Publications
January 2015

The importance of notices in construction contracts

By Kathleen Désorcy Lawyer

In Projets V.G. inc. vs. Groupe Lessard inc., (2014 QCCS 5018), the Superior Court of Québec dismissed a subcontractor's claim in the amount of $120 000 for monies owing under the contract and additional work, and confirmed the general contractor's right to terminate the contract with the subcontractor. Indeed, the Court ordered the subcontractor to pay $38 000 to the General contractor for incomplete and defective work.

FACTS

In this case, Groupe Lessard inc. (hereinafter Lessard) awarded a fixed-price contract of $155 000 to Projets V.G. inc. (hereinafter VG) to install new windows in a building belonging to McGill University. The contract stipulated that the work was to begin on May 30, 2011, and end in September 2011.

In late August 2011, however, the work was far from complete and VG had still not installed the windows on six of the building's twenty floors. As justification for the delay, VG claimed that Lessard was late in paying invoices and delivering the materials it had agreed to provide and that some of the windows were the wrong size, making them difficult to install and requiring additional work. Lessard, in turn, argued that VG had failed to properly carry out the work and that the delay was solely attributable to VG. In fact, the defects led Lessard to terminate VG's contract in early October 2011.

When the contract was terminated, VG initiated legal proceedings against Lessard, claiming $120 000 for contract and additional work. Lessard then counter-claimed for an amount of $80 000 as damages incurred for corrective works and work that VG had failed to carry out before the contract was terminated.

VG'S CLAIM

Following a review of the evidence, the Court determined that VG's claim was inadmissible since the fixed-price contract stipulated that any changes to the work, price increases or extra work hours were only valid if they were ordered in writing by Lessard or set out in a written agreement between the parties. VG did not submit any documents confirming an addition or amendment to the contract or granting extra hours. VG had presented delivery slips and shop drawings to prove that there had been modifications to the contract but the Court did not accept this as evidence of any modifications to the contract. After reviewing the caselaw, the Court declared that the terms and conditions of the contract pertaining to modifications to the work must be interpreted in a restrictive manner. To succeed, it was therefore incumbent upon VG to adduce evidence that there had been a contract amendment either ordered by Lessard or otherwise established in another agreement, which VG had failed to do.

Furthermore, in order to successfully claim that VG incurred damages as a result of delays caused by Lessard, VG was required to prove that these delays were not attributable to its own actions, which it also failed to do. Finally, the evidence provided by VG did not indicate that the delay was caused by the late delivery of materials, nor that the windows delivered were of the wrong size. In fact, after VG left the site, the materials which were claimed to be missing were found and the Court concluded that the delay was instead caused by poor work organization and execution on the part of VG.

TERMINATION OF VG'S CONTRACT AND CLAIM BY LESSARD

Based on the evidence, the Court determined that Lessard was entitled to terminate VG's fixed-price contract due to the delay and numerous inadequacies. In fact, Lessard had prepared a prototype and technical drawings to facilitate the installation of the windows. It became apparent that VG had not followed Lessard's recommendations with respect to the installation methods. Moreover, the deficiencies which were observed indicated that there were several problems with the installation, and leak tests carried out on the windows failed. In the end, Lessard was justified in its termination of the contract considering that, even after receiving the notice of default, VG never confirmed its intention to correct the problems and instead disputed the validity of Lessard's claims.

With respect to the amount that Lessard was entitled to after terminating the contract, the Court denied certain sums claimed for work carried out by Lessard while VG was still on the site, before it received the notice of default to complete the work. Contrary to Lessard's claims, the fixed-price contract stipulated that VG was to be notified in writing of any deficiencies that it was responsible for. Therefore, the Court refused to award an amount of $35,000 for the abovementioned reasons, and given Lessard incurred a sum of $193 000 to complete and correct the work carried out by VG and that the fixed-price contract was in the amount of $155 000, the Court awarded Lessard the difference in damages: $38 000.

With these considerations in mind, it is imperative that general contractors and subcontractors comply with the terms and conditions of their construction contract, such as required prior notices when a party wishes to assert a claim following a change in the nature of the work initially agreed upon or notices of default that allow the other contracting party to remedy its defaults. In fact, failure to remit such notices may be fatal when asserting a claim with respect to the construction contract.