Canada: Claims For Additional Work: The Consequences Of Failing To Follow Contractual Requirements

Structural problems were noted in a building in the city of Trois-Rivières belonging to the Corporation d'hébergement du Québec (the "CHQ") (now known as the Société québécoise des infrastructures) that required remedial work consisting of driving new piles and raising the building. The CHQ issued a call for tenders and eventually awarded the fixed-price construction contract to general contractor Aecon. The latter entered into a subcontract with Consortium Bisson-Prétech ("CBP") for driving the piles and raising the building. The owner had retained the services of engineering firm CIMA+ to draw up the plans and specifications that were included in the call-for-tender documents.

Shortly after the work began, CBP identified certain problems that prevented it from underpinning and straightening a stairwell as specified by CIMA+.

A workaround solution was devised by CBP's engineers, who consequently drew up new plans. These were sent to the engineers of CIMA+, who authorized the workaround. Due to the urgent nature of the work, it wasn't until the raising operation was completed that a detailed explanation of the modification to the contract and the additional costs it entailed was sent to Aecon, who in turn sent it to the building's owner, CHQ. The latter refused to pay any additional amount for the workaround.

On July 14, 2015, the Superior Court of Québec ruled on the validity of the claim for the additional cost of the workaround, in light of the fixed-price contract between the building's owner and the general contractor1.

The Court first of all expressed the view that Aecon had demonstrated that the pile-driving work, as specified in the plans prepared by CIMA+, was not feasible. While the price under a fixed-price contract is in principle unchangeable, the call-for-tender documents must not contain any error that would have a determinative impact on the calculation of the bid price. The caveat that "all risks are assumed by the contractor" and the latter's obligation to adequately inform itself are counterbalanced by the representations made by the project owner, and especially by its obligation not to misrepresent the risk assumed by the contractor. The Court thus recognized that inaccuracies in the plans and specifications can mislead a bidder and are grounds for claiming additional costs. The contractor is entitled to expect that the plans and specifications can be relied on and that the work is feasible. Aecon's claim for the additional work was thus well founded.

That being said, the Court noted that the contractual procedure agreed to by the parties must be respected. For as the case law recognizes, when the contract contains provisions on how to proceed, it is important that they be respected. However, the Court quoted from legal commentators who point out that certain exceptional circumstances can trigger the application of the theory of express or implied waiver of the obligation to follow the procedure specified in the contract. That theory was applied in this case, where the conduct of the parties was indicative of an adaptation to the changed requirements of the contract. While the clauses of the contract were not followed to the letter, the evidence showed that the parties wanted to be more "practical" by adapting to the new realities faced on the construction site. In any event, it appears that the project owner had been informed, both orally and in writing, that the work could not be performed as specified in the plans. Moreover, the Court noted that the call-for-tender documents did not specify how such a problem situation, once identified by the contractor, was to be brought to the project owner's attention.

In this regard the Superior Court's decision sets itself apart from the Court of Appeal's recent decision in Consortium MR Canada ltée v. Commission scolaire de Laval2, in which the Court ruled on a claim for indirect costs, in the nature of general site expenses, incurred by a contractor under a fixed-price contract. The Court denied the contractor's claim, because it had failed to follow the procedural formalities set out in the contract. Basing itself on its decision in Développement Tanaka inc. v. Corporation d'hébergement du Québec3, the Court reiterated that the cardinal rule with fixed-price contracts is that the respective obligations of the parties are immutable, subject to the strict application of clauses in the contract that allow changes to be made to the work to be performed and to the contract price4.

The issue of contractual changes requiring additional work is much debated in construction law circles. To minimize litigation risks, it is critical that the provisions of the contract be scrupulously respected. While the procedure specified in the contract may appear cumbersome, its formalities may become your closest ally in the event of a dispute.

Footnotes

1. Groupe Aecon Québec ltée v. Société québécoise des infrastructures, 2015 QCCS 3478

2. 2015 QCCA 598

3. 2011 QCCA 1278

4. Supra., note 1, par. 33

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