Canada: New And Important Construction-Law Judgment On Claims For Delays And Impact Costs

Quite often, faced with a claim or potential claim for delays and impact costs, stakeholders in the construction industry will ask themselves the following questions: What does "impact costs" mean? Aren't impact costs already included in the cost of each change order? Should I add a notation on change directives and change orders regarding additional delays or impact costs? Alternatively, should I strike out any such notation? A decision rendered on April 10, 2015 by the Quebec Court of Appeal answers these questions. 

Essentially, the decision in Consortium MR Canada Ltée v. Commission scolaire de Laval1 does the following: 

  • Distinguishes the notions of impact costs, administrative costs, and head office costs;
  • Re-affirms the principle that the general contractor must "scrupulously" respect the procedure for changing the contract price;
  • Validates the repeated refusal of the architect in this case to accept the general contractor's notation on change directives and change orders that the "impact costs" generated by the change and the costs associated with additional delays will be dealt with separately at a later date. 

The facts of the case were as follows. For every change order involving the construction site at issue, the procedure followed by the parties was always the same: the architect sent the general contractor change directives; the contractor responded with change requests as per the terms of the contract; on each such request, the general contractor made a notation to the effect that its quoted price did not include the "impact costs" generated by the change, or the costs associated with additional delays, which would have to be dealt with separately at a later date. Upon receiving the change request, the architect would strike out the notation added by the general contractor and add one to the effect that such costs were already included in the contract. The architect and the general contractor would then negotiate a revised price and a new deadline for completion of the work. Once that was finalized, the change order was prepared and sent to the general contractor, who once again would make a notation on it to the same effect as those on the change requests and return it to the architect, who once again would strike out the notation and add "inadmissible – all costs included". In each case, the general contractor and the project owner agreed on the price of the work asked by the change order, except for the additional costs referred to in the notations made by the general contractor. The dispute over those costs was what the Court of Appeal had to decide. The cause of the additional delays was not at issue on appeal; it was settled that they had been caused by the owner.  

The Court of Appeal first of all legally distinguished impact costs, administrative costs and head-office costs, which are often claimed en bloc in such cases, and were claimed in a somewhat jumbled fashion by the general contractor in this instance. Impact costs were stated to be additional costs impossible to associate with a particular change but rather with the repercussions of a change or series of changes on the rest of the project, such as additional costs inevitably incurred in winter. In our view the term "impact costs" creates a lot of confusion. For they are nothing more – or less – than a combination of indirect costs associated with one or more changes. Normally a general contractor should be able to evaluate such costs when negotiating the change(s), although that may not be possible in some special circumstances (such as a major change that has a severely disruptive effect on the construction site or a huge series of changes whose impact is difficult to evaluate during the negotiations regarding them). As for administrative costs, they are not to be confused with head-office costs. The former are fixed costs incurred by the general contractor in order to keep a construction site operational. The latter cannot be associated with any one particular site but are incurred for the operation of the enterprise as a whole. 

The Court then went on to robustly reaffirm the principle of the immutability of the respective obligations of the parties to a fixed-price contract and, in turn, the principle whereby the general contractor must "scrupulously" respect the procedure for changing the contract price. In this particular instance the costs claimed that were in the nature of administrative costs were known to the general contractor when it negotiated the revised price and therefore should have been included in the prices quoted on the change requests and subsequently on the change orders. The architect was thus fully justified in systematically striking out the contractor's repeated notations to the effect that these administrative costs would be claimed at a later date. 

In conclusion, as the Court itself conceded, the principles applied in this case are not automatically transferable to other cases, given the extent to which contractual provisions on changes to construction projects can vary. The Court nevertheless arrived at conclusions similar to those in an earlier landmark decision in this regard (Développement Tanaka Inc. v. Corporation d'hébergement du Québec, 2011 QCCA 1278), despite the fact that the respective contractual clauses at issue were quite different. In other words, the Court of Appeal seems to be sending the following message: the principles it has established in this case will sometimes be transferrable to other such contracts.

Footnote

1. 2015 QCCA 598

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions