Opinion ID: 2124349
Heading Depth: 1
Heading Rank: 1

Heading: Nature of changed-conditions clause.

Text: The changed-conditions clause is a contractual innovation designed for the mutual benefit of both the government and the contractor. The government benefits by the use of such a clause because the contractor no longer needs to add large contingency sums to his bid in order to cover the risk of encountering adverse subsurface conditions. The contractor benefits because he is awarded extra compensation if adverse subsurface conditions are encountered which materially differ from those indicated in the contract. Thus, much of the gamble is taken out of underground construction. The government does not have to pay the contractor a windfall price when only normal conditions are encountered, and the contractor suffers no disaster when unanticipated conditions arise. Furthermore, both parties benefit by the existence of an informal machinery for resolving problems through negotiation rather than litigation. There is a substantial body of federal law relating to changed-conditions clauses. The changed-conditions clause in the present case is what is known in federal parlance as a category-one changed-conditions clause, that is, a situation where encountered conditions materially differ from indicated conditions. Unlike Contract 222, many federal contracts also contain a category-two changed-conditions clause which covers a situation where unknown conditions of an unusual nature are encountered. The MSC contends that this fact renders all federal precedent inapplicable. This is not so, since nearly all federal cases involve category-one claims, and since all federal cases relied upon in our analysis here involve category-one claims. [1] The trial court did not discuss at length any of these applicable federal precedents, although it did footnote several of them in its carefully constructed opinion. Instead, the court relied mainly on principles of equity jurisprudence, and on the common-law concepts of misrepresentation and mistake. However, as the federal cases point out, [2] the applicability of the modern changed-conditions clause depends only upon a comparison of the actually encountered conditions with the indicated conditions, and not upon the fulfillment of equitable or common-law prerequisites to relief.