or investigations, the Engineer's responsibilities include determining the extent to which the physical conditions were indeed unforeseeable. Additionally, they must address matters related to time extensions and cost adjustments, following the procedures outlined in Sub-Clause 3.5 [Determinations].

In an intriguing twist, the Sub-Clause also allows the Engineer to review whether other physical conditions in similar project areas were more favourable than could reasonably have been foreseen during the tender submission. If favourable conditions are discovered, the Engineer has the authority to make corresponding cost reductions. These reductions may be subtracted from the Contract Price and Payment Certificates. However, it's important to note that the net effect of all adjustments and reductions must not result in a net reduction in the Contract Price.

The Sub-Clause acknowledges that the Engineer may take into account any evidence related to the physical conditions that the Contractor foresaw when submitting the Tender. However, it explicitly states that the Engineer is not bound by such evidence. This provision underscores the importance of the Contractor maintaining meticulous documentation regarding their foresight.

Overall, Sub-Clause 4.12 serves as a vital component within construction contracts. It provides a structured and equitable approach to addressing unforeseeable physical conditions encountered during project execution, promoting transparency and effective communication between the Contractor and the Engineer.