Surety Corner: Legal insight for contractors during challenging times

As noted in previous Surety Corner columns, contractors across Canada are facing a litany of challenges and obstacles to navigate.

Whether it is supply chain disruptions, new dispute resolution methods or increasingly onerous contracts, the industry as a whole is welcoming advice on how to tackle these issues.

For this reason, FCA Surety is pleased to introduce Joshua Strub of Margie Strub Construction Law.

Strub is a skilled construction lawyer with both private practice and in-house experience.

Along with his civil engineering degree, his background enables him to understand complex construction issues and provide efficient, high-quality legal advice. He began his legal career at a mid-sized construction law firm in Toronto. There he represented clients across the country in all forms of construction dispute resolution. Much of his early legal career involved representing clients on large, complex infrastructure disputes with claim values ranging up to $1 billion.

With regards to the challenges facing contractors listed above, Strub had the following insight and advice:

Handling supply chain issues

We hear of widespread supply chain challenges across the industry every day. When a specified item is no longer able to be supplied, what steps should a contractor take before they deviate from the specified item to be installed to ensure they remain compliant with their contract?  

Of course, the lawyerly answer is to read your contract to determine your rights and the appropriate avenue for seeking relief. This is the right approach. Regardless, I am a strong believer in the power of effective communication and transparency. So if the specified item is no longer available, then subject to specific requirements in the contract, I would communicate the issue both orally and then followed up in writing, explaining the true reason for your inability to procure the item in question and propose alternatives. However, in proposing alternatives, I would be sure to identify the similar properties and importantly, highlight the differences.

How to prepare for adjudication

The topic of adjudication is discussed frequently now that prompt payment in Ontario has been around for a few years. What best practices should contractors be implementing in order to be prepared for an adjudicated dispute?

I always preach the power of good, contemporaneous documentation. That is, keep good records of everything. That includes time records, meeting minutes, deficiency lists, handwritten notes of calls, well prepared and progressed schedules, and critically – detailed daily reports. But you cannot stop with just keeping records, you have to keep them organized. Adjudications are going to rely on documentation above everything else and adjudications are intended to be quick, leaving little time to prepare and go searching for documentation. The best preparation for adjudications is to always be prepared for an adjudication.

Tips for reviewing contracts

As general or trade contractors grow their business, they often take a leap from working on smaller private or public work to more substantial long-term projects. In doing so, contracts can become more complex and onerous. What are a few of the most important items you focus on when reviewing contracts that these growing contractors should also ensure they are cognizant of?

This is a great question and one which is tough to answer. I like to say that there are often skeletons in the closet and it is therefore critical to read the entire contract. Also – do not rely on the ctrl+F function (FIND Function) as provisions may be drafted without the use of a specific word that might be more commonly used for the same type of provision. A critical thing for contractors growing their business to be mindful of is the administrative obligations of these more complex contracts. I have too often seen contractors and trades that are used to building projects with little to no administrative or project management office staff bid larger projects on the same basis, only to later find out that they need a team of people to deal with the contract administration.

Some of the other things (this list is by no means exhaustive) that I want those clients to be particularly mindful of is:

• ensuring a process for the contractor to request a change or make a claim for an increase in price;
• ensuring the contractor’s obligation to accelerate or to prepare and adhere to a recovery plan is limited to delays or lack of progress caused by the contractor, else there must be an entitlement to payment or to dispute;
• ensuring the site condition provisions are appropriate and only impose risk upon the contractor that actually make sense (i.e. contractor takes the risk of visually ascertainable site conditions – not everything under the ground as if they were able to perform a detailed investigation);
• ensuring an aggregate limitation of liability;
• ensuring liquidated damages provisions are fair and appropriately drafted;
• ensuring entitlement to payment on an actual cost basis in the event of a change directive; and
• understanding the payment mechanism in the contract and the timing of payment.

The importance of appropriate legal representation

When choosing legal representation as a contractor, why is it so crucial to choose a construction focused law firm and lawyer?

I was recently on the phone with another lawyer who observed that certain areas of law are “respected” in that people don’t dabble. For example tax law, family law, personal injury law and medical malpractice. There is no doubt construction has its own unique characteristics, types of claims, types of defences, procedural nuances (particularly in the case of liens), and underlying complexities of the business transaction. Yet, we see a growing number of lawyers dabbling in construction. In my experience, the construction law expertise is critical. That is not to say that a clever lawyer cannot figure it out. But the time and expense to do so, coupled with the risks associated with the lack of experience, is immense.

We would like to thank Josh and Margie Strub Construction Law for the contributions and advice to our readers. Onsite performance of the work is only half the battle in the world of construction and contractual burdens can at times feel overwhelming. If you are in need of assistance, always remember, your surety brokers, accountants, law firms, etc. are all great resources to lean on as they see and review a variety of situations on a daily basis and can often assist in mitigating risk. As an industry, collaboration is an incredibly strong asset.

Matt Manol is the manager of surety for FCA Insurance. Manol recently joined FCA after spending his last six years underwriting contract and commercial surety products for a large national surety company. Send comments and column ideas to editor@dailycommercialnews.com