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In this article we address, in a general way, the challenges faced by contractors, subcontractors and suppliers who wish to pursue claims against their clients for damages or additional compensation under a contract or subcontract. As a starting point, we note that a claim for ‘additional compensation’ is different from a claim for ‘damages’.
The former is essentially a claim for an ‘extra’ for services or materials supplied, while the latter compensates you for impacts you suffer when someone has done you wrong. The difference can be significant in the construction context, because suppliers of services or materials have a claim for lien under the Construction Lien Act for the value of services or materials provided to an ‘improvement’, which would include ‘extras’. There is, however, no claim for lien for damages. Similarly, if have arguably lost your right to claim for additional compensation under your contract or subcontract, you may be able to avoid the contractual limitation by presenting your claim as a claim for damages.
We bring the distinction between damages and additional compensation to your attention so that you are aware of the legal issue. In the end, if in doubt in any particular circumstance, you should consult counsel before presenting a claim, preserving a claim for lien or commencing an action.
It should also be understood that the law will not necessarily pay damages or additional compensation simply because you have been wronged. Rather, in the case of damages, the Courts will generally require you to prove the extent to which you have suffered actual monetary losses as a result of the wrong. With respect to a claim for additional compensation under a contract or subcontract, the Courts will generally require you to prove the value of the additional services or materials for which you seek compensation. There are exceptions, where the Courts will pay damages or additional compensation even where such loss or value is not proven. These include damages for ‘punitive’ or ‘aggravated’ damages (where the Court essentially punishes a wrong-doer for unacceptable conduct), and some claims for pain and suffering (which are extremely difficult to prove and almost never arise in the construction context).
The need to prove the value of your claim for damages or additional compensation is very often overlooked by contractors and subcontractors. First, they often proceed on the basis that, because they have been wronged, they should have a remedy in a court of law. In many such circumstances, time, energy and often money is spent quarrelling over the issue, before the realization that no loss or entitlement to payment can be established sets in. Second, contractors and subcontractors all too often fail to properly document their costs or damages after becoming aware of a possible claim.
For example, contractors and subcontractors often fail to change their record keeping procedures once they become aware of a possible claim. Where they know they are working overtime to overcome a problem of the owner’s making, for example, they do not detail the purpose for which the overtime is being worked, in tracking their time. Where they incur additional material costs, they do not record quantities used or the value of same. Where they have to re-sequence their work, they do not track how the re-sequencing occurred, as the work is progressing. In such circumstances, they often wait until the damages or additional costs have been incurred, before they think about quantifying those costs, by which time it may be too late.
In the end, contractors and subcontractors are well advised, when they become aware of a possible claim, to consider how the claim is to be presented and how the claim for damages or additional compensation can be proven, if at all. In this way, they can better protect their position, in the event that a claim must be formally made.
Robert J. Kennaley – McLauchlin & Associates
Rob Kennaley practices construction law in Toronto. He speaks and writes regularly on construction law issues and can be reached for comment at (416) 368-2522 or at kennaley@mclauchlin.ca. This material is for information purposes and is not intended to provide legal advice. Readers who have concerns about any particular circumstance are encouraged to seek independent legal advice in that regard.
Rob Kennaley practices construction law with McLauchlin & Associates in Toronto and Simcoe, Ontario. He speaks and writes regularly on construction law issues and can be reached for comment at (416) 368-2522 or at kennaley@mclauchlin.ca. This material is for information purposes and is not intended to provide legal advice. Also, changes in the law and its application may have occurred since the original drafting of this article and neither Rob Kennaley, McLauchlin & Associates or Landscape Management Network warrant that the information contained herein is up-to-date. Those who have concerns about any particular circumstance are encouraged to seek independent legal advice in that regard.
