DSC and Exculpatory Clauses can Exist in the Same Contract

Differing subsurface or physical conditions ("DSC") clauses are often contained in construction contracts to protect a contractor from unknown subsurface conditions encountered during construction.  These clauses permit additional recovery by the contractor when such conditions are encountered after the start o f work.  Conversely, exculpatory clauses are often found in construction contracts as well which protect owners from claims for additional compensation from contractors where the contractors bid the project without completing a sufficient due diligence investigation.  In a recent unpublished opinion issued by the Appellate Division, the exculpatory clause stated that the contractor, "will not use any of the information made available to him ... as a basis or ground of claim or demand of any nature."  In addition, the contract language made clear that the owner did not, "warrant or guarantee that ... conditions ... encountered during construction will be the same as those indicated," and that, "[e]ach bidder must inform himself fully of the conditions relating to the construction ... and in particular as to subsurface and groundwater conditions."

The contractor argued that the DSC clause governed and trumped the exculpatory clause.  However, the court disagreed and held that both DSC and exculpatory clauses can validly co-exist in the same contract.  Therefore, there was a question of fact as to whether the contractor could receive additional compensation for the subsurface obstructions that contract encountered after beginning the work.  At trial, the jury found there to be no cause for recovery by the contractor, enforcing the exculpatory language of the contract.  The contractor moved for a judgment notwithstanding the verdict, but this was denied by the trial judge and upheld on appeal.   (Scafar Contracting, Inc. v. City of Newark)