J2007 - Construction Law Report

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Robins Appleby & Taub LLP Suite 2600, 120 Adelaide Street West, Toronto, ON M5H 1T1 (416) 868-1080

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 projects centre, orchestrating the

progress of the project and dealing with all others involved

in the process including:

unit purchasers;

contractors;

lenders;

consultants, which may include architects,

engineers and cost consultants;.

the municipality; and

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

TIME IS MONEYThe Condominium Developers Guide to Delay Claims

BY IRVING MARKSAND BARBARA GREEN

ConstructionLaw Report

KEEPING YOU INF ORMEDJULY 2007


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CONSTRUCTION LAW REPORTTime is MoneyThe Condominium Developers Guide to Delay Claims JULY 2007

Robins Appleby & Taub LLP 2 (416) 868-1080

project costs are sensitive to delays, the developers 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 maycause 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.

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.

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.

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.

The paper addresses the following topics: Where delays can occur in a project:

developer delays

general contactor delays

subcontractor delays

consultant delays

municipality delays

lender delays

Assessing damages in delay claims:

notice requirements

when is a party entitled to damages on

the basis of delay?

the categories of delay:

excusable

non-excusable

compensable

non-compensable

damages arising from delay

foreseeability

additional construction costs

loss of profits

contract limitations

supporting documents

expert evidence

mitigation of damages

Review of some typical terms in construction con-

tracts:

exclusion clauses/disclaimers

penalty claims vs. liquidated damages clauses

time is of the essence clauses

arbitration clauses

implied terms

Defences to delay claims, including:

force majeure clauses

concurrent delay

exclusion clauses

A checklist for success


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CONSTRUCTION LAW REPORT Time is Money The Condominium Developers Guide to Delay Claims JULY 2007


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 ofsuch a project include:

The developer purchases land suitable for the

project.

A concept or design for the project is developed.

The developer obtains the necessary zoning

and development approvals from the municipal

authorities.

Tarion registration.

Unit pre-sales.

The developer obtains project financing.

The project is constructed.

Unit purchasers take interim occupancy.

The condominium is registered.

Final closing.

a) Delays Caused by the Developer

The relationship between a condominium unit purchaserand 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 purchasers

potential claims on the basis of delay.1

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:

excessive changes in requirements or design;

defective or insufficient plans;

the failure to obtain necessary work permits; and

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 developers breach and

may prevent the contractor from later claiming damages

from the developer for delay.4

b) 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 contractors 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:

contractor management and performance

problems;

contractor management and performance

problems;

failure to properly staff the job;


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failure to order materials and equipment in a

timely fashion; and

the unavailability of labour, material or

equipment.

A contractor who incurs additional costs because of its

own delay is not entitled to recover such costs from the

developer.7

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

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 contractors

suppliers is the contractors responsibility as far as the

developer is concerned.10

d) Delays Caused by Consultants

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.

e) Delays by the Municipality

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.

For instance, inAxelrod 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 frequentlyslow.

f) Delays by the Lender

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 latters 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

Assessing Damages in Delay Claims

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.

a) Notice Requirements: A Possible Precondition

to a Damages Claim

Construction contracts frequently require that a specific

form of timely notice be given to the defaulting party as

a precondition to preserving the innocent partys 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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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

b) When is a Party Entitled to Damages on the

Basis of Delay?

A delay can be categorized as excusable or non-

excusable. 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.

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

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 naturethat 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

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 contractors 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

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 partys rights had not been violated.

Typical heads of damage for a delay claim made by a

developer include:

additional construction costs

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

liquidated damages (depending on the terms of

the contract)

diminution of value of the project

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

ii) Additional Construction CostsSince 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 damagesis based on the loss in the value of the land.19

iii) Loss of Profits

Where a contractor can prove that it suffered a loss as a

result of the developers 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 owners

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 contractors 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 Goodfellows Trucking Ltd. v. New Brunswick, the Court

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 thePlaintiff suffered compensable damages as a result of the

delay, and that a particular measure of damages is proper

in the circumstances.

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.

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.

Keep clear and accurate records of all contracts

related to the project.

Maintain detailed accounting records since the

losses will be financial.

All staff involved in the construction project

should keep detailed records of daily events

during the course of construction.

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.

Keep all correspondence, as well as written notes

of discussions.

Any problems related to delays in the

construction schedule should be addressed during


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meetings. Minutes of those meetings should be

circulated to attendees for approval.24

e) Expert Evidence

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.

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 reasonablemanner 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 partys failure to mitigatecould significantly reduce the damages ultimately awarded

to it by the court.27

Tips and Traps of Common Construction

Contract Clauses: Strategies for Examining

Contractual Terms

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 maketime 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.

a) Exclusion Clauses/Disclaimers

Construction contracts frequently contain clauses which

attempt to limit or exclude a partys liability if certain eventsoccur. 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 developers 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 contractors 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

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

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 enforcean 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

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.

Penalty clauses are void and unenforceable because a partycannot 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

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

clause. Further, the developer will likely have to prove that

it suffered actual damages in the amount of the claimed

liquidated damages.35

Liquidated damages provisions for delay in completion are

inapplicable if the contractor never started the work underthe 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.38Therefore, 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.

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.

Further, any arbitration clause contained in the construction

contracts should specifically exclude arbitration where adeveloper 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.

However, these concerns are not usually an issue when

a developer has entered into a General Contract with a


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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).

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.

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 contractors work which

may result in delay in its completion.39

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 ClausesFrustration 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

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

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

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. Forinstance, 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 owners

claim for rent.42

Further, if a party can prove that an excusable but non-

compensable 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


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Proving a concurrent delay may reduce or defeat the delay

claim even when the defending party is not asserting a delay

claim itself.44

c) Exclusion Clauses

Exclusion clauses, also known as disclaimers, are a possibledefence 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;

establish and maintain a project schedule;

maintain records of construction progress;

maintain proper accounting records;

comply with all contractual notice provisions;

act reasonably to mitigate losses; and

be prepared to devote the time, attention and

money necessary to win. Litigation is expensive

and it may end up becoming the developers next

project!

APPENDIX A

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 suchorder 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 Contractors 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


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delays unless such delays result from actions by

the Owner.

6.5.4 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.

6.5.5 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.]

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 appoint-

ment within the 30 day period, within 15

days after either party by notice in writing

requests that the Project Mediator be ap-

pointed.

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

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 ContractDocuments.

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 partys 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


12/14



courts or to any other form of dispute resolution,

including arbitration, which they have agreed to

use.

8.2.8 If neither party requires by notice in writing given

within 10Working Days

of the date of noticerequesting 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

.1 held in abeyance until

(1) Substantial Performance of the Work,

(2) the Contract has been terminated, or

(3) the Contractor has abandoned the Work,

whichever is earlier, and

.2 consolidated into a single arbitration under

the rules governing the arbitration under

paragraph 8.2.6.

Endnotes

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

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.

5. Anderson Industrial Doors Ltd. v. Genstar Construction

Ltd. [1985] CarswellBC 768 (B.C.S.C.)

Supra, note 2 at 5-16

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.


13/14



14. Supra, note 4 at 2 and 3

15. Torbray (Town Council) v. Metro Enrg. & Const. Ltd.

(1980) 30 Nfld. & P.E.I.E. 298 (Nfld. T.D.)

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

17. Ibid, at 6-5

18. Smith v. Tennant (1890), 20 O.R. 180

Can. Foundry Co. v. Edmonton Portland Cement Co.

(1918) CarswellAlta 157

(P.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.)

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

22. Shore & Horowitz Construction Co. & Franki of

Canada Ltd. [1964] CarswellOnt 70 (S.C.C.)

23. [2003] CarswellNB 587 (N.B.Q.B.); affd 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.)

26. W.J. Kenny, Cook Duke Cox (Edmonton-Calgary),

Delay Claims at 41 (source unknown)

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.).

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

D.J. Lowe (1980) Ltd. v. Nova Scotia (Attorney

General) [1993] CarswellNS 152

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).

For a lengthier discussion on this topic, please see this

article at pages 3 and 4 (ecarswell).

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

30. W.J. Kenny, Cook Duke Cox (Edmonton-Calgary),

Delay Claimsat 32 (source unknown)

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.

32. Syncrude Canada Ltd. v. Hunter Engineering Co.

[1989] CarswellBC 37 (S.C.C.)

W.J. Kenny, Cook Duke Cox (Edmonton-Calgary),

Delay Claims at 32 (source unknown).

Some other cases that have considered the effectof 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).

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

(S.C.A.)

Macdonald v. Northwest Biscuit Co. [1924]

CarswellAlta 84 (A.C.A.)

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.)

37. 1473587 Ontario Inc. v. Jackson [2005] CarswellOnt

712 (S.C.J.); affd at [2005] CarswellOnt 3282

(C.A.)

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


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R.P.R. (3d) 291; affd 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.)

W.A. Stephenson Construction (Western) Ltd. v. Metro

Canada Ltd. [1987] CarswellBC 675 (B.C.S.C.)

Supra, note 4 at 4 and 5.

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.), affd at [1967] S.C.R. 189

(S.C.C.) and World Land Ltd. v. Daon Development

Corp. [1982] CarswellAlta 131.

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.

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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