Michigan’s Unforeseen Site Conditions Statute
Unforeseen site conditions clauses are not new to construction contracts. In fact, almost all construction contracts contain provisions regarding the claim process for unforeseen conditions and whether adjustments to the contract are to be allowed. However, when working on public projects, it is important to be aware that the contract terms regarding this issue may not ultimately control the outcome. That is due to the fact that Michigan has a statutory scheme of dealing with the claim process for unforeseen site condition claims on public projects that exceed $75,000.
The statute, in pertinent part, requires a contractor that discovers either of the following conditions to promptly notify the owner in writing:
(i) A subsurface or a latent physical condition at the site is differing materially from those indicated in the improvement contract; or
(ii) An unknown physical condition at the site is of an unusual nature differing materially from those ordinarily encountered and generally recognized as inhering in work of the character provided for in the improvement contract.
Other provisions of the statute control situations that may preclude a contractor’s claim such as failure to provide notice or receiving final payment. The impact of this statutory scheme is that it may conflict with similar contractual provision governing unforeseen site conditions. Since, Michigan courts have yet to address this statute, it is imperative to be aware that this statute may impact such a claim and to be proactive in seeking guidance when presented with unforeseen site conditions.