Lawsuits are always cause for concern when embarking on a project. But lawyers at SHK Law Corporation offered some tips at this year’s Buildex Vancouver to avoid spending time in the courtroom.
Mark Braidwood and Vanessa Reakes, both principals at SHK, laid out best practices for dealing with change orders and extra work.
"Most legal disputes concerning extras or change orders involve contract interpretation," said Reakes. "There is no perfect contract for every job, but knowing your contract is essential to ensuring compliance and resolving conflicts and getting paid. The biggest takeaway is know your contract."
A claimant who seeks compensation additional to the contract must find a justifiable legal basis to establish that the performance of the contract or subcontract has been fundamentally altered. Depending on the contract, this can be difficult.
Reakes noted that City of Vancouver or BC Hydro contracts are notoriously onerous for a claimant.
Braidwood stated he was involved in a recent case in Ontario where the claim process was so complex that when he mapped it out it showed it would take close to a year to fulfill.
"I came to the conclusion that the process was so onerous that it was meant to dissuade a claim," he said.
Reakes said she is always wary of contracts that don’t seem equitable, noting her preference is to draft a fair contract.
"The fact of the matter is that changes are inevitable on every project and that’s not always a negative thing," she said. "Changes are going to happen and you should just have a process to deal with them."
She suggested including contractual terms that provide a formula in order to address changes in scope. When a dispute arises, follow the formula.
"Don’t wait, provide your notice in writing, make sure you read your contract and make sure you read your supplemental conditions," she said.
Reakes explained the project doesn’t always need to stop due to a dispute. She said the Law Equity Act provides a means to permit progression of the work in the face of dispute. If a resolution cannot be achieved, one can provide notice of performance of the work under protest, though she advised getting a lawyer if this step is needed.
Beyond that, one can terminate for non-payment.
"Termination is always a very significant step," Reakes said.
Braidwood and Reakes both stressed the importance of the conditions of notice in a contract which have the potential to derail a claim before it has even started. Often informal notice is made during meetings or in an email. The lawyers stated it was important to have formal, documented communication.
Keeping records can also be key to winning a case. This means keeping emails, text messages, diary entries — anything that can prove what was said and when. Photos that are dated and labelled can also be extremely useful, Reakes added.
"Staff are often frequently too busy building the job to accurately document what happened and what it cost," she said. "Litigation often results in parties having to reconstruct events and costs after the fact at significant increased cost."
She advised developing a record keeping practice, follow change order requirements, update schedules often and advise in writing any and all impacts.
"Document, document, document," she said.
While this may seem adversarial, Reakes said this can actually go a long way in avoid a problem before it starts.
"There is an appreciation that your goals are to keep the project and relationship on track," she said. "Documentation will often avoid a dispute because it is a form of communication."