February 8, 2022
CCDC updates Stipulated Price Contract
BY ROB KENNALEY
The Canadian Construction Documents Committee (CCDC), made up of representatives from all levels of the construction sector, prepares standard form construction contracts for use in Canada. Last year, it introduced the new CCDC 2-2020 fixed price standard form, in large part to bring it in line with prompt payment and adjudication legislation which has been introduced, is being rolled out or is being considered in most jurisdictions in Canada. It is the first CCDC 2 to be updated in this regard.The CCDC forms are intended for national use, and the legislation will vary from jurisdiction to jurisdiction. It’s accordingly not possible for the Committee to dovetail its forms to the legislation in any detailed, surgical way. The most the Committee can do is make the forms conform with the aspects of prompt payment and adjudication which it believes will be common across jurisdictions and, then, make the forms subject to any applicable “Payment Legislation” in any event.
The new form follows the basic approach to payment set out in Ontario’s Construction Act, R.S.O. 1990, c.C30. In this regard, both the new form and the Ontario Act require that a payment application (or “proper invoice” under the Act) be given to the owner and paid within 28 days unless a written notice giving reasons for the revision or rejection (which is a “notice of non-payment” under the Act) is given to the contractor within 14 (calendar) days. As regards to adjudication, the new form merely provides that nothing in the Contract affects the parties’ rights to resolve a dispute by way of such legislation.
In addition to bringing the CCDC form(s) into conformity with prompt payment and adjudication legislation, there is much that can be done, contractually, to address gaps, confusion and inconsistencies in the legislation and better manage risks associated with the same. In what follows, we will review some contractual mechanisms that might be used, in the context of Ontario’s Construction Act. Those in Ontario might consider addressing these issues, regardless of the form of contract being used. Parties in other jurisdictions should consider whether similar issues arise under the form in place, or being considered, in their jurisdiction.
First, the provisions of the prior Construction Lien Act apply under contracts procured or entered into before July 1, 2018, and the prompt payment and adjudication provisions apply under contracts procured or entered into on or after Oct. 1, 2019. Toward avoiding confusion, the contract can expressly confirm when it was procured (if at all) for the purposes of these provisions.
We suggest payment obligations be altered by Supplementary Condition to expressly bring them in line with the Act, where prompt payment and adjudication apply. For example, while the Act requires (unless a notice of non-payment is given) that the holdback be paid upon the expiry of the lien period, the updated CCDC 2 requires payment within 10 days of that expiry. In addition, final payment is to be made under the Act within 28 days of the contractor’s proper invoice for the same, while the updated CCDC 2 requires payment within five days of the consultant’s certificate in that regard.
In addition, where a notice of termination of the contract is published, the party publishing might be required to provide a copy of the Notice to the other party as this is not actually required by the Act. This, because lien rights under the Act will commence ticking at the time of the termination set out in the notice.
Also, under both the old and new versions of the Ontario Act, many documents must be “given.” Although determining how this occurs is not simple, the parties can agree to do so by email communication, and this agreement can be set out in the contract. In addition, the Act requires various documents to be published in a “daily construction newspaper” (including certificates of substantial performance, notices of non-payment of holdback, notices under the Condominium Act and notices of termination of a contract), which can now be an online publication which meets prescribed requirements. As there are now three online options in that regard, the newspaper in which the documents should be published might be clarified in the contract (although publication in a publication which complies with the Act will nonetheless be effective).
Contractors should be careful to review the terms of a tender package or contract to understand how the owner might have altered payment provisions to better meet its payment obligations under the Act.
These might include contractually varying the requirement that proper invoices be given monthly, requiring payment applications to be provided initially in draft form and/or with additional information or documentation, protocols for precisely when and where invoices and backup are to be sent and site meetings or walk-throughs for the purposes of review.
Ontario’s Act allows for the early release of holdback, either annually or on a phased basis, in certain circumstances where the contract calls for it. Contractors may wish to negotiate for the annual or phased release of the holdback, where possible.
As regards adjudication, Ontario’s Construction Act allows parties to agree on aspects of the process, so long as the Act’s requirements are complied with. In this regard, there are innumerable things that parties can do, in their contracts and subcontracts, to more effectively manage the risks associated with the process.
The following options might, for example, be considered by way of Supplementary Condition:
(i) Developing a process to name agreeable adjudicator(s), to avoid an adjudicator with little experience with the legal or factual issues being appointed in the relatively short four calendar day time-frame the parties are otherwise given to agree on one (using a process for selecting a project mediator which is already called for under the CCDC 2).
(ii) Allowing a notice of adjudication to be given after the contract or subcontract has been completed, as disputes often don’t arise or become heightened until after that date; allowing more than one matter to proceed to adjudication at a time (subject to the adjudicator’s agreement); agreeing (subject to the adjudicator’s agreement) on timelines and processes for the adjudication, including those relating to the exchange of documents, the introduction of evidence, rights of reply and oral submissions; and altering the rules for and timelines for mediation and arbitration, to make them more palatable to the parties than an adjudication under the Construction Act, if the parties wish to avoid adjudication all together.
(ii) Allowing a notice of adjudication to be given after the contract or subcontract has been completed, as disputes often don’t arise or become heightened until after that date; allowing more than one matter to proceed to adjudication at a time (subject to the adjudicator’s agreement); agreeing (subject to the adjudicator’s agreement) on timelines and processes for the adjudication, including those relating to the exchange of documents, the introduction of evidence, rights of reply and oral submissions; and altering the rules for and timelines for mediation and arbitration, to make them more palatable to the parties than an adjudication under the Construction Act, if the parties wish to avoid adjudication all together.
Rob Kennaley is with Kennaley Construction Law, a construction law firm with offices in Simcoe, Toronto and Barrie.