When parties to an agreement negotiate, sign, then shelve the Contract until the end of the Project, they do so at their peril. Many standard construction contracts include provisions requiring notice of intent to claim delays, extra costs and disputes with findings. These often have strict time periods that, depending on the facts of the situation, will be enforced by the Courts.
In Newton Mechanical/Electrical Inc. v. NDL Construction Ltd., a recent 2019 decision of the Manitoba Court of Queen’s, the Judge directed that the impact of notice provisions on the claims of the parties was an issue that should be determined on a preliminary basis.
The dispute in question arose from the construction of a new school in northern Manitoba. The plaintiff was the mechanical and electrical subcontractor. The defendant was the general contractor. The project was approximately one year delayed and the parties blamed each other. Following substantial completion, the general contractor sent the subcontractor a proposed change notice for costs it incurred as a result of the delays it alleged were attributable to the subcontractor. The bulk of the claim related to the cost of room and board for its personnel beyond the expected completion date. In response, the subcontractor advanced its own claim for extras attributable to the delays occasioned by the general contractor and the owner.
The issue to be determined was whether the delay claims of both parties should be dismissed on the basis that insufficient notice and/or lack of supporting information was provided.
In the decision, the Judge reproduced the applicable notice provisions of the Contract. It appears the parties had agreed to use the Canadian Construction Association (CCA)’s standard form “Stipulated Price Subcontract.” Those provisions, much like other CCA or Canadian Construction Documents Committee (CCDC) contracts, required timely Notice in Writing of the intent to claim. They also require that upon commencement of the event or series of events giving rise to the claim, the party intending to make a claim take all reasonable measures to mitigate any loss or expense incurred as a result of the event or circumstance, and keep records necessary to support the claim. After the initial notice, a party is required to submit, within a reasonable time, a detailed account of the amount claimed and the grounds upon which the claim is based.
The subcontractor argued that the general contractor’s proposed change notice given after substantial completion and seeking a claim for delay stemming back almost two-and-a-half years, was barred. Not only did the notice not comply with the contractual requirement that it be timely; the delay also resulted in the lost opportunity to claim credits to the Contract price. The general contractor argued that it had provided sufficient notice in an email well prior and that the subcontractor was aware of the dissatisfaction with the progress and the adjustments that would be made at the end of the job. The general contractor argued that it could only finalize its claim after substantial completion.
The Judge reviewed the law in Canada and commented that Courts have applied varying levels of strictness to the application of notice provisions. The Judge further commented that where parties to a Contract agree to a specific time period, it should be expected that a Court will be more likely to apply the clause strictly. However, where parties use more open-ended words such as “timely notice” or “within a reasonable time” there may be greater latitude to “do justice” between the parties. Finally he noted that the trend in construction matters involving notice, based on his review of the law, is to enforce the provisions the parties freely agreed upon, even if they may ultimately prove to be onerous.
After reviewing the specific facts of the case, the Judge decided that the general contractor’s claim for the room and board costs was barred by the provisions of the Contract. The decision found that the general contractor was aware of the specific costs it was incurring well before substantial completion and its failure to give the notice deprived the subcontractor of a meaningful opportunity to deal with the concerns. Other claims of the general contractor were allowed to proceed, but those claims required a further evidentiary foundation of all relevant circumstances to determine if the notice provided was within a “reasonable time”. Because the subcontractor’s claim resembled simply a “reaction” to the claim by the general contractor and did not meet the provisions of the Contract, it was also barred.
This recent Manitoba case provides a timely and sober reminder of the potential impact of notice provisions. Although consideration will be made of all relevant factual circumstances and the specific provisions in the Contract, it should be expected that a Court will enforce the contractual agreement reached between the parties, even if it may be onerous.
The lawyers in the construction law group at MLT Aikins have the experience and knowledge to assist you in drafting, interpreting, resolving or litigating disputes relating to all manner of construction contracts.
This article first appeared in Build Manitoba, a publication of the Winnipeg Construction Association.
Note: This article is of a general nature only and is not exhaustive of all possible legal rights or remedies. In addition, laws may change over time and should be interpreted only in the context of particular circumstances such that these materials are not intended to be relied upon or taken as legal advice or opinion. Readers should consult a legal professional for specific advice in any particular situation.