A claim for “extras” – a claim for payment work done outside the scope of a contract – is one of the most common issues giving rise to disputes on construction projects. Perhaps equally as common are disputes arising from “back charges” levied by one party against another lower down the contractual chain.
In the recent Court of Queen’s Bench of Alberta decision, Impact Painting Ltd v Man-Shield (Alta) Construction Inc, 2017 ABQB 743, the Court dealt with disputes arising from both of these things.
Man-Shield was the general contractor on a retirement community construction project in Edmonton. Impact was Man-Shield’s subcontractor with respect the painting and wallpaper installation.
At the end of its work on the project, Impact issued a number of invoices to Man-Shield for “extras”, totalling approximately $134,000 for which no written change orders had been issued. Man-Shield denied the vast majority of those invoices. Impact registered a builders’ lien against the project and commenced an action against Man-Shield to seeking payment for the extra work and other unpaid amounts.
The Court held that in determining the liability for costs of extra work the following questions must be answered:
- Was the work performed, in fact, extra work?
- If so, did the party from whom payment is being sought give instructions, express or implied, that work be done or was the work otherwise authorized?
- Was the party from whom payment is being sought informed or necessarily aware that the extra work would increase the cost
- Did the party from whom payment is being sought waive the contractual provision requiring changes to be made in writing or acquiesce in ignoring those provisions?
If a contractor can prove each of these elements, then it will be entitled to payment for a reasonable amount for the extra work completed.
Man-Shield filed a counterclaim against Impact in the amount of approximately $209,000 for 12 back charges it had issued to Impact throughout the course of Impact’s work on the project.
The Court held that a party claiming to be entitled to a back charge must prove that:
- The back charge is for an expense actually, necessarily and reasonably incurred by the party claiming the charge;
- By the terms of the contract, or by some other agreement between the parties, the charge is one, or is in relation to some task, for which the party subject of the charge undertook responsibility;
- The party claiming the charge incurred the expense because the other party defaulted on the on the responsibility to which the charge relates;
- Prior to incurring the charge, party claiming the charge gave notice to the other party of its default and a reasonable opportunity to cure it.
The Court then undertook a careful analysis of each extra and back charge claimed, with a net judgment being granted in Impact’s favour in approximately $58,000.
How does this decision affect you?
In any construction dispute, the particular construction contract in question will play a central role in how that dispute is decided by a court or arbitrator. Understanding your contract, ideally before any dispute arises, is essential whether you are advancing or responding to claims for extra work or levies for back charges. When parties do not follow the contractual provisions regarding changes to the work, uncertainty and disputes are bound to arise. Back charges must be well-documented and clearly arise from the failure of the party subject to the charge to meet its contractual obligations.
If you are involved in a dispute over a construction contract or need assistance assessing a claim for extras or back charges, Field Law can help. For more information, contact Field Law, to discuss your options.