In construction, no matter how well a project is planned, unexpected conditions below the surface can derail budgets, schedules, and relationships. Latent conditions—those physical site conditions not apparent on reasonable inspection—continue to be one of the most disputed areas on Australian projects.
For builders, the ability to claim time or cost for latent conditions depends entirely on the contractual definition and the process for making a claim. Many contracts define latent conditions narrowly or include strict procedural hurdles that can make recovery difficult or even impossible.
What counts as a latent condition?
Typical examples include:
- Rock where soil was expected
- Contaminated or unstable soil
- Uncharted underground services
- High water tables or groundwater ingress
In D&C contracts, builders often inherit more of this risk—particularly if they are deemed to have had “adequate opportunity” to inspect the site, or if the contract refers to geotechnical reports provided “for information only.”
Key legal issues to watch for:
- Definition of latent conditions: If the contract doesn’t clearly define what is (and isn’t) latent, you may face an uphill battle in proving your claim.
- Notice requirements: Most contracts require prompt notice—sometimes within just 2–3 business days of encountering the issue.
- Risk allocation clauses: Some contracts attempt to push all ground condition risk to the contractor—even where conditions couldn’t have reasonably been foreseen.
Best practices for builders:
- Negotiate a balanced definition that covers risks outside the builder’s reasonable foresight.
- Ensure reports are contractual documents, not just “for information,” or disclaim the risk based on reliance.
- Keep detailed site records, including photographs and site diaries from day one.
- Lodge notice promptly—even if investigations are ongoing, a placeholder notice is better than none.
Latent conditions are one of those risks where the greatest danger isn’t just what’s underground—it’s what’s left out of your contract.