Construction lawyers Geza Banfai and Christina O’Donnell presided over the launch of the latest CCA 1 standard contract recently with a piece of unambiguous advice for observers tuned into the kickoff webinar: it’s essential to take the time to read all applicable contracts associated with a project.
It might be obvious instruction, said Banfai, counsel with McMillan who was part of the working group that drew up the new CCA 1 – 2021 Stipulated Price Subcontract, but it’s important.
“The subcontract never just stands alone in isolation,” Banfai stressed during the recent event. “There’s always a prime contract up there. And those two agreements have to work together in kind of a dance. In getting a construction project done, there has to be co-ordination between them.
“If you’re a trade contractor, subcontractor, ignore that at your peril.”
The new CCA 1 was officially released Dec. 13 so the Dec. 9 event hosted by the Canadian Construction Association (CCA) served as a virtual training event and launch.
O’Donnell, general counsel at Black & McDonald, who sits on the Canadian Construction Documents Committee as CCA rep, explained the CCA 1 contract is a “flow-down” from the CCDC 2 – Stipulated Price Contract, which is the industry standard prime contract between the owner and prime contractor.
She said it’s imperative to understand that the CCDC 2 or other bespoke prime contract is relevant to the CCA 1 as the prime contract, and thus how the CCDC 2 – 2020 has changed from its 2008 predecessor.
“It starts with the preamble to the CCA 1, which references the subcontract work as being included within the overall scope of work to be done under the prime contract in accordance with the prime contract documents,” Banfai said.
“So you’ve got a consultant sitting there, retained typically by the owner in the CCDC 2 environment, and that consultant also has a finger in the pie of your subcontract insofar as approving payments and so on is concerned.
“There are a lot of players here, they matter.”
Besides always reading the prime contract before signing a subcontract, O’Donnell said, it’s wise to read any supplementary conditions as well as the Division 01 section, if it’s listed as a contract document.
“If you think your subcontract is the entire contract, it’s simply not true,” she said. “You’ll have half of the contract in your possession.”
Lawyers for subs were alerted to six key changes in CCDC 2 2020: ready for takeover; early occupancy; Division 01 general requirements; payment legislation; adjudication; and warranty.
Banfai said ready for takeover was a significant change.
“The new milestone was introduced into CCDC 2 because in the previous version, the only real milestone in it for end-of-contract purposes was substantial performance work,” said Banfai. “And substantial performance work is and remains as defined in the legislation across the country. What the industry was finding was that from the point of view of the owner, the substantial performance milestone wasn’t working all that well for them because it was too coarse.”
O’Donnell called attention to the CCDC 2’s Division 01 section, which she noted is completely editable.
“The general requirements have all kinds of headings, you’re free to edit it if it’s applicable to the project,” she noted.
“I think it’s also a really good document to review when you’re going through it and turn your mind to areas where maybe we should put this into the contract.”
Examples of potential inclusions included overheads and the markup on change orders, she said.
Banfai also stressed that statutory obligations for payment, such as those contained in Ontario’s Construction Act, override all contractual payment provisions.
“This applies to applications for payment, written notices for rejection of payment applications – the Construction Act is the mechanism to deal with that,” said Banfai.
The overall message from the CCDC and the CCA is that lawyers are strongly encouraged to direct their minds to the new risk allocation issues that have been incorporated into the CCDC 2, Banfai concluded.
“The reason for this is obvious, because there are so many disputes out there that are caused, or they are the result of, people not reading the contract, not thinking, not spending the extra hour or two thinking in advance of the contract formation stage about the issues that we’ve talked about,” he said.
“The cost of that is outrageous, compared to the cost that would have been incurred in mitigating the problem on the front end.”
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