March 1, 2013

This month features steps you can take, from contract negotiation through counsel retention, to be better prepared and protected in the event a dispute arises that cannot be solved without litigation.

Who is your customer?
Know with whom you are contracting. “John Doe Construction” has no meaning: it is either John Doe, or a partnership, or corporation. If you are dealing with a corporation, make sure you have the full corporate name. If you are concerned the person you are contracting with doesn’t own the land, or might not have any equity in the land, consider a title search. This can be important if you believe you might eventually have to pursue a claim for lien.

Contract tips
Make sure your contractual scope of work describes your work accurately and is as detailed as possible. Most disputes in construction arise over what is, and is not, a “change in the work.” In the residential context, make sure your contracts comply with any applicable consumer protection legislation.

Where you are a subcontractor, know whether or not you are required to perform your work in accordance with the “Prime Contract” between the Contractor and the Owner. If so, obtain a copy of, and read, that Contract — preferably before you agree to a price for your work. Make sure, so far as is possible, that your subcontractors agree to be bound by the terms of the contract you have with your client. You want them to play by the same rules you do with respect to notices, changes in the work, obstructions, delays, etc. You want to avoid a “gap” in the allocation of risk.

Avoid the “battle of the contract documents” where both parties believe it is their form of contract or subcontract that governs the relationship between them. (This happens all the time: the subcontractor submits a bid with his qualifications, terms and conditions, and the contractor awards on the basis of the contractor’s form of subcontract. Often, no document is actually signed between the parties).

Have a copy of your contract or subcontract at hand through the performance of the work, so that you can meet notice and other contractual requirements in the event of a dispute. In this way, you can (with any luck) eliminate a number of arguments before they are raised.

Mind the extras
If it appears you may want additional compensation for any particular item or event, check your contract and meet any notice requirements in that regard. Some contracts require notice to be provided much earlier than you might otherwise believe. With additional compensation requests for any particular item or event, change, or recordkeeping, be sure to keep detailed timesheets and field records in relation to the issue. Backup to the quantum of your claim, be they invoices, timesheets, lead letters for labour rates, etc., should be attached to whatever other documents might support your claim (such as approvals, notices, correspondence, etc.).

If it appears someone might seek additional compensation from you, keep the same detailed records. Pulling together these documents when the matters at issue are fresh in your mind will save you time, aggravation and (probably) money at the end of the day.

The paper trail
Whatever you write in relation to a project — letters, emails, internal correspondence, field notes, etc. — should be written as if a judge will read them. Avoid self-incrimination and inflammatory language. Make sure all your employees diligently put all emails relating to a project into a single folder. This way, if litigation arises, the emails can be produced to counsel with a few clicks of a mouse. Otherwise, you, your employees, or your lawyers will have to spend hours and hours going through hundreds or thousands of emails to try to pull out the ones that relate to the project. Even then, you might not catch them all and a negative inference might be drawn against you at trial.

Safety policy is a must
Have an occupational health and safety policy. Update that policy regularly and ensure your employees are properly trained in relation to same. In addition, have a process in place to ensure your occupational health and safety policies are actually being followed. Where transgressions are noted, document them and strictly impose graduated discipline to make sure they don’t occur again. Also, where transgressions are noted, revise your policy to speak directly to the issue in future training.

Timing is everything
Understand the time frames that govern the preservation of a claim for lien in your jurisdiction, and don’t leave the preservation until the last moment. Seek legal advice early. If you are working on a condominium or subdivision project, keep in mind that your lien rights will probably be lost as the condominiums or subdivision lots are turned over to new home buyers. Again, seek early legal advice in that regard.

Take care in negotiating additional compensation to keep those negotiations “without prejudice.” If your claim is for $100,000, but you are willing to take $75,000 to settle the issue, making your communication “without prejudice” will retain your ability to pursue $100,000 in the event a settlement cannot be reached.

Consult qualified legal counsel early
If someone gives you notice that a claim of negligence against you or your company may be forthcoming, get legal advice early. First, any steps you take to negotiate or address the issue might prejudice your insurer such that insurance coverage can be denied. Second, you may want any communications or assessments that you undertake in relation to the issue to remain privileged. In Canada, this privilege can most easily be protected if counsel is involved. Litigation privilege might be also established where the dominant purpose of the communication is preparation for litigation — a privilege which your advisors can assist you to establish.

Because litigation can be expensive, explore settlement possibilities early. Because construction litigation can be complex and specialized, consider retaining counsel with expertise in the area.

And finally, keep doing what you are doing! Take advantage of resources like Landscape Trades, CNLA and others that can assist in risk management.

Robert Kennaley has a background in construction and now practises construction law in Toronto and Simcoe, Ont. He speaks and writes regularly on construction law issues, including in his blog: Rob can be reached for comment at 416-368-2522, at, or on LinkedIn. This material is for information purposes and is not intended to provide legal advice in relation to any particular fact situation. Readers who have concerns about any particular circumstance are encouraged to seek independent legal advice in that regard.