Contractor Denied "Extra" for Poor Soil Conditions

Contractor Denied Extra for Poor Soil Conditions

Jason Callicoat - Querrey & Harrow, Ltd. – Chicago, Illinois

Jason CallicoatThe U.S. District Court for the Northern District of Illinois recently refused to allow a contractor to recover additional money under a construction contract for work that was allegedly an“extra.” The court decided that the allegedly “extra” work was actually contemplated by the parties at the time they signed the construction contract. As a result, the contractor was required to complete the project for the contract price, without being paid any additional money for excavation work needed to address poor quality soil on the job site.

In Nar Bus. Park, Inc v. Ozark Auto. Distribs., LLC, 2019 U.S. Dist. LEXIS 223371 (N.D. Ill. 2019), the plaintiff contractor agreed with the defendant landowner that the contractor would build an automotive distribution center. The landowner had a soil analysis performed and this showed that significant excavation would likely be needed to reach soil that was suitable for the foundation of the project. The landowner provided the soil analysis results to the contractor and the two later signed a contract for the project, in which the contractor would receive approximately $21 million in exchange for its work. The contract placed the risk of loss on the contractor, stating that in exchange for the $21 million, the contractor agreed to furnish all of the construction work needed for the project. The contract incorporated the soil analysis as part of the construction agreement.

The contractor began work on the project and almost immediately encountered problems due to the poor soil quality. The contractor asked for more money because of the extensive excavation work required and the landowner refused. After the project was completed, the contractor sued that landowner, seeking an additional $334,000 for the excavation work that it had to perform, which it argued was not contemplated by the original contract. The contractor argued that the substandard soil was a concealed condition on the property and that it should be paid the additional amount for having to address this concealed condition.

The court disagreed, finding that the soil analysis was unambiguously incorporated into the parties’ contract and that the soil analysis clearly showed that extensive excavation was going to be needed to reach suitable soil. The contractor conceded it was given a copy of the soil analysis before it signed the contract fixing the project price at $21 million. The court held as a result that the contractor should have done a better job at estimating the correct cost of the work it was going to need to do to comply with the contract that it then signed.

The contractor argued that there was a cheaper solution to the soil problem than excavating all the way down to suitable native soil, as the soil analysis report recommended. The court rejected this argument, finding that the contract had incorporated the soil analysis report and that the contractor was not free to disregard the solution called for by the report after signing the contract for the project. The court entered summary judgment for the landowner and against the contractor, finding that the contractor was not entitled to any additional money for the purportedly “extra” work that it had to do to complete the contract. The court found this was not “extra” work at all, but that it was called for in the original scope of work described by the contract, which the contractor agreed to perform for $21 million.