Risk Relating to Ground Conditions under Civil Law and Common Law - Virginie A. Colaiuta
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10/15/2020
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EUROPEAN SOCIETY OF CONSTRUCTION LAW
________________________________________________
Risk Relating to Ground Conditions
under
Civil Law and Common Law
ESCL Summer Webinar on Construction Law
by
Virginie A. Colaiuta
________________________
14 October 2020
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Article 1792 of the French Civil Code
“Any builder of a work is liable as of right, towards the building owner or
purchaser, for damages, even resulting from a defect of the ground, which imperil
the stability of the building or which, by affecting it in one of its constituent parts
or one of its equipment items, render it unsuitable for its purposes.
Such liability does not take place where the builder proves that the damages were
occasioned by an extraneous event.”
“Tout constructeur d'un ouvrage est responsable de plein droit, envers le maître ou l'acquéreur de l'ouvrage, des dommages,
même résultant d'un vice du sol, qui compromettent la solidité de l'ouvrage ou qui, l'affectant dans l'un de ses éléments
constitutifs ou l'un de ses éléments d'équipement, le rendent impropre à sa destination.
Une telle responsabilité n'a point lieu si le constructeur prouve que les dommages proviennent d'une cause étrangère.”
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Article 1792 of the French Civil Code
The phrase «vice du sol», which litterally means «defect of the ground», intends to refer to the
impact that the characteristics of the ground may have on the construction.
The contractor is responsible for all damages deriving from the ground conditions under Article
1792 that may affect the stability of the overall construction or one of its main components.
Ground conditions do not represent a ground for exoneration of liability of the contractor as
Article 1792 of the French Civil Code expressly refers to them.
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French Law Approach
Article 1792 implies that the contractor has the obligation to survey and study the ground
conditions so that the construction to be realised is solid and fit for its purposes.
Survey and study about the characteristics of ground, including the rock nature and resistance,
groundwater, existence of mines, fractures and underground quarry and pollution.
The same obligation is imposed also in the event of works to be performed on a pre-existing
construction unless the renovation works are marginal and not structural.
As under French law, the contractor has a duty to advise its client/employer, he will have the
obligation to make all the necessary enquiries, express the relevant observations and make the
necessary reservations.
The contractor must even refuse to perform the construction works if the ground conditions are
contrary to the obligations he has assumed.
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Article 1792 of the French Civil Code
Given the content of Article 1792, the parties could negotiate and agree the allocation of risks
deriving from ground conditions with regard to the costs of the works rather than in relation to
any other aspect that may affect the stability of the construction itself or its fitness for its
purpose, which remains subject to the legal guarantees imposed by French law.
Example:
The existence of pollution is often discovered in the case of earthworks and would not typically
affect the stability of the construction but may affect the aptitude of a construction to be fit for its
purposes
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Contracts for Public Works
Contractors to contracts for public works may invoke the théorie des
sujétions imprévues if there is no express clause for contractual
allocation of risk.
The contractor would be entitled, under certain conditions, to full
compensation for the loss caused by unforeseen ground conditions,
including the costs of additional works.
The conditions must be unforeseen, abnormal and unaffected by the
will of the parties.
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Contracts between private parties: Article 1195: Imprévision
«If a change of circumstances that were unforeseeable at the time of the conclusion of the
contract renders performance excessively onerous for a party that had not accepted the risk of
such a change, that party may ask the other contracting party to renegotiate the contract. The
affected party must continue to perform its obligations during the period of renegotiation.
If the renegotiation is refused or fails, the parties may agree to terminate the contract or to turn
to a court or arbitral tribunal to adapt the contract. In the absence of such an agreement in a
reasonable time, upon the request of any party, a court or tribunal may amend or terminate the
contract. In such circumstances, the court or tribunal would determine the date and conditions
of the termination.”
“Si un changement de circonstances imprévisible lors de la conclusion du contrat rend l'exécution excessivement onéreuse pour
une partie qui n'avait pas accepté d'en assumer le risque, celle‐ci peut demander une renégociation du contrat à son
cocontractant. Elle continue à exécuter ses obligations durant la renégociation.
En cas de refus ou d'échec de la renégociation, les parties peuvent convenir de la résolution du contrat, à la date et aux
conditions qu'elles déterminent, ou demander d'un commun accord au juge de procéder à son adaptation. A défaut d'accord
dans un délai raisonnable, le juge peut, à la demande d'une partie, réviser le contrat ou y mettre fin, à la date et aux conditions
qu'il fixe.”
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Imprévision
The relevant contract must have been concluded after 1 October 2016
in order for a party to rely on the doctrine of imprévision
The contracting parties are free to exclude or adjust the regime
of imprévision.
A crucial requirement is to demonstrate that the economic imbalance
between the parties is excessive.
In a 2015 decision on economic hardship as defined in the UNIDROIT
Principles, the French Cour de cassation ruled that increase of the
prices by the suppliers of the affected party between 4% and 16%,
which resulted in the reduction of the affected party’s gross margin by
nearly 60%, did not constitute an event that fundamentally altered the
equilibrium of the contract.
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The Contractor’s Liability
In principle, the contractor has usually an obligation to a committed result (obligation de
résultat) as opposed to an obligation to perform some works by providing services and materials
(obligation de moyens).
If the contractor has the obligation to a committed result, the risk for ground conditions is
typically allocated to the contractor.
However, the contractor’s liability is not without limits.
The contractor would have only a limited liability in the event the employer has deliberately
accepted the risks affecting the construction as a result of the ground conditions, of which the
employer was aware.
The contractor is not responsible for an event that would constitute a force majeure event, that is
for instance for damages deriving from any earthquake to the extent that the rules applicable to
constructions to make them seismic resistant in the specific region have been respected by the
contractor.
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Article 1218 of the Civil Code: Force majeure
“In contractual matters, there is force majeure where an event beyond the
control of the debtor, which could not reasonably have been foreseen at the
time of the conclusion of the contract and whose effects cannot be avoided by
appropriate measures, prevents performance of his obligation by the debtor.
If the prevention is temporary, performance of the obligation is suspended unless
the delay which results justifies termination of the contract. If the prevention is
permanent, the contract is terminated by operation of law and the parties are
discharged from their obligations under the conditions provided by articles 1351
and 1351‐1.”
“Il y a force majeure en matière contractuelle lorsqu'un événement échappant au contrôle du débiteur, qui ne
pouvait être raisonnablement prévu lors de la conclusion du contrat et dont les effets ne peuvent être évités par
des mesures appropriées, empêche l'exécution de son obligation par le débiteur.
Si l'empêchement est temporaire, l'exécution de l'obligation est suspendue à moins que le retard qui en résulterait
ne justifie la résolution du contrat. Si l'empêchement est définitif, le contrat est résolu de plein droit et les parties
sont libérées de leurs obligations dans les conditions prévues aux articles 1351 et 1351‐1. ”
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French Law Approach
• Exteriority (extériorité) = the event is beyond the affected party’s control. The
event must not result from the affected party or from anything or anyone that
would lead to the liability of the affected party (for example its employees).
• Unforeseeability (imprévisibilité) = could not have been reasonably foreseen at
the time of the conclusion of the contract.
• Irresistibility (irrésistibilité) = the effects of the event cannot be prevented
through appropriate measures. This is determined in abstracto by French courts
by referring to whether an average person in the same circumstances could have
still been able to perform its obligations. If performance were possible, even if
costly, the event cannot qualify as force majeure.
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Contractual Liability under French Law
Parties can agree to limit or exclude their liability. Contractor can exclude its liability for
indirect or consequential losses, including loss of business or profits.
Exclusion of liability will not be valid if:
-a party is guilty of gross negligence (faute lourde) or willful misconduct (dol)
-the exclusion of liability is too broad and thus insignificant
-liability is established as per public policy (ordre public), which includes:
- garantie de parfait achèvement = one-year warranty, which applies to all defects
indicated by the employer within one year after the handover (Article 1792-6 of Civil Code)
- garantie biennale = two‐year warranty, which applies to all defects affecting separable
equipment, which can be detached from the main construction without damaging the latter or been
damaged (Article 1792‐3 of the Civil Code)
- garantie décennale = ten‐year warranty, which applies to defects that compromise the stability
of the construction or make it unfit for its purposes (Article 1792‐4‐1 of the Civil Code)
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Obrascon Huarte Lain SA v Her Majesty’s Attorney General for Gibraltar
• Background
• Obrascon Huarte Lain SA ("Obrascon") contracted with the Government of Gibraltar to design and
construct a road around the perimeter of Gibraltar Airport, including some tunneling works.
• The Contract incorporated the FIDIC Yellow Book Conditions.
• A contaminated land desk study, which was provided to bidders, outlined the history of the area and
described the contamination likely to be present.
• Obrascon stopped the work after it encountered contaminated soil and proposed to re‐design the
tunnel
• Six months later, the Government of Gibraltar terminated the contract because of Obrascon’s failure
to progress the work and its non‐compliance with a notice to correct
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Obrascon Huarte Lain SA v Her Majesty’s Attorney General for Gibraltar
• Technology and Construction Court, [2014] EWHC 1028
• Akenhead J held:
• The contaminants encountered were reasonably foreseeable at the date of tender
• The amount of the contaminant which was reasonably foreseeable could exceed the 10,000m3
provided in the Environmental Statement:
• “[T]he quantities actually encountered and present were likely to have been less than could have been
reasonably foreseen by an experienced contractor and it has certainly not been established otherwise”
(at para 227).
• The Government of Gibraltar properly terminated the contract under clause 15 of the FIDIC
Conditions following Obrascon’s failure to proceed with the works over several months
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Obrascon Huarte Lain SA v Her Majesty’s Attorney General for Gibraltar
• The Court of Appeal, [2015] EWCA Civ 712 ‐ Appeal unanimously dismissed
• The contamination was reasonably foreseeable:
• “The contractor must draw upon its own expertise and its experience of previous civil engineering
projects. The contractor must make a reasonable assessment of the physical conditions which it may
encounter. The contractor cannot simply accept someone else's interpretation of the data and say that
is all that was foreseeable”
• The Court of Appeal also accepted the lower court’s finding that:
• “The historical material provided to the contractor made it clear that very extensive contamination was
foreseeable across the site. The contractor needed to make provision for a possible worst case scenario;
the contractor should have made allowance for a proper investigation and removal of all contaminated
material”
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Van Oord UK Ltd & Anor v. Allseas UK Ltd., [2015] EWHC 3074 (TCC)
• Background
• Van Oord UK Ltd. made disruption and prolongation claims against Allseas UK Ltd.
in relation to the construction of a thirty‐inch gas export pipeline in the Shetland
Islands.
• Article 2.2.3 of the contract required the contractor to provide notice if it
encountered unforeseen subsurface conditions
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Van Oord UK Ltd & Anor v. Allseas UK Ltd., [2015] EWHC 3074 (TCC)
• Court held that an “experienced contractor” must consider that more adverse
conditions may exist that have not been tested:
• “Every experienced contractor knows that ground investigations can only be
100% accurate in the precise locations in which they are carried out. It is for an
experienced contractor to fill in the gaps and take an informed decision as to
what the likely conditions would be overall”
• “In my view it is wrong in principle for a contractor to argue that, merely
because in some particular locations, the conditions were different to those set
out in the pre Contract information those different conditions must somehow
have been unforeseeable.”
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Virginie Colaiuta
LMS Legal LLP
4 New Street Square
London EC4A 3BF
United Kingdom
virginie.colaiuta@lmslex.com
+44(0)7585996261
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