Construction Law Report KEEPING YO U INF O RMED

JULY 20 07

TIME IS MONEY The Condominium Developer’s Guide to Delay Claims “Time is money” is an appropriate motto in the field of high-rise condominium projects. Yet, delays are an expected, although unfortunate, reality of such projects. Introduction The developer is at the project’s centre, orchestrating the progress of the project and dealing with all others involved in the process including:

BY IRVING

MARKS AND BARBARA GREEN

Robins Appleby & Taub LLP

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unit purchasers;

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contractors;

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lenders;

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consultants, which may include architects, engineers and cost consultants;.

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the municipality; and

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Tarion.

A developer is vulnerable to damage from delays because the project revenue is fixed early in the process by the sale price of the condominium units. Return on invested equity is always diminished by delays. Further, some project costs may be variable and sensitive to delays, such as financing costs, especially where there is a variable interest rate, and possibly construction costs, depending on whether the contracts are “stipulated price” or “cost plus”. When

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CONSTRUCTION LAW REPORT “Time is Money” The Condominium Developer’s Guide to Delay Claims

project costs are sensitive to delays, the developer’s ultimate return on investment is also sensitive to delay. In recent years, there has been little litigation driven by condominium unit purchasers on the basis of delay because of a strong market and rising prices. Although delay may cause these purchasers inconvenience, the delay often does not generate financial losses significant to justify a lawsuit. Even if a purchaser ultimately backs out of the deal, the developer can often sell the unit to a new purchaser for more money.

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municipality delays

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lender delays

Assessing damages in delay claims: 

notice requirements

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when is a party entitled to damages on the basis of delay? 

While there has been an unprecedented run of rising prices, market conditions could easily change. If prices fall, even marginally, a delay could cause the developer to suffer significant losses. In the worst case scenario, all of the purchasers could terminate, leaving the developer to resell all of the units at lower prices. In those circumstances, the developer would want to hold the responsible parties accountable for the delay. This paper briefly addresses the remedies available to the developer, and the risks the developer faces as the target of delay lawsuits.

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Delay claims are frequently complicated, requiring an analysis of complex factual and legal arguments. The number of parties and different legal relationships between them often leads to multi-party litigation with numerous crossclaims, counterclaims and third party claims.

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The topic of delay claims is so broad that entire textbooks have been written on the subject. Given the scope of this topic, the purpose of this paper is to introduce some key concepts and issues which arise in delay claims from the perspective of the developer, as well as to provide some practical tips to protect the developer, even before the project encounters a delay.

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the categories of delay: ■

excusable

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non-excusable

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compensable

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non-compensable

damages arising from delay ■

foreseeability

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additional construction costs

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loss of profits

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contract limitations

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supporting documents

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expert evidence

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mitigation of damages

Review of some typical terms in construction contracts: 

exclusion clauses/disclaimers

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penalty claims vs. liquidated damages clauses

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“time is of the essence” clauses

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arbitration clauses

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implied terms

Defences to delay claims, including:

The paper addresses the following topics:

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“force majeure” clauses

Where delays can occur in a project:

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concurrent delay

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exclusion clauses

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developer delays

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general contactor delays

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subcontractor delays

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consultant delays

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A checklist for success

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Where Delays Arise in a Condominium Project and Who May be Liable Delays can occur at any time and at more than one stage of development and construction of a condominium project. A delay at one step often leads to delays at other steps because the steps are so inter-dependent. Typical stages of such a project include: ■

The developer purchases land suitable for the project.

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A concept or design for the project is developed.

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The developer obtains the necessary zoning and development approvals from the municipal authorities.

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Tarion registration.

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Unit pre-sales.

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The developer obtains project financing.

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The project is constructed.

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Unit purchasers take interim occupancy.

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The condominium is registered.

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Final closing.

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excessive changes in requirements or design;

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defective or insufficient plans;

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the failure to obtain necessary work permits; and

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the failure to provide or approve drawings in a reasonable time.

Where some part of the construction must be carried out by or on behalf of the developer before the contractor can perform its work under the contract, any delay in the work amounts to a breach of contract for which the developer may be liable. However, if a contractor is delayed because other contractors have defaulted and the developer is not responsible for the delay, the developer will not be responsible for paying damages to the contractor arising from the delay unless the contract states that the developer must prevent such delays.3 When the developer causes delay, it commonly grants an extension of time to the contractor to complete its work. If the contractor accepts the extension from the developer without claiming damages for the delay, this may amount to a “waiver” (or an acceptance) of the developer’s breach and may prevent the contractor from later claiming damages from the developer for delay.4

a) Delays Caused by the Developer

b)

The relationship between a condominium unit purchaser and the developer, both with respect to delays and more generally, is governed by the terms of the Agreement of Purchase and Sale. For new condominium units, the Ontario New Home Warranty Program Act also sets out a regime of permissible delays and limitations on the purchaser’s potential claims on the basis of delay.1

Delays Caused by a Contractor

A contractor who is responsible for delay in the completion of work will be in breach of its contractual obligations and may be liable to the developer for damages. A sufficient delay may also enable the developer to terminate the contract altogether.5 In addition to the contractor’s duty to perform the work pursuant to the terms of the contract, the contractor may have additional obligations under the contract, such as compliance with statutory rules and regulations and by-laws. If the contractor fails to fulfil these obligations, this constitutes a breach of contract.6 Other examples of delay caused by the contractor include:

A contractor is entitled to assume that the work will be completed in the time provided for in the contract, and to arrange other projects accordingly. Even if the contract does not provide a specific completion date, the developer must not do, or fail to do, anything to delay the contactor in carrying out the work. A developer who causes delay by, for example, directing work to be performed in a sequence different than originally planned, imposing testing beyond what is necessary, or interferes in some similar fashion, could be liable for interference.2 Other examples of delay caused by the developer include: Robins Appleby & Taub LLP

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contractor management and performance problems;

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contractor management and performance problems;

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failure to properly staff the job;

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failure to order materials and equipment in a timely fashion; and

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the unavailability of labour, material or equipment.

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For instance, in Axelrod v. City of Toronto, the Court ordered a municipality to issue demolition permits to a developer after its refusal to do so without proper grounds.11 Legal proceedings against a municipality will likely cause further delays given that the judicial process is frequently slow.

A contractor who incurs additional costs because of its own delay is not entitled to recover such costs from the developer.7

f) Delays by the Lender If a contractor knows in advance that it will not be able to complete its work in a timely fashion, it may apply to the developer for an extension of time. If the developer grants the extension and the work is completed within the extended time period, the contractor will not be considered to have breached the contract. If the delay was solely the fault of the contractor, the developer is not required to grant an extension.8

The rights between a developer and its lender, typically a large financial institution, are governed by the lending commitment agreement between them. A developer may have limited contracting freedom with a lender as the lending agreements are frequently geared towards protecting the latter’s interests. Delays by a lender in making proper advances could result in a failure to pay contractors and the registration of construction liens. However, depending on the terms of the agreement, a developer may have a claim for breach of contract and damages for loss of profits in circumstances where the lender failed to abide by the terms of their agreement which results in project delays. For instance, in National Trust Co. v. Saks, the developer was successful in its claim against the lender for breach of contract when the latter wrongfully disregarded the terms of the loan agreement by demanding that the developer make cash equity injections to pay cost overruns.12

Standard form construction contracts have timelines that specifically address the issue of delay. For instance, General Condition 6.5 of the stipulated price contract in CCDC 2-1994 contains a specific delay section, attached as Appendix “A”.9

c) Delays Caused by Subcontractors Delay caused by the subcontractors or the contractor’s suppliers is the contractor’s responsibility as far as the developer is concerned.10

d) Delays Caused by Consultants

Assessing Damages in Delay Claims

If work performed by a consultant is not timely or is deficient, which leads to delay, the developer may have a claim in contract or professional negligence against the consultant. Examples of this are: design deficiencies, delay in approval of change work orders, and delays in payment certification.

The following section explores the topic of the computation of damages in delay claims and how notice provisions in the contract and the duty of the innocent party to mitigate its losses impact the claim. In addition, the significance of proper documents and expert evidence on delay claims is briefly reviewed.

e) Delays by the Municipality

a) Notice Requirements: A Possible Precondition to a Damages Claim

Practically speaking, it may be difficult and expensive to successfully sue a municipality for causing development delays. However, Courts have held municipalities liable for delays in unique circumstances. An application can be made to Court under section 8 of the Building Code Act, 1992 to require issuance of a building permit or demolition permit.

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Construction contracts frequently require that a specific form of timely notice be given to the defaulting party as a precondition to preserving the innocent party’s right to claim compensation for delay. It is essential that the notice requirements of a contract be strictly adhered to in order

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CONSTRUCTION LAW REPORT “Time is Money” The Condominium Developer’s Guide to Delay Claims

to preserve the right to claim damages. Particulars must be given in a timely fashion so that the defaulting party is notified that a claim will be advanced against it for costs related to delays but has the opportunity to take protective measures.13

recover damages for breach of contract, and the breaching party is excused from any further performance under the contract. The developer may terminate the contract and retain other forces to complete the contractor’s work.15 However, if the innocent party does not accept the repudiation, the breaching party is not excused from further performance, and the innocent party can still claim damages for the breach of contract.16 Whether in any given circumstances the breach is sufficiently fundamental so as to amount to a repudiation is in each case a question to be determined in light of the particular terms of that contract.17

b) When is a Party Entitled to Damages on the Basis of Delay? A delay can be categorized as “excusable” or “nonexcusable”. To decide which category a delay falls into, the construction contract is reviewed first to determine whether it permits the delay and whether it provides for entitlement to compensation or an extension of time in the circumstances.

c) Damages Arising From Delay In order to recover damages, the innocent party must be able to establish that there has been a breach of duty or contract, that it suffered a loss, and that the loss is a result of the breach of contract or negligence. The purpose of awarding damages is to put the injured party, as far as money can accomplish this, into the same position as if the innocent party’s rights had not been violated.

An “excusable” delay is a delay for which the claimant is entitled to an extension in the contract time, or compensation for the delay, or both. If there is entitlement to compensation, as well as an extension in the contract time, the delay is a “compensable excusable delay.” If the claimant is only entitled to an extension of the contract time, the delay is a “non-compensable excusable delay”. Delays not caused by a party, such as acts of G-d, severe weather, and natural disasters such as floods or fires, are generally considered “non-compensable excusable delays”. When such delays occur, the developer typically is required to give the contractor an extension of time to perform the contract, but this does not permit the developer to make any claim for additional costs arising out of the delay, or to terminate the contract on that basis. A “non-excusable delay” is one for which the party is entitled to neither an extension in the contract time nor any monetary compensation.14

Typical heads of damage for a delay claim made by a developer include:

The usual remedy sought by a party to a building contract is damages for breach of the contract. A claim for breach of contract may only be made against the party with whom the contract was made. If the breach is of such a nature that there is a “repudiation” of the contract (ie: the breach goes to the root of the contract or there is a substantial failure of performance or the breaching party has indicated its intention to no longer be bound by the contract), the innocent (ie: non-breaching) party may elect to accept the repudiation and treat the contract as terminated by the breach. In these circumstances, the innocent party may

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additional construction costs

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overhead and carrying costs, such as interest and property tax during the period of delay

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liquidated damages (depending on the terms of the contract)

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diminution of value of the project

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loss of profits

i) Foreseeability Even if a delay amounts to a breach of contract, not all damages are necessarily recoverable. Damages are only recoverable if they arise naturally from the breach or, in some circumstances, if they could reasonably have been within the contemplation of the parties when they entered into the contract. All other damages will be considered too remote. For instance, if a developer requires a building to be completed by a certain date, and its purpose is to generate income, a contractor who fails to complete its work in time

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will be liable to the developer for damages for loss of profits only if the contractor actually knew that the building was required for such purpose, or if that purpose was reasonably within the parties’ contemplation.18

ordered damages to be paid pursuant to the method selected by the parties and set out in the contract.23

d) Supporting Documents Supporting documents are critical in proving that there was a delay, that it was caused by the Defendant, that the Plaintiff suffered compensable damages as a result of the delay, and that a particular measure of damages is proper in the circumstances.

ii) Additional Construction Costs Since the purpose of a damages award is to grant full compensation, but not a windfall, if the developer is the innocent party, the cost of completing or correcting the work over and above the contract price is the proper measure of damages in many cases, especially when the contractor failed to perform the work. It is usually more expensive to call in another contractor during the course of work to complete it, and such additional costs must be paid by the defaulting contractor if the developer reasonably incurred such costs. In other cases, the proper measure of damages is based on the loss in the value of the land.19

The following are suggestions of steps and documents that should be maintained throughout the course of the project: ■

The developer should have a well-established project schedule and maintain accurate and timely records of all delays, as they occur, and how the delay impacted upon the project. This will assist the developer to corroborate any consequential losses resulting from the delay.

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Immediately put the responsible parties on notice of the need to comply with a specific deadline and that they will be held responsible for any delay.

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Keep clear and accurate records of all contracts related to the project.

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Maintain detailed accounting records since the losses will be financial.

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All staff involved in the construction project should keep detailed records of daily events during the course of construction.

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Photos and video footage showing the status of a construction project on any given day are often helpful in proving delay claims, as well as logs and journals which recorded details of events that transpired on site.

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Keep all correspondence, as well as written notes of discussions.

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Any problems related to delays in the construction schedule should be addressed during

iii) Loss of Profits Where a contractor can prove that it suffered a loss as a result of the developer’s breach, the measure of damages is the net loss occasioned by the breach.20 Where a contractor can establish that it has lost profit as a result of the owner’s breach of contract, it will be entitled to recover lost profit as damages.21 A contractor is also entitled to claim damages for idle equipment and for office overheads as a result of the delay. Further, if the scope of the contractor’s work is significantly changed by the owner during construction, the contractor will be entitled to the increased costs as damages.22 Loss of profit claims are complex and usually involve an analysis of actual profits as against budgeted or projected profits. The question is how much profit would have been realized “but for” the delay. The analysis usually includes a discount for the risk that the projections might not have been achieved even if there were no delays.

iv) Contract Limitations Many contract clauses provide that if there is a delay, recoverable damage will be computed in accordance with a particular formula or only using specified heads of recovery. In Goodfellow’s Trucking Ltd. v. New Brunswick, the Court

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CONSTRUCTION LAW REPORT “Time is Money” The Condominium Developer’s Guide to Delay Claims

meetings. Minutes of those meetings should be circulated to attendees for approval.24

Tips and Traps of Common Construction Contract Clauses: Strategies for Examining Contractual Terms

e) Expert Evidence

The terms of the contract have clear implications on delay claims. For instance, what does the contract say about delivery dates? Are the dates firm? Does the contract make “time of the essence”? Set out below is a brief analysis and practical tips regarding some common construction contract terms, including: exclusion clauses, penalty and liquidated damages clauses, “time is of the essence” provisions, arbitration clauses, as well as the effect of implied contractual terms.

In order to establish a claim for delay of any significant size, expert evidence will be necessary. It is strongly recommended that the expert be retained in the early stages of litigation so that the expert can assist in the preparation of pleadings, assist with the discovery process, assist counsel to prepare the case for trial, and appear as a witness at trial. At trial, experts are permitted to give evidence of the proper method to be adopted in assessing a delay claim as a matter of industry practice, and testify as to any exceptions to that method which should be made in the case. The expert may also express an opinion about the type of effect that is generally caused by the delay of one branch of a construction project upon other branches of the project. The expert can also provide factual evidence about construction techniques and practice.25 Expert accounting evidence will also be required to establish a loss of profit claim.

a) Exclusion Clauses/Disclaimers Construction contracts frequently contain clauses which attempt to limit or exclude a party’s liability if certain events occur. Often, a developer includes such a provision stating that in no, or only limited, circumstances will it be liable to the contractor. If a developer seeks to exclude its liability for delay in respect of its own breaches of contract, it may do so but it is mandatory that the disclaimer expressly provides that it includes the developer’s own breach of contract. Language such as “the developer shall in no circumstances be responsible to the contractor for damages resulting from the delay of the contractor’s work operations” has been found to be insufficient because it fails to include in express language the situation where the developer has breached its contractual obligations.28

f) Mitigation of Damages In the case of a breach of contract, the innocent party is required to mitigate (minimize) its damages by taking reasonable steps to protect itself from further loss. In other words, the innocent party must behave in a reasonable manner with a view to ensuring that its damages resulting from the breach are as minimal as possible, which includes seeking the most economical and efficient way of making up for a delay. It may also include the least expensive method of returning the innocent party to the same position. For instance, the developer must attempt to replace a contract as quickly as possible where a contractor has failed to complete. The onus is on the party asserting that the innocent party has not mitigated its damages to prove that it did not do so.26 The innocent party’s failure to mitigate could significantly reduce the damages ultimately awarded to it by the court.27

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By contrast, in Perini Pacific Ltd. v. Greater Vancouver Sewerage & Drainage District (No. 2), the Supreme Court of Canada held that the addition of the more specific phrase: “whether or not such delay may have resulted from anything done or not done by [the developer] under the contract” was an effective exclusion clause as this was exactly the kind of loss which precluded the claim according to the language of the contract.29 Because exclusion clauses and disclaimers are strictly construed, it is necessary that clear and unambiguous language be used. If there is ambiguity, an exclusion clause will be read strictly against the party for whose benefit it was inserted. Therefore, the best tool to attack an exclusion clause is to have it strictly construed against the

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interest of the party who put it forward, on the grounds of ambiguity.30

clause. Further, the developer will likely have to prove that it suffered actual damages in the amount of the claimed liquidated damages.35

There is no rule that necessarily invalidates an exclusion clause in the event of a fundamental breach or other type of breach of contract.31 In deciding whether to enforce an exclusion clause in the face of a fundamental breach of contract, the court will decide whether doing so would be “unconscionable” or so unreasonable that the parties could not have intended this result. “Unconscionability” usually arises in situations where there is a vast disparity of contractual bargaining power between two parties to the contract so that the imposition of the disclaimer was essentially forced upon a party (usually the contractor) with no real commercial choice but to accept the term. Where there is equality of bargaining power, the courts will usually give effect to the bargain.32

Liquidated damages provisions for delay in completion are inapplicable if the contractor never started the work under the contract, as they apply only once work has begun.36

c) “Time is of the Essence” Provisions Where a construction contract makes time “of the essence”, the breach of an obligation calling for performance at a specified time may amount to a breach of an essential element of the contract which can be treated by the innocent party as discharging the agreement and relieving against performance by the innocent party.37 In contracts where time is of the essence, even a 10-minute delay has been held to be a breach of this term.38 Therefore, when a time is of the essence clause exists in a contract, strict compliance with time limits is imperative. Therefore, when a time is of the essence clause exists in a contract, strict compliance with time limits is imperative.

b) Penalty Clauses vs. Liquidated Damages Clauses Construction contracts sometimes contain clauses which provide for the payment of a stipulated sum of money per day for any delays in completing the work beyond the completion date in the contract. Such clauses may be characterized as either a liquidated damages clause or a penalty clause.

d) Arbitration Clauses Construction contracts often contain arbitration clauses, such as the one set out in General Condition 8.2 of the CCDC Stipulated Price Contract, attached as Appendix “A”. It is strongly recommended that all contracts in a given project be consistent with respect to arbitration provisions. Either all project contracts should contain an arbitration clause, or none should have this clause. This consistency may prevent procedural problems and a multiplicity of proceedings given that section 7(1) of the Arbitration Act, 1991 provides that a court proceeding must be stayed in favour of arbitration when there is an agreement to arbitrate.

Penalty clauses are void and unenforceable because a party cannot legally provide in a contract for the payment of a penalty.33 For example, a late payment clause of $1,500.00 per day in a contract worth $59,000.00 to install new foundations and pillars and to replace 13 existing buildings on new structures was held to bear no relation to reality, nor was it a genuine attempt to make a pre-estimate of the damages likely to occur. It was therefore held to be a penalty clause and void.34

Further, any arbitration clause contained in the construction contracts should specifically exclude arbitration where a developer has been sued and wishes to commence third party proceedings. Otherwise, the main action could proceed in court while the third party claim proceeds by arbitration, resulting in a multiplicity of proceedings and potentially inconsistent results.

Parties to a contract are, however, permitted to provide for a pre-estimate of damages which are likely to arise in certain circumstances and to agree on the payment of liquidated damages in such circumstances. In order for a liquidated damages clause to be considered valid, it must provide for payments which bear a relation to reality and must be a genuine attempt to make a pre-estimate of the damages which are likely to occur. The amount should not be excessive. Otherwise, the Court will view this as a penalty Robins Appleby & Taub LLP

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However, these concerns are not usually an issue when a developer has entered into a General Contract with a 8

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general contractor. In this situation, the developer has no direct relationship with the subcontractors so any delay claims would be governed solely by the contract between the developer and the general contractor (and the developer would not need to bring claims against the subcontractors for delay).

of such a clause. If the event occurred without the clause in the contract, the contract would be frustrated and the parties no longer bound to perform their future contractual obligations. In order to rely on a force majeure clause as a defence to a delay claim, the circumstance which occurred should not have been foreseen and could not have been prevented. Strict compliance with the notice provisions set out in the contract has been held to be a condition precedent to invoking a force majeure clause.40

The prevalence of arbitration in construction cases (and other commercial cases) has lead to a dearth of recent reported court cases on these issues. While this may benefit the immediate parties (lower costs, speed and privacy), it deprives subsequent parties and their lawyers the benefit of guidance from decided case law.

b)

Concurrent Delay

Concurrent delay occurs when two or more causes of delay operate at the same time. If different parties are responsible for different concurrent delays, the court will generally assign a percentage of fault to each responsible party. A court will do the best it can to apportion responsibility on an estimated basis, on the basis of expert evidence. If the court cannot decide how to apportion the fault, an equal percentage of the blame will be assigned to each party.41

e) Implied Terms Since it is almost impossible to foresee all situations that may arise during the course of construction to provide for all of them in the contract, the court will sometimes have to imply a term to address a situation when the parties did not deal with it expressly. In the absence of an express provision in a contract, it is an implied term of a construction contract that the developer will do everything reasonable to allow the contractor to complete its work, such as making timely payments and refraining from interfering with the contractor’s work which may result in delay in its completion.39

Concurrent delay is frequently used as a defence to a delay claim. If a party can successfully assert a concurrent delay so that the court apportions the concurrent delay, the party might be able to reduce such a claim by the percentage of concurrent delay for which the claimant is responsible. For instance, in Alberta Engineering Co. v. Blow, the contractor brought an action for the balance of the contract owing. The owner counterclaimed for delay on the basis that the project was delivered several months after the agreed completion date and the owner lost rental income as a result. The contractor asserted that the owner was responsible for some concurrent delay. The court attributed over a quarter of the concurrent delay to the owner, thereby reducing the owner’s claim for rent.42

Defences to Delay Claims Depending on the circumstances, there may be some available grounds to reduce or eliminate a delay claim. Set out below is a brief analysis of some common defences: “force majeure” clauses, concurrent delay as a defence, and disclaimer clauses.

a) “Force Majeure” Clauses

Further, if a party can prove that an excusable but noncompensable delay ran concurrently with the compensable delay, the party can try to entirely defeat the delay claim on the grounds that the non-compensable delay overrides the compensable delay such that only an extension of time is permitted.43

Frustration of a contract occurs when its performance becomes impossible due to a supervening event caused by neither party, and not within their contemplation. Many condominium construction contracts contain a force majeure clause to address these situations. Section 6.5.2 of the CCDC-2 1994, set out in Appendix “A”, is an example

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APPENDIX “A”

Proving a concurrent delay may reduce or defeat the delay claim even when the defending party is not asserting a delay claim itself.44

GC 6.5 DELAYS 6.5.1

If the Contractor is delayed in the performance of the Work by an action or omission of the Owner, Consultant, or anyone employed or engaged by them directly or indirectly, contrary to the provisions of the Contract Documents, then the Contract Time shall be extended for such reasonable time as the Consultant may recommend in consultation with the Contractor. The Contractor shall be reimbursed by the Owner for reasonable costs incurred by the Contractor as the result of such delay.

6.5.2

If the Contractor is delayed in the performance of the Work by a stop work order issued by a court or other public authority and providing that such order was not issued as the result of an act or fault of the Contractor or any person employed or engaged by the Contractor directly or indirectly, then the Contract Time shall be extended for such reasonable time as the Consultant may recommend in consultation with the Contractor. The Contractor shall be reimbursed by the Owner for reasonable costs incurred by the Contractor as the result of such delay.

6.5.3

If the Contractor is delayed in the performance of the Work by labour disputes, strikes, lock-outs (including lock-outs decreed or recommended for its members by a recognized contractors’ association, of which the Contractor is a member or to which the Contractor is otherwise bound), fire, unusual delay by common carriers or unavoidable casualties, or without limit to any of the foregoing, by a cause beyond the Contractor’s control, then the Contract Time shall be extended for such reasonable time as the Consultant may recommend in consultation with the Contractor. The extension of time shall not be less than the time lost as the result of the event causing the delay, unless the Contractor agrees to a shorter extension. The Contractor shall not be entitled to payment for costs incurred by such

c) Exclusion Clauses Exclusion clauses, also known as disclaimers, are a possible defence to a delay claim, as set out above.

Conclusion and Checklist for Success Preparation in advance is the key to a successful delay claim and will assist in the defence of any such claim. Below is a short checklist to assist the developer to prepare itself. These steps are summarized in greater detail above, and should be considered and, where applicable, undertaken from the outset of the project and on an on-going basis throughout the project: ■

take care in the review and co-ordination of all project contracts;

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establish and maintain a project schedule;

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maintain records of construction progress;

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maintain proper accounting records;

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comply with all contractual notice provisions;

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act reasonably to mitigate losses; and

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be prepared to devote the time, attention and money necessary to win. Litigation is expensive and it may end up becoming the developer’s next project! „

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delays unless such delays result from actions by the Owner. 6.5.4

6.5.5

of the matter in dispute and the relevant provisions of the Contract Documents. The responding party shall send a notice in writing of reply to the dispute within 10 Working Days after receipt of the notice of dispute setting out particulars of this response and any relevant provisions of the Contract Documents.

No extension shall be made for delay unless notice in writing of claim is given to the Consultant not later than 10 Working Days after the commencement of delay, providing however, that in the case of a continuing cause of delay only one notice of claim shall be necessary. If no schedule is made under paragraph 2.2.9 of GC 2.2 - ROLE OF THE CONSULTANT [ie: the Consultant will furnish Supplemental Instructions to the Contractor with reasonable promptness or in accordance with a schedule agreed to by the Consultant and the Contractor], no claim for delay shall be allowed because of failure of the Consultant to furnish instructions until 10 Working Days after demand for such instructions has been made and not then, unless the claim is reasonable.”]

8.2.3

The parties shall make all reasonable efforts to resolve their dispute by amicable negotiations and agree to provide, without prejudice, frank, candid and timely disclosure of relevant facts, information, and documents to facilitate these negotiations.

8.2.4

After a period of 10 Working Days following receipt of a responding party’s notice in writing of reply under paragraph 8.2.2, the parties shall request the Project Mediator to assist the parties to reach agreement on any unresolved dispute. The mediated negotiations shall be conducted in accordance with the latest edition of the Rules for Mediation of CCDC 2 Construction Disputes.

8.2.5

If the dispute has not been resolved within 10 Working Days after the Project Mediator was requested under paragraph 8.2.4 or within such further period agreed by the parties, the Project Mediator shall terminate the mediated negotiations by giving notice in writing to both parties.

8.2.6

By giving a notice in writing to the other party, not later than 10 Working Days after the date of termination of the mediated negotiations under paragraph 8.2.5, either party may refer the dispute to be finally resolved by arbitration under the latest edition of the Rules for Arbitration of CCDC 2 Construction Disputes. The arbitration shall be conducted in the jurisdiction of the Place of the Work.

8.2.7

On expiration of the 10 Working Days, the arbitration agreement under paragraph 8.2.6 is not binding on the parties and, if a notice is not given under paragraph 8.2.6 within the required time, the parties may refer the unresolved dispute to the

GC 8.2 NEGOTIATION, MEDIATION, AND ARBITRATION 8.2.1

In accordance with the latest edition of the Rules for Mediation of CCDC 2 Construction Disputes, the parties shall appoint a Project Mediator .1 within 30 days after the Contract was awarded, or .2 if the parties neglected to make an appointment within the 30 day period, within 15 days after either party by notice in writing requests that the Project Mediator be appointed.

8.2.2

A party shall be conclusively deemed to have accepted a finding of the Consultant under GC 2.2 - ROLE OF THE CONSULTANT and to have expressly waived and released the other party from any claims in respect of the particular matter dealt with in that finding unless, within 15 Working Days after receipt of that finding, the party sends a notice in writing of dispute to the other party and to the Consultant, which contains the particulars

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Endnotes

courts or to any other form of dispute resolution, including arbitration, which they have agreed to use. 8.2.8

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1. Ontario New Home Warranty Program Act, R.S.O. 1990, c. O.31 2. Immanuel Goldsmith and Thomas G. Heintzman, Goldsmith on Canadian Building Contracts, 4th (Toronto: Thomson Carswell, 1988) at 5-9

If neither party requires by notice in writing given within 10 Working Days of the date of notice requesting arbitration in paragraph 8.2.6 that a dispute be arbitrated immediately, all disputes referred to arbitration as provided in paragraph 8.2.6 shall be

3. Ibid. 4. Esposito, Anna M. and Maria Tassou, “Overview of Construction Delay Claims and Delay Damages” in Construction Delay Claim: Following the Critical Path, Ontario Bar Association, Continuing Legal Education [CLE Program] (2006: Toronto, Ontario) at 3.

.1 held in abeyance until (1) Substantial Performance of the Work, (2) the Contract has been terminated, or

5. Anderson Industrial Doors Ltd. v. Genstar Construction Ltd. [1985] CarswellBC 768 (B.C.S.C.)

(3) the Contractor has abandoned the Work, whichever is earlier, and

Supra, note 2 at 5-16

.2 consolidated into a single arbitration under the rules governing the arbitration under paragraph 8.2.6.

6. Supra, note 2 at 5-18 7. Josyln & Olsen Contractors Ltd. v. Bouey [1976] CarswellAlta 21 (A.C.A.) 8. Supra, note 4 at 4 9. “CCDC” stands for “Canadian Construction Documents Committee”, which is a joint committee comprised of owners and representatives of various institutes. The italicized terms are defined terms in the contract. 10. Supra, note 2 at 5-17 11. [1984] CarswellOnt 519 (Div. Ct.); (1984) 13 D.L.R. (4th) 634 (H.C.J.); varied at [1985] O.J. No. 2664 (H.C.J.) 12. [1998] CarswellOnt 2554 (O.C.A.) 13. Supra, note 4 at 9 W.J. Kenny, Cook Duke Cox (Edmonton-Calgary), Delay Claims at 37(source unknown) For further reading on the issue of the importance of timely notice on such claims, please see: Esposito, Anna M. and Maria Tassou, “Overview of Construction Delay Claims and Delay Damages” in Construction Delay Claim: Following the Critical Path, Ontario Bar Association, Continuing Legal Education [CLE Program] (2006: Toronto, Ontario) at 9 to 12.

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14. Supra, note 4 at 2 and 3

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For a lengthier discussion on this topic, please see this article at pages 3 and 4 (ecarswell).

15. Torbray (Town Council) v. Metro Enrg. & Const. Ltd. (1980) 30 Nfld. & P.E.I.E. 298 (Nfld. T.D.)

29. [1967] CarswellBC 187 (S.C.C.)

16. Supra, note 2 at 6-3 and 6-4

30. W.J. Kenny, Cook Duke Cox (Edmonton-Calgary), Delay Claims at 32 (source unknown)

17. Ibid, at 6-5

31. A fundamental breach can be defined as a breach going to the root of the contract, or one based on performance that is totally different from that which the contract contemplated.

18. Smith v. Tennant (1890), 20 O.R. 180 Can. Foundry Co. v. Edmonton Portland Cement Co. (1918) CarswellAlta 157 (P.C.).

32. Syncrude Canada Ltd. v. Hunter Engineering Co. [1989] CarswellBC 37 (S.C.C.)

19. Supra, note 2 at 6-9 and 6-10 20. Pendivic Contracting Co. v. International Nickel Co. [1975] CarswellOnt 299 (S.C.C.)

W.J. Kenny, Cook Duke Cox (Edmonton-Calgary), Delay Claims at 32 (source unknown).

21. Lowe v. Robb Engineering Co. [1905] CarswellNS 11 (N.S.S.C.)

Some other cases that have considered the effect of exclusion clauses in the context of construction delay claims are: Alden Contracting Ltd. v. Newman Bros. Ltd. [1997] CarswellOnt 3734 (Gen. Div.) and Summitville Consolidated Mining Co. v. Klohn Leonoff [1989] CarswellBC 697 (B.C.S.C.). For further reading on the topic of exclusion clauses, please see: Mueller, Warren H.O. “Contractual Exclusion and Limitation of Delay Claims” 47 C.L.R. (3d) 5 (2005).

22. Shore & Horowitz Construction Co. & Franki of Canada Ltd. [1964] CarswellOnt 70 (S.C.C.) 23. [2003] CarswellNB 587 (N.B.Q.B.); aff’d at [2005] CarswellNB 411 (N.B.C.A.) 24. Supra, note 4 at 12 and 13 25. Cogar Estate v. Central Mountain Air Services Ltd. [1992] CarswellBC 305 (B.C.C.A.)

33. Covert v. Janzen (No. 2) [1908] CarswellSask 128 (S.C.A.)

26. W.J. Kenny, Cook Duke Cox (Edmonton-Calgary), Delay Claims at 41 (source unknown)

Macdonald v. Northwest Biscuit Co. [1924] CarswellAlta 84 (A.C.A.)

27. Some cases which address the duty to mitigate and the effect of mitigation on a claim for damages are: Rice v. Sockett [1913] CarswellOnt 425 (O.C.A.); Sault Ste. Marie (City) v. Proctor & Redfern Ltd. [1986] CarswellOnt 785 (H.C.J.); and Westland Investment Corp. v. Carswell Collins Ltd. [1996] CarswellAlta 29 (Alta Q.B.).

34. H.A.R. Construction Ltd. v. DeMerchant Construction [1989] CarswellNB 68 (N.B.Q.B.) 35. Calgary v. Janse-Mitchell Const. Co. [1919] CarswellAlta 156 (S.C.C.) 36. Lembke v. Chin Wing [1912] CarswellBC 208 (B.C.S.C.)

28. Westcounty Construction Ltd. v. Nova Scotia [1985] CarswellNS 124 (N.S.T.D.)

37. 1473587 Ontario Inc. v. Jackson [2005] CarswellOnt 712 (S.C.J.); aff’d at [2005] CarswellOnt 3282 (C.A.)

D.J. Lowe (1980) Ltd. v. Nova Scotia (Attorney General) [1993] CarswellNS 152

38. Union Eagle Ltd. v. Golden Achievement Ltd., [1997] A.C. 514 (Hong Kong P.C.), referred to with approval in 1473587 Ontario Inc. v. Jackson [2005] CarswellOnt 712 (S.C.J.) and in Harris v. McNeeley (1998) 21

Mueller, Warren H.O. “Contractual Exclusion and Limitation of Delay Claims” 47 C.L.R. (3d) 5 (2005) at 4 and 22 (note: page references are to ecarswell).

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R.P.R. (3d) 291; aff’d at (2000) 47, O.R. (3d) 161 (O.C.A.) 39. W.J. Crowe Ltd. v. Pigott Construction Ltd. [1963] CarswellOnt 64 (S.C.C.) Smith v. Johnson Brothers Co. [1953] CarswellOnt 100 (H.C.J.)

Irving Marks is the senior partner of thelitigation group. Irving has extensive experience in all aspects of business litigation in the superior and appellate courts.

W.A. Stephenson Construction (Western) Ltd. v. Metro Canada Ltd. [1987] CarswellBC 675 (B.C.S.C.) Supra, note 4 at 4 and 5.

Barbara Green is a senior associate in the litigation group, focusing on commercial litigation with an emphasis on real property disputes, commercial leasing, condominium

40. Some cases which have considered the effect of a force majeure clause are: Perini Pacific Ltd. v. Greater Vancouver Sewerage & Drainage District [1966] CarswellBC 182 (B.C.C.A.), aff’d at [1967] S.C.R. 189 (S.C.C.) and World Land Ltd. v. Daon Development Corp. [1982] CarswellAlta 131.

litigation, banking litigation and corporate disputes.

Supra, note 2 at 1-66. Supra, note 4 at 5 - 7. 41. Korban Inc. v. Pigott Construction Ltd. [1993] CarswellOnt 825 (Gen. Div.) Supra, note 4 at 15 For further reading on the subject of concurrent delay, please see: Grenier, Glenn. “Evaluating Concurrent Delay - Unscrambling the Egg.” 53 C.L.R. (3d) 46 (2006). 42. [1914] CarswellAlta 165 (Alta T.D.) Grenier, Glenn. “Evaluating Concurrent Delay Unscrambling the Egg.” 53 C.L.R. (3d) 46 (2006) at 8.

provides expertise in all areas of business law including commercial real estate, municipal and property tax assessment, banking and insolvency law, tax law and estate planning, commercial litigation and corporate law.

43. Grenier, Glenn. “Evaluating Concurrent Delay Unscrambling the Egg.” 53 C.L.R. (3d) 46 (2006) at 8. 44. Ibid, at 11

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