Contracts and performance

Standard contract forms

What standard contract forms are used for construction projects in your jurisdiction? To what extent do parties deviate from these standard forms?

Standard contract forms are widely used in British Columbia and Ontario on a variety of construction projects. The Canadian Construction Document Committee (CCDC) Contract Forms are widely used for the construction aspects of projects. The Fixed Price Contract (CCDC 2) is the most common standard form contract used for most projects in British Columbia and Ontario. CCDC also has a series of subcontract forms that are regularly employed. Alternatively, the Canadian Construction Association also offers a series of standard construction contract forms.

The most commonly used form for the retainer of a prime consultant is the Royal Architectural Institute Contract Form RAIC 6. Where an engineer is the prime consultant, the contracting forms of the Association of Consulting Engineers of Canada are adopted, most notably, ACEC Document 31, Engineering Agreement Between Client and Engineer.

On most public/private partnership projects the provincial government has developed a very detailed standard format for public projects, particularly infrastructure projects. The form is amended in some significant ways from project to project to meet individual conditions and requirements.

Definition of ‘construction work’

How is ‘construction work’ legally defined?

‘Work’ under many construction contracts is defined as the entirety of the labour and materials required to construct the project in accordance with the applicable codes, standards, plans and specifications.

Governing law

Are there any rules or restrictions on the governing law of construction contracts?

Construction contracts in British Columbia and Ontario are subject to the Builders Lien Act in British Columbia, and the Construction Act in Ontario.  Such contracts are interpreted in accordance with the common law of contract and negligence.

Formalities

Are construction contracts subject to any formal requirements?

There is no formal statutory requirement applicable to the form and substance of any contract.

Mandatory/prohibited provisions

Are there any mandatory or prohibited provisions in relation to construction contracts?

There are several prohibited provisions found in various statutes which could be applicable to construction projects. By way of example, the Builders Lien Act (British Columbia) and the Construction Act (Ontario) prohibit contracting out of lien holders’ rights under the act.

Implied terms

Can any terms be implied in construction contracts?

There are very few, if any, implied terms imported into contracts between owners and contractors or contractors and subtrades. However, there are several implied terms imported into a procurement period of construction contracts, an area of the law set afoot by the Supreme Court of Canada in R v Ron Engineering in 1985. In the procurement phase, there are long lists of implied terms applicable to both project sponsor/owners and bidders, as well as to consultants charged with responsibility for assessing bids.

Risk allocation

How are risks typically allocated between parties to construction contracts?

The practice in respect of risk allocation in both British Columbia and Ontario is generally described as a process which seeks to assign risk to that party or those parties best able to manage the risk or whose role and responsibilities on the project define the risk that they ought to assume.

Limitation of liability

How and to what extent can parties to construction projects contractually limit or exclude their liability?

Under the common law applicable in both British Columbia and Ontario, parties are free to limit their liability in any way they see fit. There is no statutory prohibition to defining the limit of liability in contract, even as far as removing any liability whatsoever or shortening or lengthening the time prescribed for claims under the applicable statute.

Liquidated damages

How are liquidated damages typically calculated and to which liabilities are they usually applied?

Liquidated damages are frequently found as part and parcel of major construction projects, particularly public projects. The liquidated damages are most commonly specified as a daily or weekly charge for failing to meet contract schedule or contract performance over a stipulated period.

Force majeure

How are force majeure clauses treated in your jurisdiction? Is there a legal definition of force majeure events?

Force majeure clauses are enforced by the courts in British Columbia and Ontario. The Supreme Court of Canada has described such clauses as follows:

an act of God or force majeure clause… generally operates to discharge a contracting party when a supervening, sometimes supernatural, event, beyond the control of either party, makes performance impossible. The common thread is that of the unexpected, something beyond reasonable human foresight and skill. (Atlantic Paper Stock Ltd v St Anne-Nackawic Pulp & Paper Co, [1976] 1 SCR 580, Paragraph 4).

General performance obligations

What are the general performance obligations of contractors and employers?

The general performance obligation of a contractor is to complete the project in accordance with the applicable plans and specification and within the project schedule and in doing so, to exercise reasonable care in carrying out the work. Employers, on the other hand, are usually limited to their payment obligations under the contract and to providing adequate and timely site access and information required by the contractors which is in the possession of the employer.

Project delays

How are project delays typically handled? Do any set rules, restrictions or procedures apply in this regard?

Delay claims are frequently raised on construction projects in British Columbia and Ontario. There are no set rules, restrictions or procedures applicable to these claims. They are frequently complex, factually driven and expensive to process.

Contract variations

To what extent can the parties make variations to the contract? Do any set rules, restrictions or procedures apply in this regard?

Parties to contracts in British Columbia and Ontario are free to enter into any form of contract that they wish, as long as it is not for an illegal purpose.      

Termination

What are acceptable grounds for the termination of a contract?

Provided that the terms and conditions of the contract pertaining to termination are strictly complied with, contracts can be terminated. Missing a step in the required termination sequence can be fatal to any attempt to avoid the obligations under a contract.

Remedies for breach

What remedies are available for the breach of construction contracts?

The standard remedy for breach of contract is recovery of the foreseeable losses as a result of the breach, sometimes softened by the contributory wrongdoing on the part of the claimant.

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