record keeping for disputes table of...

RECORD KEEPING FOR DISPUTES

TABLE OF CONTENTS

INTRODUCTION

II. HOW TO AVOID AND DECREASE DISPUTES

A. CONTRACT DOCUMENTSB. PREPARATION OF THE BIDC. DEALING WITH DISPUTES - AVOIDING DELAY

III. DOCUMENTING DELAY

IV. EXTRAS AND CHANGES

V. PREPARATION FOR A CLAIM

VI. RIGHT TO INFORMATION

VII. OBTAINING COMPLETION CERTIFICATES

APPENDICES

- Sample Letter of Request for aCertificate of Substantial Performance

- Certificate of Substantial Performance(Prescribed Form)

- Sample Certificate of SubstantialPerformance

- Notice of Change- Supplementary Instruction Form- Supplementary Contract Conditions- The Builders Lien Act, SSe 3, 41, and 85

(as amend~C!)

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RECORD KEEPING FOR DISPUTES

I. INTRODUCTION

Whether you act for an owner, contractor or subcontractor,

adequate records are essential to prove your case. In many

respects the suggestions contained herein would be more

appropriately given to the parties prior to the tender being

prepared. It is included in these materials so that those

lawyers fortunate enough to have contact with their client

before the tender process begins will be able to advise

their clients of the types of records which may become

useful in proving or defending a claim at a later date. In

addition, since many contractors and subcontractors alread~

have some sort of record keeping system in place, this

material should assist lawyers in asking their clients or

other parties at discovery for the types of records which

one would hope to find. Of course, there is no exhaustive

list of the types of records which will assist in any

particular- action ~.. -

II. HOW TO AVOID AND DECREASE DISPUTES

A. CONTRACT DOCUMENTS

Disputes are more likely to arise in situations where

inadequate contract documents have been executed.

If you are fortunate enough to be consqlted by an owner

prior to the tender process, you should ensure that the

owner is satisfied that the bid documents reflect what will

be required to produce the desired result. If the owner has

not employed an experienced consultant (engineer) to

represent him, you should recommend that one be employed.

The bid documents should include:

(i) The Tender Form (inclUding instructions to bidders);

(ii) The proposed contract;

(iii) All specifications for the work including the workschedule, drawings and the list of specific productsto be used (manufacturer and model· number ifpossible).

Most contractors are familiar with the standard form

contract documents pUblished by the· Canadian Construction

Documents committee (CCDC). These documents are available

at a nominal cost from the Saskatchewan Construction

Association. If you wish to alter the terms of the standard

contract document; it-may be in everyone's best interest to

do such alterations by adding a list of supplementary

conditions to the contract document. This will draw the

contractor's attention to the changes you require.

During the tender period owners or their consultants will

often be asked for clarifications to the specifications.

The consultant will reply to the questions posed and should

send a copy of all questions and answers -to each contractor

bidding on the job.

Page 3

These questions and answers are

.'

referred to as "Bid Clarifications" and are usually numbered

sequentially. contractors should retain copies of each of

the Bid Clarifications received and the date they were

received. Similarily, the consultant may issue amendments

to the specifications. These are usually numbered

sequentially

contractor.

and copies should be retained by the

Many disputes arise from a misunderstanding of the

contractor's scope of work. This is especially so on very

large projects where the owner may contract directly with a .-

number of "general" contractors for different phases of the

work. The first source of information to resolve such

disputes is the tender documents, including the Bid

Clarifications and amendments.

There is no subst!tute for clearly defined specifications

but even the most careful consultant may overlook some

particulars which can cause problems during performance of

the contract. In order for a contractor to protect himself

and avoid potential disputes later, the preparation of the

tender should begin as early as possible so that there will

be adequate time to submit any requests for clarifications

to the consultant. If the contractor submits a request for

a bid clarification the day before the tenders close, the

consultant may refuse to answer the questions since

providing the answer at such a late date may prejudice other

bidders •..

B. PREPARATION OF THE BID

After the contractor prepares a bid he should retain all of

the working documents used to arrive at the price. These

documents should include the price of materials, labour

requirements (including the work to be performed by each of

the trades), the cost of labour, a schedule of the work

including when the various trades are expected to be

employed on the site and the contractor's "mark up" and

fixed cost or administration cost allowance. This

information will prove to be invaluable from a number of

perspectives if a dispute arises. It should establish the

scope of work contemplated by the contractor when preparing

the bid and will ~ssist with the calculation of damages at a

later date if required.

It will also assist the contractor in clearly stating his

position when a dispute arises with respect to the scope of

work. The same recommendations apply equally to

subcontractors.

e.DEALING WITH DISPUTES - AVOIDING DELAY

Since timing is critical on most construction projects it is

essential that disputes be resolved as quickly as possible.

For example, if a contractor or subcontractor insists that

certain work is not his responsibility to perform or insists

that the work should be performed .ina manner other than

that contemplated by the consultant, delays may occur while

the dispute is being resolved. Such delays may affect not

only the contractor, the subcontractor in question, and the

owner, but may also affect the ability of other

subcontractors to perform their work on time.

The general contractor's principal responsibility is to

coordinate the work so that the project is completed in the

time specified. The eeDe contract documents provide that

when a dispute arises which cannot be resolved promptly, the

consultant will ..give the necessary instructions to perform

the work immediately. The parties are then required to

perform the work according to the instructions and by doing

the work they will not jeopardize any claim they may have if

the instructions are in error or at variance with the

contract documents. The objective is to keep the work

moving ahead to completion.

Each of the parties involved in a dispute ~hould state their

position as clearly as possible, with reference to the

contract documents, at the earliest possible time. The

first contact is invariably verbal. The parties should make

a record of any discussions and summarize their own

positions and their understanding of the positions of each

of the other parties. They should then provide a written

statement of their position to the other parties.

If the contract documents do not contain a clause providing

for immediate performance of the...disputed work and deferral

to later settlement or arbitration, agreement in writing to

that effect should be obtained.

The instructions given by the consultant or general

contractor for the performance of the disputed work should

be given in writing. If they are not, the party performing

the work should make a record of the instructions and give a

copy to th~ consul~ant or general contractor, as the case

may be, as soon as possible and preferably before commencing

the work. This will decrease the likelihood of a further

dispute with respect to the work to be performed.

The contractor or subcontractor should make a record of the

date the work was commenced and completed, the labour and

materials employed to complete the work including the trades

employed and the time spent completing the work. This

information can be used to quantify any claim for extra work

at a later date.

In addition to the cost -to the contractor, or sUbcontractor,

of performing the work, additional costs may arise. For

example, the contractor or subcontractor in addition to

recording the cost of the additional work should also record

any effect that the extra work has had on completion of

other parts of his contract or subcontract. For example,

consider a situation where a concrete subcontractor is

expected to complete a concrete floor within a specified

time. When the concrete subcontractor arrives, a dispute

arises with respect to the amount of reinforcing steel to be

used. Adding the additional reinforcing steel may not

require that additional labourers be employed to install it

but ~he extra time taken to install it may require that the

concrete finishers start later and work overtime or that

additiona~ finish.~s need to be hired to finish the floor on

time. On the face of it, no delay has occurred. However,

additional costs have been incurred.

If the subcontractor has a record of the number of finishers

and- the time estimated to do the work upon which he based

his bid, his claim for additional labour cost is more easily

quantified thereby decreasing the likelihood of a dispute

regarding the cost of the additional work if the additional

· '

reinforcing steel is found to be extra to the original

contract. Payroll records will serve to document the labour

cost and, invoices for materials and rentals will provide the

basis for an increased material cost claim. Such information

is invaluable to the lawyer whether the dispute goes to

arbitration or to court. If the subcontractor does not have

a record of the cost assumptions upon which he based his bid

price, his increased cost must be determined by reference to

what would be reasonable if the change had not occurred. Of

course, the subcontractor's cost assumptions can. always be

attacked as being unreasonable but since the bid was

accepted it might be difficult to dispute that the initial

price and the assumptions underlying it were unreasonable.

Records of the productivity achieved by the contractor or

subcontractor on previous similar jobs can also assist in

supporting the reasonableness of the assumptions underlying

the price.

III. DOCUMENTING DELAY

Delay can arise from a number of events or combinations of

events. These include delays caused by materials not

arriving on time, changes or extras to the contract,

drawings not being available when required and failed

coordination. An example of failed coordination would be

where the concrete floor referred to earlier was not

completed in the specified time thereby preventing machinery

from being installed when required which might further delay

electrical contractors, finishing carpenters, and other

trades. Failed coordination may also arise where the

consultant refuses to accept the work of a subcontractor and

the subcontractor takes extra time to rectify the work

thereby preventing others from proceeding.

From the owner's perspective delay in substantial completion

will prevent the utilization of the building or structure at

the time anticipated. such delay may give rise to loss of

profits, extra rental charges at the owner's present

location or increased financing charges caused by the

inability to complete the sale of his former premises, to

name a few.

From a contractor's or subcontractor's point of view delay

may increase l~~our costs, equipment rental costs or

administrative costs and may even result in the loss of

opportunity to move to another unrelated job in a timely

manner.

If the contract and subcontract schedules clearly specify

the date upon which work is to be commenced and completed,

there is rarely a question of whether or not a delay

occurred. The question is who caused it and what effect it

had on the parties.

In order -to assist in identifying the cause of any delays

the contractor's or subcontractor's job supervisor should

keep a daily log of activities on the job site. The log

should contain,

- the project identification (site, contract number, etc.)

- the date

- the weather

- the manpower and equipment on site

- the work performed

- discussions with others including the names of thosepresent

- other trades on site and work being performed by them

- delays, including reasons for the delays and the workaffected.

Often the general contractor will hold weekly or other

periodic meeting, at which all of the subcontractors are

present. The minutes of the meeting will be taken and

distributed later. Since they have a wide distribution, the

contents of the minutes may carry more weight than the

contractors or subcontractor's notes of the meeting. For

this reason, minutes of project meetings should be reviewed

as soon as they are received in order to ensure that they

accurately reflect the discussions and agreements at the

meeting. If the minutes and handwritten notes taken at the

meeting are inconsistent in any way, the person who prepared

the minutes should be advised in writing of the

inconsistency and the note should be attached to the minutes

in the job file.

Minutes of project meetings and your client's notes of the

meeting are a valuable source of information for resolution

of disputes arising out of delay. The minutes will serve to

outline the flow of the job and often the source of delays

will be recorded. One frustrating thing about minutes of

project meetings is that they are rarely written in complete

sentences and often use abbreviations with which you may not

be familiar. Your client's notes of the meeting may help

but often the only thing that can be done is ask your client

to review the minutes with you.

In addition to the daily log and contract meeting minutes,

the follo~ing doc~ents should be maintained in the job

file:

Correspondence: All correspondence relating to the project

should be kept in the job file. It is the practice of some

contractors to file· correspondence on the basis of the

company with whom they are corresponding. since contractors

often work with each other on more than one job at a time, a

particular file may contain many irrelevant pieces of

correspondence. Therefore ask the contractor to place

correspondence, or copies, on the job file. Correspondence

often contains summaries of the matters in dispute including

the factual assumptions· upon which the writer's position is

based.

Memos to the file: Job supervisors should be encouraged to

write memos to the job file whenever an event occurs which

could affect the performance of the project. The memos are

often directed at one particular point· and therefore may

contain more information on the point than the daily log.

Photographs: Photographs are useful to show the progress of

the job as well as the quality of workmanship. If they are

to be used to help document delay, they must be dated.

Photographs should be taken at each step in the job's

progress and in particular when paYments are requested so as

to record ~he de9~ee of completion of the work at that time.

Inspection Reports: Most contracts provide for periodic

inspections by the consultant. These are most often

required prior to approval of a paYment under the contract.

The inspection reports will help to define the dates by

which certain. work was completed. The job supervisor's

daily log should include a record of any consultants on site

in order to identify when reports may have been made.

General contractors will also inspect work periodically and

a record of when those inspections took place and any

discussions at the time should be made. Copies of the

inspection reports will help to identify both the length of

a delay and its cause.

IV. EXTRAS AND CHANGES

Extras and changes to a contract (or subcontract) are

similar for record keeping purposes. A change is usually

initiated by the owner through the consultant and may result

in a change in the contract price. For example, an owner

may decide that more expensive fixtures be installed or that

a larger parking lot be built. In these cases there is no

question that what is being requested is different than that

called for in the specifications included with the contract

documents.

On larger contracts the procedure for making changes is

usually included in the contract general conditions. The

CCDC contract documents contemplate that no changes in the

work shall be proceeded with without a written order signed

by the owner. The procedure is that the owner, through the

consultant, provides a written description of the change to

the contractor who in turn submits a price to the consultant

for approval. Negotiations on the price m~y take place at

"

this point. A change order is then issued and work can

commence.

A change order will often give rise to a change in the

contract price and a change in the time for completing the

contract. The change notice will provide a space for the

contractor to include a percentage mar.kup on the cost of the

work. The "normal" markup allowed by consultants is ten

percent. The contractor should be aware that the allowed

markup will often be insufficient to cover the additional

administrative costs incurred in preparing the price,

coordinating the work and the delay caused in completing the

contract. Therefore, when sUbmitting the price for the

change the contractor should type on the face of the

document, a clause such as the following:

"The compensation allowed by this changeorder does not include any amounts forchanges in the sequence of work, delays,disruptiQ~s and/or impact costs, and theright is expressly reserved to make claimsfor any and all of these related items ofcost prior to any final settlement of thiscontract."

Such a clause should protect the contractor from claims by

the owner that the contractor has been fUlly compensated for

the work by the price given. For an example of a case in

which this defence by the owner was successful see: Doyle

Construction Co. v. Carling O'Keefe Breweries of Canada Ltd~

(1987), 23 C.L.R. 143 (B.C.S.C.).

Extras to a contract are handled in a similar fashion except

that the' request for approval of an extra is often initiated

by the contractor or a subcontractor and presented to the

consultant who in turn will request a price and issue a

change order after negotiation Qf the price. As noted

earlier (infra, section II.C.) an extra may arise out of a

dispute regarding the scope of the work and resolution may

be deferred to a later date.

The courts have commented on entitlement to payment for

extras as follows:

"Generally speaking, in my opinion, thefollowing rules should apply:

Rule 1. An item specifically provided forin the contract is not an 'extra'.

Rule 2. When the plaintiff suppliedmaterial of a better quality than theminimum quality necessary for thef~lfilmeRtof the contract, without anyinstructions,· express or implied, from thedefendant to do so, he is not entitled tocharge the extra costs as an 'extra'.

Rule 3. When the plaintiff did work orsupplied materials not called for by thecontract (plans or specifications) withoutinstructions,express or implied, from thedefendant, or the consent of thedefendant, he is not entitled to chargethis additional work or materials as an'extra' •

Rule 4.suppliedcontractimplied

When the plaintiff did work ormaterials not called for by the

on the instructions, express orfor the defendant, he is en~itled

to charge for additional work or materialsas an I extra I •

What amounted to instructions from thedefendant is dependent on thecircumstances relating to each item. Ifthe defendant, without giving definiteinstructions, knew the plaintiff was doingextra work or supplying extra materialsand stood by and approved of what wasbeing done and encouraged the plaintiff todo it, that, in my opinion, amounts to animplied instruction to the plaintiff, andthe defendant is liable."

Re Chittick and Taylor (1954), 12 W.W.R. 653 (Alta.), at p.

654.

"Extra work, entitling the contractor toadditional payment, must be work which issubstantially different from, and whollyoutside the scope of the work contemplatedby the contract: Goldsmith, CanadianBuilding Contract (3rd ed., 1983), p. 83.Although there appears to be no generallyaccepted definition of "extra work", ithas been suggested that in a lump sumcontract it may be defined as work notexpressly or impliedly included in thework for which the lump sum is payable.If work is included in the originalccmtract ,. _ sum, the contractor cannotrecover extra'payment for it, although hemay not have anticipated that theadditional work would be necessary:Keating, Building Contracts (3rd ed.,1969), p. 63.

Keating has also suggested (at p. 62)that, in order to recover payment for workas an "extra", the contractor must prove:(1) that the "extra" work was not includedin the work for which the lump sum ispayable; (2) that there was a promise,expressed or implied, to pay for the work;(3) that any agent who authorized the workwas authorized to do so; and (4) that anycondition precedent to payment. has beenfulfilled."

Ron's Trucking and Hauling Ltd. v.

Page 17

city of Estevan

(1985), 11 C.L.R. 148 (Sask. Q.B.) at p. 151.

"In the interpretation of buildingcontracts the general rule is that allwork which is indispensable for thecompletion of the project falls within thecontract notwithstanding that it is notspecifically mentioned. See: Halsbury'sLaws of England, 4th ed., para 1175. Itdoes not seem to me to matter that extrawork or materials may be required byvirtue of the nature of the terrain or tosatisfy the lawful requirements of amunicipal authority. Those are matterswhich a contractor must anticipate andinvestigate before agreeing to a price orembarking on the work."

McMillan Bros. Ltd. v. Alex Smith Decorating Ltd. and Alex

Smith Rentals Ltd. (1980) 6 Sask. R. 301 (Sask. Dist. ct.)

at p. 303.

When the construction project is governed by contracts

containing. specific pr~visions for the pricing and approval

of extras much of the documentation will be available by

virtue of the way the contract is administered. However,

many projects are not governed by contracts containing such

clauses. In all cases, but especially where the contract

does not provide procedures for extras or changes, the

following information regarding extras and changes should be

recorded in the job file.

- a description of the extra or change

all discussions regarding the extra or change including arecord of all those persons present while the discussiontook place.

- any agreements regarding the extra or change includingacknowledgements that the work is an extra or a change andthe agreed price.

- the date upon which ~he extracompleted and the materials andcomplete the extra.

work was commenced andlabour expended to

At the earliest opportunity the contractor or subcontractor

should provide a written description of the agreed extra or

change to the owner or contractor, as the case may be, with

a record of the agreed price and a clause similar to the one

already noted reserving the right to claim for additional-

costs. The owner or contractor should be asked to sign the

agreement.

As with the initial contract price, a record should also be

kept of the way in which the price quoted for the extra or

change was determ~~ed. This will help to define the scope of

work contemplated by the contractor or subcontractor.

As noted earlier changes and extras to a contract often

result in additional costs to the contractor which are not

adequately compensated by the agreed price.

The completion date of the contract may be moved back giving

rise to additional expenses for supervis~ry personnel or

equipment rentals. The delay in completing one part of the

job may move the date for performance of another part of the

job into· winter months thereby reducing labour productivity,

A contractor or subcontractor may be forced to perform work

in a different sequence than that originally contemplated

(commonly called "disruption") or may be forced to hire

additional labour to complete the contract on time (commonly

c~lled "acceleration"). The same types of costs can also

arise for reasons other than changes or extras. For this

reason the contractor .or.sub.contractor .must keep accurate

records of all costs incurred and the cause of the cost in

the performance of the contract. The records will assist in .

assessing the quantum of damages including impact costs.

For a review of the concept of impact costs which will

assist in identifying the records required to prove such a

claim see: Revay, Stephen G. "Calculating Impact Costs" 27

C.L.R. 239.

v. PREPARATION FOR A CLAIM

The foregoing has outlined some basic types of records which

should be kept by contractors and subcontractors. When you

are contacted by a contractor or subcontractor about a

potential claim, you should ask that the following material

be supplied to you:

(a) The client's written analysis of . the claim covering

both the strengths and weaknesses of the claim.

(b) A chronology of events with referenc~ to supportingdocuments.

(c) A list of all documents which may be relevant andcopies of the documents in chronological order.These should include; the client's pricecalculations, the work schedules, the daily logs,relevant correspondence and memos, job site meetingminutes, labour records, photographs, completioncertificates, statutory declarations and inspectionreports.

(d) The name, phone number and address of the principalcontact person from whom you will receiveinstructions.

(e) A list of potential witnesses such as employees,ex-employees and others who were on the job.

which may be( f) A recommended expert or expertsrequired.

(g) A list of all parties including the owner,contractor and subcontractors.

(j)

(h) Written statements from key witnesses ..

(i) copies of all contract documents including: alltender documents including bid clarifications, theprime contract, the relevant subcontracts andchanges orders.

The rele~ant performance and labour and materialbonds. .-

(k) A record of all invoices submitted and paymentsreceived.

VI. RIGHT TO INFORMATION

Sections 82 and 83 of The Builders' Lien Act provide methods

for obtaining information prior to the commencement of an

action.

section 82 of The Builders' Lien Act grants owners, lien

claimants or beneficiaries of a trust under the Act the

right to' demand information from other parties. A lien

claimant or beneficiary to a trust under the Act may by

written request require from the owner or his agent:

(i) The terms of the contract and the state of accountsbetween the owner and the contractor;

(ii) The name and address of the financial institution inwhich the holdback trust account has been openedincluding the account number;

(iii) A statement as to the particulars of credits to andpaYments from the holdback trust account includingthe dates and the balance at the time the informationwas given;

(iv) A copy of any labour and material paYment bond postedby the contractor;

(v) Where the owner is the Crown, the names and addressesof lien claimants who have given claims of lien tothe Crown pursuant to Section 52 of the Act.

A lien claimant or beneficiary to a trust under the Act may

also request from a mortgagee or unpaid vendor or their

agent:

(i) The terms of the mortgage or agreement for sale;

(ii) A statement showing the amount advanced under themortgage and the dates of those advances withparticulars of arrears in paYment and interest;

(iii) A statement showing theagreement for sale andinterest.

amount secured under theany arrears in payment and

Pursuant to Section 82(2) the owner may, by written request,

require from a subcontractor when a . claim of lien has been

registered or a written Notice of Lien has been received by

him and from a contractor at any time:

(i) The terms of any subcontract inclUding the names ofthe parties, the price, the state of accounts betweenthe parties and this information is to be verified bystatutory declaration.

(ii) A copy of any labour and material paYment bond postedby a subcontractor with the contractor or asubcontractor with another subcontractor.

The persons of whom the requests are made have 10 ten days

from the date the information was served on them to reply.

The Act provides that failure to comply could result in

liability for damages caused by the refusal to reply and in

addition the owner may withhold further paYments to a

contractor who refuses to comply or instruct the contractor

or another subcontractor to withhold payment from another

party who refuses to comply.

Section 83 of the Act allows an Examination for Discovery of

a person who has verified a claim of lien that has been

registered or, on application, Examination for Discovery of

a person other than the person who has verified the claim of

lien that has been registered. It should be noted that only

one examination on a claim of lien can take place pursuant

to this section. Section 90 provides that the evidence

given at the Examination may be used in evidence against the

party on whose behalf the person was examined and all other

parties of like interest. Leave of -the court must be

obtained in order to examine the party again after the

action is commenced. Therefore the examination should be as

wide ranging as if an action had been commenced. The

Examination for Discovery can be held on at least seven

days' notice without an order of the Court. Notice must be

given to the person to be examined, every other person

against whose estate or interest in land a lien is claimed,

the contractor and the payer of the lien claimant.

The availability of the section 82 and 83 opportunities for

information should be distinguished. Section 82 allows a

request for information to be delivered to a subcontractor .

who has registered a claim of lien or delivered a Written

Notice of Lien whereas Section 83 only allows Examination

for Discovery of a person who has verified a claim of lien

that has been registered. Delivering a written Notice of

Lien does not fall within the definition of "registered" in

the Act.

In addition to the provisions of The Builders' Lien Act

the contract documents may provide opportunities for

obtaining information. For example, the CCDC contracts

contain the following clause:

"The consultant may, upon reasonablerequest and at his discretion, provide toa subcontractor information as to thepercentage or quantity of thesubcontractors work which has been .

certified for pa~ent."

If such a request is made to the consultant and is denied,

it is· open to a subcontractor to make an application under

section 82 (6) for production of records relating to the

contract. The section provides that an application may be

made for inspection of all contracts, subcontracts,

documents, books or records relating to the contract or

sUbcontract or to the payment of the contract or sUbcontract

price. Access to those records should be sufficient to gain

the information sought.

VII. OBTAINING COMPLETION CERTIFICATES

Section 3 of The Builders' Lien Act provides rules for

determining substantial completion of a contract or

subcontract. Generally speaking substantial completion is

achieved when the improvement to be made under the contract

or subcontract 15- ready for use or is being used for the

purpose intended. When this point has been reached the

contractor or subcontractor should refer to the other

provisions of Section 3 to determine whether a request can

be made for a certificate of substantial performance.

Section 41 of The Builders' Lien Act is in the process of

being amended. In addition the regUlations will be amended

and should be included in the November.· 1989 Saskatchewan

following

should be

Gazette.

sections

1990 •.· .

The

which

discussion deals with the

proclaimed in force January

new

1,

Briefly a contractor or subcontractor may make a request to

the payment certifier (consultant) for a certificate of

substantial performance. In the case of a subcontractor if

there is no payment certifier, the request is made of the

owner and the contractor and in the case of a contractor,

the request is made of the owner.

If the payment certifier (or the owner and/or contractor)

refuses or fails to certify substantial performance within

the 7 days specified in the Act, the contractor or

subcontractor as the case m~y be may refer the question to

an arbitrator pursuant to Section 85(1) or make an

application· to Court for an order that the contract or

sUbcontr~ct is substantially performed. The date of the

decision of the arbitrator or the court is deemed to be the

date of

Page 26

substantial performance unless that date is

determined to be a different date by the court or the

arbitrator.

When the payment certifier (or owner and/or contractor)

refuses to issue a certificate of substantial performance

the contractor or subcontractor should request that reasons

be given for the decision. Preferably the reasons would be

given in writing. If the reasons are given verbally the

contractor or subcontractor should reoord those reasons as

completely as possible and as soon after the discussion as

possible so that those reasons can be used as part of the

the arbitrator-

material to be forwarded to or as part of the

material used in support of an application to court.

section 45 of The Builders' Lien Act allows payment of the

holdback portion of a subcontract to be paid out 40 clear

days after the ~date of substantial performance of the

subcontract. This is a useful provision for subcontractors

employed on large projects which may take many months to

complete. If the subcontractor, such as the excavating

contractor, is employed at the beginning of the job, there

is no reason why he should have to wait until the completion

of the entire project before receiving the remaining 10

percent of the subcontract value.

sections 41 and 85 (as amended) and Section 3 of The

Builders' Lien Act, a sample letter of request for a

certificate of substantial performance, the prescribed form

of the certificate of substantial performance, and a sample

of a certificate of substantial performance used by a

Saskatoon Engineering Consultant are included in the

Appendix to this section of the materials.

Also included in the Appendix to this section of the

materials is a sample of a "Notice of Change", a

Supplementary Instruction Form and a sample of Supplementary

Conditions to the CCDC standard contract 2 which are used by

a Saskatoon Engineering Consultant.

Please note that the recent amendments to The Builders'

Lien Act apply only to contracts and subcontracts arising

thereunder which were entered into on or after the day the

amendments come into force.

(The next page is 29 )

SAMPLE LETTERPERFORMANCE

Page 29

REQUESTING A CERTIFICATE OF SUBSTANTIAL

Date:---------To: [Owner, Owner and General Contractor or Payment

Certifier (Consultant)]

project:

Address of Project:

Request for certificate of Substantial Performance

Pursuant to Section 41 of The Builders' Lien Act

we request that you either:

1. complete and return the enclosedSubstantial Performance withindays)* days of receipt; or,

certificate ofseven (or ten .

2. Agree to arbitration of this request by thefollowing person.

Proposed Arbitrator:Arbitrators Address:

Our address for service is

Yours truly,

(contractor or subcontractor)

(NOTE: be sure to include the certificate of SubstantialPerformance and be sure that the work or contract for whichcertification is being requested is clearly specified init. )

* section 41(1) of the current unamended Act provides tendays for the payment certifier to determine whethersubstantial completion has been achieved.

FormCCERTIFICATE OF SUBSTANTIAL PERFORMANCE

OF CONTRACTOR SUBCONTRACT(Su bsection 41 fl) ofthe Builders' Lien Act)

page 30

This is toc:ertify that the """":"'" _(state whether contract or subcontract)

in relation to the following services or materials:

(Short description ofsen-ices or materials)

to the following improvement:

(Short description ofimprol:ement)

to the following land:

(Ciuic address ofland or legal description)

is substantially performed.

Day/Month/Year

Date certificate signed

(Payment qertifier,ifany)

(Ifno payment certif&er,certificate must be signedby owner and contractorjointly) ( Contractor

Owner

Name of OWner: _

Address for Service: _

Name of Contractor fifcertifyingsubstantial performance ofa contract) :

Name of Subcontractor fifcertifying substantial performance ofa subcontract) :

Name of Payment Certifier: _(Where there is a payment certif&er)

Address of Payment Certifier: _(Where there is a payment certif&er)

Mac:PHEDRAN & ROBB ENGINEERING LTD.STRUCTURAL CONSULTANTS3022 LOUISE STREETSASKATOON, SASKATCHEWAN S7J 3L8

Phone (306) 477-0655

CERTIFICATE OF SUBSTANTIAL PERFORMANCEPage 31

PROJECT:

OWNER:

CONTRACTOR:

CONTRACT DATED:

DATE:

FILE No.:

)

)

THIS IS TO CERTIFY that, based on our observations at the site at intervals appropriate tothe stage of construction, the Work described in the above Contract has been, to the best ofour knowledge, information and belief, Substantially Performed as defined in the ContractDocuments. This certificate is issued in the context of the General Conditions of -theContract.

This Certificate does not constitute an acceptance of any Work not in accordance with theContract Documents or any Work not completed as required by the Contract Documents.

The date of this Certificate shall be taken as commencement of the Lien Period and of thetwelve (12) month Warranty Period.

The Contractor shall continue towards Total Performance of the Work without delay. Contract payments are subject to- a retention to cover Work not Totally Performed.

MacPHEDRAN " ROBB ENGINEERING LTD.

Distribution:

NOTICE OF CHANGEMac:PHEDRAN '" ROBB ENGINEERING LTD.

PROJECT

CONTRACTOR

CHANGE No.

FILE No.

DATE

Page 32

THIS IS NOT AN AUTHORI~TION FOR EXTRA WORK. The COllttaetor ,hall forward the price chance to the Project Coordinator U lOOn U pouible, and Wore any work ia commenced. It approved by the Owner, a CHANGE ORDER wW be iaaueci.

THIS IS AN AUTHORIZATION FOR EXTRA WORK. The COlltractor ,hall forward the price change to the Project Co-ordinator u

SOOIl U pollible. Wbea approved by the Owner, a CHANGE ORDER wiU be iaaued.

DESCRIPTION:

DISTRIBUTION:

.-

MacPBEDRAN " ROBB ENGINEERING LTD.

CONTRACTOR'S REPLY (A complete breakdown ot all quotuiolll to be attached.)

EXTRA CREDIT

OWN WORK • OWN WORK •MARKUP ( %) • WORK BY OTBERS •WORK BY OTBERS • TOTAL •MARKUP ( %) •TOTAL • .' - NO PRIg ClWfGE

DATE

DATE

CHANGE ORDER

___RECOMMENDED

___NOT RECOMMENDED

CONTRACTOR'S SIGNATURE

MacPBEDRAN "ROBB ENGINEERING LTD.

THIS IS AN AUTHORIZATION TO PROCEED WITH THE CHANGES OUTLINED ABOVE. WORK TO BE PERFORMED ANT ).IDFOR IN ACCORDANCE WITH TO TERMS OF TBE CONTRACT.

DATE OWNER'S AUTHORIZED SIGNATURE

Mac:PHEDRAN & ROBB ENGINEERING LTD.Structural Consultants3022 Louise StreetSaskatoon. Saskatchewan S7J 3L8

Phon. (306) 471-0655 Fax: (306) .71-1995

SUPPLEMENTARY INSTRUCTIONS

TO:

Page 33

Dace _

FUe No. _

Inscruccion No. _

PROJECT:

You an requac.d co ClUTY out: ch. foUowinr supplement:ary inst:ruct:iol1l co t:h. cont:ract: which shall noc be .construed asauchoNinr a chanr. in t:h. cont:ract: amount:. Should ch. contraccor hold t:hat: cha. inat:ruct:ions involve a change in theconcract: amount: h. shall notifY che consulcant: in wricinr wichin cen (10) days of che above dace before proceeding wich the

worle.

MacPHEDRAN & ~OBB ENGINEERING LTD.

Pu --'-_

1

2

3

4

5

6

7

8

SUPPLEMENTARY CONDITIONSSECTION 00800

Page 1

AGREEMENT - ARTICLE A-4 (c)page 34

Interest shall be lot.

DEFINITIONS ITEM #2

Insert after " •.• consists of ••• " in the first line," ••• the Instructions to Bidders, ••• ".

DEFINITIONS ITEM #8

ADD:When a PORTION of the work is taken over, accepted, andis being used by the Owner, that PORTION may be defineas "the Work" for the purposes of beginning guarantees,maintenance by the Owner, release of holdbacks, on thePORTION.

ADD To GC 1.4

The Contract Documents are of the abbreviated type andmay include incomplete sentences. omissions of worgsor phrases such as "The Contractor shall", ."Conformitytherewith", "an" and "all" are intentional. Omittedwords and phrases. shall be supplied by inference in thesame manner as if they were in full~ .

When the words "approved", satisfactory", "undirected","SUbmitted", "inspected", or similar words or phrasesare used it shall be assumed that the word "Consultant"follows the verb as obj ect of the clause, such as"approved by the Consultant".

GC 5.2

Change the words "five working days" to read "withinthe time specified by the Consultant".

GC 5.3

Change the words "in the five working days specified"to read "within the time specified by the Consultant".

GC 5.6

Change the word "If" to the word "AS".

GC 11

After "Owner" in 11.1 (b) ADD: "or the Consultant",


Page 2

35l2.l(c)plus a

Items

..

ADD: .- GC 12.7Page

The charges determined by methods 12. 1 (a) orshall be computed on an estimated costpercentage fee as determined from Chart #1.generally covered by the percentage fee shall be:1) head office expenses.2) the salaries of superintendents, engineers,

timekeepers, accountants, clerks, watchmen andsimilar personnel normally employed directly on thework. (Wages of workmen and foremen and theassessments thereon for Workers' Compensation,Unemployment Insurance, vacation with pay andCanada Pension payments, etc., are part of theactual cost);

3) use of temporary offices, sheds, etc., includingcost of telephone, light, power, and heat usedtherein;

4) insurance premiums; and5) licenses and permits, exc;ept when these are special

for a particular item of work.

9

The cost of related changes involving both extras andcredits shall be applied against one another and th~.

percentage fee applied to the NET difference.·Unrelated changes shall be considered separately.

Credits may be figured at the actual "cost" and neednot include a credit for overhead and.profit originallyincluded in the stipulated Sum, but, neither shall apercentage fee be applied to the "cost" of a credit toreduce the credit.

Quotations for Changes shall include an itemizeddetailed breakdown of costs including a materials listwith the cost of each item, number of hours of labour,etc. . '

CHART #1Contractor on Subs

Value of Change Subs on Sub-Subs On Own($) (t) (t)

o - 299 17 20300 - 599 15 18600 - 899 13 16900 - 2,999 11 14

3,000 - 5,000 9 125,000 + negotiable negotiable

10 ADD GC13.7

The second and all subsequent applications for paymentshall be accompanied by a statutory Declaration on theform included in these Contract Documents.

11

7

GC 14.2


Page 3

Page 36

12

Change " ••• five (5) days .•• " to read" ••• Fifteen(15) days ..• "in the second line.

GC 14.3

12.1 After the first sentence ADD:"With his application, the Contractor will provide alist of the work which the Contractor is aware isincomplete or deficient".

12.2 After the second sentence ADD:"If it is found that the list submitted by theContractor is excessively incomplete and the consultantdisapproves of the application then sUbsequentinspections and assessments of Substantial Performancewill be at the Contractor's expense (ConSUltant's,Owner's, and their staffs' time at current per diemrates)".

13 GC 14.7

After the first sentence ADD:"With his application, the Contractor will provide awritten declaration that the work noted as incompleteor deficient at the time of Substantial Performance hasbeen completed or corrected".

After the second sentence ADO:"If it is found that the work has not been completed orcorrected and the Consultant disapproves theapplication, the subsequent inspections of the Workuntil .Total .Performance shall be at the Contractor'sexpense (ConSUltant's, Owner's and their staffs' timeat current per diem rates)".Second last line change the words .••. "five days"to read ••• "fifteen days".

14 GC 14.12

ADO:(d)

(e)

failure of the Work to comply· withrequirements of the Contract Documents,incompleteness of the Work.

the

15 GC 15.3

ADD the word "unscheduled" prior to the words "changesin such taxes".

+ .....-

). 16 GC 24.1


Page 4

Page 37

17

18

19

Add the following at the end of 24.1"and further shall correct at his own expense any andall original accepted work which was not in fact inconformance with the requirements of the ContractDocuments, and in such event the guaranteed period isbegun again at the date when the non-conforming work isreplaced, repaired or otherwise made to conform andcontinued thereafter for the same per iod as theoriginal guarantee. Any materials, fixtures orequipment requiring excessive servicing during theguaranteed period will be considered defective".

GC 25.1

ADD:"The Contractor shall be responsible to carry out andcomplete the Work in accordance with the ContractDocuments and failure ,on the part, of the Consultant orOwner to observe any defect or deficiencies in the work.will not relieve the Contractor of thisresponsibility".

ADD: GC 27.4

standard specifications referred to throughout theSpecifications shall form a part of the ContractDocuments and shall be read in conj unction therewith.Where standard specif ications other than CanadianStandards Association (CSA) are named, equivalent eSASpecifications shall take precedence and shall governwherever applicable. Whenever any product is specifiedin accordance with an ASTM Standard, CSA Specificationsor other Association Standard, the Contractor, ifrequested, ~~hall present an affidavit from the'manufacturer certifying that the product complies withthe particular standard specification. Where necessaryand requested, or specified, supporting test data shallbe SUbmitted to sUbstantiate compliance. Codes,standards, bylaws, statutes and Manufacturer'sAssociation specifications or instructions mentioned inthe Contract Documents refer to the latest revisions·thereof at time of calling for tenders unless otherwisespecifically designated.

ADD: GC 32.6

Warranty Period Inspection - ten months after thewritten acceptance of the Building, the Contractor, theOwner, and the Consultant shall together inspect thebuilding to determine any deficiencies in materials orworkmanship which have occurred or·'become apparentsince acceptance. . ..

19

20


Page 5

continued Page 38The Consultant will notity the Contractor to rectifydeticiencies listed within the two months prior to theend of the one-year warranty period.

Immediately before the end of the one-year warrantyperiod provided by the contractor, the Consultant, theOwner and the Contractor shall make a tinal inspectionto assure that the items recorded at the ten-month inspection have been corrected by the Contractor.

ADO: GC 37 - CONTRACT TIME

37.1 Time is ot the essence.

37.2 Extension to the Contract Time for changes ordelays'wi'l! 'only be" 'allowed tor those which are"critical" as in critical Path Method ofConstruction Scheduling. The onus to providethat an activity is "critical" will be on the.·Contractor.

- End of section -

The Builders' Lien Act (as amended).

3(1) For the purposes of this Act, a contract orsubcontract is substantially performed:

(a) when the improvement to be made under thatcontract or subcontract or a substantial partof the improvement is ready for use or is beingused for the purposes intended; and

(b) when the improvement to be made under thecontract or subcontract is capable ofcompletion or, where there is a known defect,correction, at a cost of not more than theaggregate of:

(i) 3% of the first $500,000 of the contractprice or subcontract price;

(ii) 2% of the next $500,000 of the contractprice or subcontract price; and

(iii) 1% of the balance of the contract priceor subcontract price.

(2) For the purposes of this Act:

(a)

(b)

where the improvement or a substantial part ofthe improvement is ready for use or is beingused for the purposes intended and theremainder of the improvement cannot becompleted expeditiously for reasons beyond thecontrol - of the contractor or subcontractor, asthe case may be; or

where the owner and the contractor or thecontractor and SUbcontractor, as the case maybe, agree not to co~plete the improvementexpeditiously;

the price of the services or materials remaining tobe provided and required to complete the improvementshall be deducted from the contract or subcontractprice in determining substantial performance.

"

Page 40

41(1) At the request of the sUbcontractor, the paymentcertifier or, if there is no payment certifier, theowner and the contractor jointly shall, within sevendays after the day of the request:

(a) determine,subcontractand

pursuant to section 3, whether thehas been substantially performed;

(b) where he, she or they determinesubcontract has been substantiallycertify the substantial performancea certificate in the prescribeddelivering it to the subcontractor.

that theperformed,by signing

form and

(1.1) A request pursuant to subsection (1):

(a) may be made in the form prescribed in theregulations; and

(b) shall include a declaration by:

(i) the subcontractor; and

(ii) the payer on the subcontract;

SUbstantiallybeenhassubcontractthat theperformed.

(1.2) At the request of the contractor, the paymentcertifier or, if there is no payment certifier,' theowner shall, within seven days after the day of therequest:

(ar determine" pursuant to section 3, whether thecontract has been substantially performed; and

(b) where he or she determines that the contracthas been substantially performed, certify thesubstantial performance by signing acertificate in the prescribed form anddelivering it to the contractor.

(1.3) A request made pursuant to subsection (1.2):

(a) may be made in the form prescribed in theregulations; and

(b) shall include a declaration by the contractorthat the contract has been substantiallyperformed.

(2)

Page 41

Where a contract or subcontract has been certified tobe sUbstantia~ly performed, the payment certifier, bypersonal serv1ce or by registered mail within sevendays after the day the certificate was signed, shallgive a copy of the certificate:

(a) to the owner and the contractor; and

(b) to all persons providing services or materialsin the performance of the contract orsubcontract and who have requested the paymentcertifier in writing, by personal service of arequest, with a return address, to give them acopy of the certificate;

and where there is no payment certifier the ownershall give a copy of the certificate in accordancewith clauses (a) and (b).

(2.1) The contractor or, where there is no contractor, theowner shall post a copy of the certificate described.in subsection (2) in a prominent spot on the main jobsite.

(4) Where a dispute arises with respect to a refusal orfailure to certify substantial performance that hasnot been referred to an arbitrator pursuant tosection 85, the court may, on the application of anyperson, order that the contract or subcontract isSUbstantially performed.

(5) Where, pursuant to this Act, the court or anarbitrator determines that a contract or subcontractis substan~ially performed, the decision of the courtor the arbitrator, as the case may be, has the sameeffect as a certificate of substantial performanceunder subsection (1) or (1.2), as the case may be,and the owner shall give and post copies of thedecision as required of a payment certifier andcontractor with respect to a certificate undersubsection (2) and (2.1).

(6) For the purposes of this Act, the day on which acontract or subcontract is SUbstantially performed isdeemed to be:

(a) the day on which the certificate is signedpursuant to subsection (1) or (1.2); or

(b) where, pursuant to this Act, the court or anarbitrator determines that··the contract or

Paqe 42

subcontract is sUbstantially performed, the dayon which the decision of the court orarbitrator is rendered;

.unless:

(c) the certificate expressly indicates a differentday as the day of substantial performance; or

(d) the day of substantial performance isdetermined to be a different day by the courtor by an arbitrator.

(7) Where a copy of the certificate of substantialperformance is given by registered mail, it is deemedto be given when the addressee actually receives it,or two clear days after the day of registration,whichever is earlier, which time shall be included inthe days allotted for giving the certificate.

85(1) Subject to subsection (1.1), where a dispute arisesat any time during the construction of an improvementwith respect to the payment of money, the dispute,with the consent of the parties to the dispute, maybe referred to a single arbitrator chosen by theparties.

(1.1) Where a dispute arises:

(a) at any time during the construction of animprovement with respect to the failure orrefusal _to certify substantial performancepursuant-to section 41; or

(b) with respect to the payment of moneys to acontractor or subcontractor who has obtained acertificate of substantial performance withrespect to his or her contract or subcontract;

the person making the request, by personal service ofa written notice in the prescribed form, may requirethat the dispute be referred to an arbitrator.

(1.2) Where the parties to the dispute are unable to agreeon an arbitrator within three days of service of thenotice pursuant to .. subsection (1. 1), the personmaking the request may apply to the person specifiedin the regulations for the designation of anarbitrator. .

. .