Renovation Related Contracts: Agreements with Owners and Subcontractors

For members of the construction industry engaged in renovation work it is critical that agreements with owners be formulated to address two major considerations. Firstly, the contractor will want to have an agreement which addresses essential legal rights of the parties. Secondly, agreements should be written in concise simple language so as not to be intimidating, which may dissuade owners from retaining the contractor. In respect to the content of a Renovation Agreement, there are several topics which should be considered from the Contractor’s perspective.

The following is a summary consideration of some major issues:

Contract Documents:   

a. In this section the parties identify the plans and documents which form specifications of the work, for example, drawings, plans and details.

Description of the Work:

b. In this section there is a description of the work;

c. It is also prudent to describe what is beyond the scope or not included in the work, for the sake of clarity and to avoid disputes in the event of uncertainty;

d. Finally, it is wise to include a statement that any matters beyond the scope of Work are additional or extra to the contract.

Unknown or Unforeseen Conditions:

e. In this section the Agreement deals with the rights of the parties in the event that circumstances are encountered which were not initially anticipated. If these circumstances increase the amount of work and/or materials required, the Agreement should state that these are extra’s and that Contractor has a right to be paid for addressing these issues in addition to the Contract Price. The basis for calculating the additional charges should be indicated (ie. Contractor’s cost plus 10%, a lump sum or etc.). Finally, all such changes and extra’s should be confirmed in writing, as for example, in a Work Change Order, signed by the Owner and Contractor;

Work Change Orders:

f. It is advisable that all changes to the Agreement in respect to the scope of Work, be confirmed in writing. These written confirmations of changes are normally referred to as Work Change Orders, signed by the Owner and Contractor. The reason for this is to avoid disputes after the fact as to whether the change in Scope of Work was extra to the Agreement and therefore resulting in an increase to the Contract Price or if it reduced the Scope of Work and thereby reduced the Contract Price.

Quality, Service and Warranties:

g. A thorough Agreement should indicate what warranties are being offered by the Contractor and their limitations.

Contract Price and Payment:

h. The Agreement should be clear about the total price being charged for the Work;

i. Additionally, the Agreement will specify whether the price is payable in a lump sum or payable in installments, or draws. In any event the contract will indicate the timing when payment is due;

j. Finally, the Agreement will deal with the issue of statutory holdbacks required pursuant to the Construction Lien Act and indicate the due date for payment of the amounts held back upon expiry of the applicable period of time.

Timing:

k. The estimated dates for starting and completing the work will be set out;

l. As there are frequently unanticipated events beyond the control or anticipation of the Contractor, the circumstances allowing for an extension of time to complete should be indicated. For example: labour disputes, unavailability of materials, delays in obtaining permits, natural events such as weather conditions, Unforeseen or Unknown Conditions, etc.

Permits:

m. The responsibility of the Owner and Contractor to obtain governmental approvals and permits required to authorize the work such as: zoning variances, demolition, building and other permits;

n. It is prudent for the Agreement to indicate that the Contractor will not be responsible for the consequences of default in obtaining permits for which the Owner is responsible.

Utilities and Facilities:

o. If the project requires utilities to facilitate the work the agreement will specify whose responsibility it is to provide them such as: electrical, water, sanitary and waste removal.

Other Contractors:

p. In the event that the Contractor is performing work in addition to other contractors retained directly by the Owner, the Agreement will specify who is responsible for coordinating the work of the contractors and the additional amount payable in this respect;

q. Should this situation result in delays, the Contractor may wish to specify an amount of money payable for each day of delay caused by the operation of other contractors on the work site.

Insurance:

r. The Agreement will specify the respective obligations of the Contractor and Owner to provide for different types of insurance coverage, such as third party liability, fire and comprehensive insurance covering the building and renovation work, with details of these coverages.

Disputes/Termination:

s. In the event of a dispute between the parties, the Agreement will indicate the procedure for resolution of different types of disagreements. For example, should the parties attempt mediation and/or arbitration prior to resorting to the courts?

t. The Contractor may wish to specify what circumstances give it the right to cease work and/or treat the contract as terminated.

Owner’s Rights to Cancel:

u. Pursuant to the Consumer Protection Act, owners have certain rights to terminate agreements, of which they should be notified

The foregoing are some important aspects of agreements relating to Renovation work which should be covered by written contracts. Please consult a lawyer for advice about your individual situation. This Article is not legal advice, nor is it intended to be.

Frank Feldman, B.A., LL.B.

Barrister & Solicitor

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