Engineers Australia

Latent conditions and the experienced contractor test

Gordon Smith

In modern tenders for major civil engineering works, contractors have little or no opportunity to carry out site investigations, and may not have included any price contingency for latent conditions. If such conditions are encountered, these can result in protracted and technically complex disputes.

Latent condition clauses in construction contracts reallocate the risk for latent conditions from the contractor to the principal by a test which assesses conditions actually encountered against a standard of what could reasonably have been foreseen by an experienced contractor at the time of tender. Gordon discusses this test by reference to case examples, and suggests a number general principles derived from the cases.

About the speaker

Gordon SmithBarrister and Solicitor, Chartered Accountant

Gordon Smith is a barrister and solicitor, arbitrator and adjudicator. He has practised in Australia, Singapore and Hong Kong, and was a partner in the arbitration and construction law practices in international law firms in Singapore and Hong Kong until 2012. More recently, he was Senior Legal Counsel advising the EPCM and EPC contractors on the Gorgon and Inpex LNG projects respectively on major claims.

Prior to becoming a lawyer, Gordon practised for 12 years as a consultant civil/structural engineer and project manager in Australia and New Zealand in the design and construction of mining, oil and gas, and hydro-electric projects.

He is an experienced international arbitrator, regularly appointed on major infrastructure, oil and gas, commodity, commercial, and investor-state arbitrations. He is also an adjudicator under the Western Australia Construction Contracts Act 2004 and Northern Territory Construction Contracts (Security of Payments) Act 2004.

Gordon is listed on a number of arbitral institutional panels of arbitrators, including the Singapore International Arbitration Centre, the Hong Kong International Arbitration Centre, the London Court of International Arbitration, and the CIArb Presidential Panel. He is also a member of the CIArb Approved Faculty, and has taught the International Arbitration Diploma and Fellowship Courses.

He has substantial experience as counsel in complex international arbitrations, having conducted over 50 arbitrations of up to $US2.2b in value in London, Hong Kong, Singapore, Tokyo, Kuala Lumpur, Bangkok, and Jakarta.

He is a Fellow of the Institution of Engineers Australia, Fellow and Chartered Arbitrator of the Chartered Institute of Arbitrators, and Fellow of the Singapore Institute of Arbitrators.

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