CONTRACTS

What is a contract?

A legally enforceable agreement, a promise or set of promises recognized by law with a remedy for breach

Required elements of a contract

Offer, acceptance, consideration

What is an offer?

A clear and definite promise capable of acceptance

What is acceptance?

Unconditional agreement to the exact terms of an offer

Can silence be acceptance?

No

What is consideration?

Something of value exchanged between parties

What is an express contract?

A contract stated in words, written or oral

What is an implied contract?

A contract inferred from the conduct of the parties

What is a written contract?

A contract recorded in written form

What is an oral contract?

A verbal contract that may be legally enforceable

What is a unilateral contract?

A contract accepted by performance only

What is a bilateral contract?

A contract formed by exchange of promises

What is privity of contract?

Only parties to a contract have rights and obligations under it

Project delivery method

A method used to organize design and construction responsibilities on a project

Design-Bid-Build

A project delivery method where design is completed before construction is tendered

Construction Management

A project delivery method where a construction manager coordinates trade contractors

Design-Build

A project delivery method where one entity is responsible for both design and construction

Integrated Project Delivery (IPD)

A collaborative project delivery method with shared risk and reward

Stipulated price contract

A fixed-price contract where the scope and quantity of work are defined in advance

Cost plus contract

A contract where the owner pays actual costs plus a stipulated fee or percentage

Unit price contract

A contract with fixed prices per unit of work when quantities are uncertain

Guaranteed Maximum Price (GMP)

A cost-plus contract with an agreed maximum price limit

Canadian Construction Documents Committee (CCDC)

The committee that produces standard construction contract documents in Canada

Purpose of CCDC contract documents

To fairly allocate risk and define the rights and responsibilities of the parties

Three main sections of a CCDC contract

Articles of Agreement, Definitions, General Conditions

Articles of Agreement

The section of a CCDC contract that contains project-specific information

Definitions

The section of a CCDC contract that defines capitalized terms used throughout the document

General Conditions

The section of a CCDC contract that defines standard rights and responsibilities

CCDC 2

The standard stipulated price contract between an owner and a contractor

CCDC 3

The standard cost-plus contract between an owner and a contractor

CCA 1

The standard stipulated price subcontract between a contractor and a subcontractor

CCDC 14

The standard design-build stipulated price contract

CCDC 5A

The construction management contract where the construction manager acts as the owner’s agent

CCDC 5B

The construction management at-risk contract

CCDC 17

The stipulated price contract for trade contractors on construction management projects

CCDC 30

The integrated project delivery contract

Four phases of a building construction project

Design, Tendering, Construction, Project Turnover

Phase when owner and consultant contract is signed

Design phase

Phase when project is put out to tender

Tendering phase

Phase when contractor bids are opened and evaluated

Tendering phase

Phase when construction begins

Construction phase

Phase when change orders are typically issued

Construction phase

Phase when substantial performance is achieved

Construction phase

Phase when owner occupies the building

Project Turnover phase

Phase when construction deficiencies are corrected

Project Turnover phase

Legal principles of tendering

The legal requirement that the tendering process be fair and treat bidders equally

What must be protected in the tendering process?

The integrity of the tendering system

Owner obligation in tendering

To treat all bidders fairly and equally

What is prohibited in tendering?

Giving any bidder an unfair advantage

Contract A

The binding bidding contract formed when a compliant bid is submitted

Contract B

The construction contract formed when a bid is accepted

Which case established Contract A and Contract B?

Ron Engineering v Ontario

Significance of Ron Engineering v Ontario

Submitting a compliant bid creates Contract A

What obligation does Contract A impose on the owner?

To treat all bidders fairly and equally

Privilege clause

A clause allowing the owner to accept or reject any or all bids

Limit of privilege clause

It cannot override fairness or allow secret preferences

What is a compliant bid?

A bid that meets all mandatory requirements of the tender

When is bid validity assessed?

At the time the bid is submitted

What happens if a bid defect is more than a minor irregularity?

The bid is invalid as a matter of law

Request for Expression of Interest (RFEI)

A process used to assess market interest

Request for Qualification (RFQ)

A process used to assess bidder capability

Request for Proposal (RFP)

A formal bid request outlining scope and evaluation criteria

Key elements of a fair tender process

Clear solicitation, due diligence, and fair selection

Bid closing requirement

A fixed time and place for tender submission

Bid irrevocability

A requirement that bids remain open for a set period

Bid bond

Security guaranteeing the seriousness of a bidder

Consent of surety

Agreement by a surety to issue performance and payment bonds

Subcontract

A contract where a contractor assigns part of the work to another party

Who remains responsible for subcontracted work?

The contractor

Assignment

The transfer of contractual rights with consent

Can obligations be assigned?

Generally no, without consent

Agency

A relationship where one party is authorized to act on behalf of another

Express authority

Authority clearly granted by the principal

Implied authority

Authority inferred from prior actions

Apparent authority

Authority perceived by third parties

Agent of the owner

The role of the consultant in a standard construction contract

Consultant impartiality

A requirement that the consultant not favour either the owner or the contractor

Consultant’s role under CCDC

To act as the owner’s agent

Primary duties of the consultant

Contract administration, review of work, and payment certification

What the consultant reviews during construction

Work for compliance with the design

What must the consultant provide for payment

Certificates for payment

What must the consultant not do

Supervise construction or control site safety

Is the consultant responsible for contractor failures?

No

How is the consultant protected under CCDC?

Decisions are based on observations, not perfection

Negotiation

Dispute resolution without third-party involvement

Mediation

A non-binding dispute resolution process with a third party

Arbitration

A binding dispute resolution process decided by a third party

Litigation

Resolving disputes through the court system

Alternative dispute resolution (ADR)

Methods of resolving disputes outside of court

Which case clarified owner discretion in accepting bids?

MJB Enterprises v Defence Construction

What did MJB Enterprises establish?

Owners must accept only compliant bids unless privilege clause allows otherwise

Which case dealt with ambiguity in tender pricing?

Vachon Construction v Cariboo Regional District (1996)

Issue in Vachon v Cariboo

Discrepancy between written and numeric bid price

Court ruling in Vachon v Cariboo

Bid invalid due to ambiguity

Which case involved correction of arithmetic error?

Foundation Building West v City of Vancouver (1995)

Outcome of Foundation Building West

No breach of fairness, claim dismissed

Small Claims Court monetary range in BC

Claims between $5,001 and $35,000

Types of claims in Small Claims Court

Debt, damages, breach of contract, recovery of personal property

What happens if a party misses a settlement conference?

The judge may make an order or dismiss the claim

First step in a Small Claims trial

Opening statement by the claimant