Contractor/Sub-Contractor Entitlement to Payment for “Extras”

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is a litigation lawyer practicing at Perley-Robertson, Hill & McDougall LLP in Ottawa, Ontario. He may be reached at 613.566.2823 or obourns@perlaw.ca.

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In a “fixed price” or “stipulated price” contract the contractor has agreed, by way of successful bid or non-bid agreement, to perform the work set out in the contract documents (which would include tender documents) for a fixed price.  [Note the term contractor will be used herein, although the term sub-contractor could be substituted throughout].  Further, below sets out the general or typical rules, but keep in mind that the specific contract rules the day and it may modify what is and is not compensable extra work and the steps that are required to be taken by a contractor who seeks to claim for extra work.  If you have an issue regarding the interpretation of a construction contract or with respect to a claim for the payment of extra work you should seek legal advice as soon as possible.

It is incumbent on the contractor to properly review all contract documents and to ensure that obvious ambiguities are clarified at the outset.  After the contract has been executed, the contractor and the owner (or party with whom the contractor or sub-contractor has been contracted by) are bound by the terms of the contract.  The scope of work has been agreed to, as has the price to be paid for that work. Work done beyond what is set out in the contract may be compensable as an “extra”.  Note that a contractor will be entitled to an extra where:

  • work is requested that is beyond the scope of the contract;
  • work is required to be done on account of incorrect information set out in tender documents;[i]
  • the owner has misrepresented certain facts so that extra work fits within the initial scope of contract; and
  • the contractor has received the consent necessary in the circumstances.

Where a contractor is entitled to compensation for extras the amount shall be a reasonable amount, with the burden on the contractor to show what is reasonable.  In determining the value of extras, the Court may look at the work and materials supplied under the contract as a guide, though it is not necessarily binding.[ii]

An issue that often arises is whether the contractor followed the provisions in the contract with respect to providing notice and securing consent to perform the extra work.  The starting point, where written authorization is required, is set out in the 2012 Atlantic Windoor Ltd. decision as follows:[iii]

Contracts which entitle the owner to order extras usually contain a provision to the effect that the contractor will not be entitled to payment for extras without a written order to such extra work signed by the architect or engineer, or some other authorized person.  Compliance with such a provision, however unrealistic it may be in actual practice, is a condition precedent to payment; and a contractor who voluntarily chooses to perform such extra work without a written order, takes the risk that he may not get paid for the work.

However, in some cases it can be presumed that the owner consented to the extra work being done.  In Sargent Douglas & Co. Ltd. v. Kozic Holdings Ltd. Perry L.J.S.C. wrote:[iv]

The general principles of law applicable to extras and to be applied in the present case, may be briefly stated.

Firstly, it must clearly appear that the work for which extra compensation is demanded was not embraced by the original contract. Work cannot be recovered for as an extra which must have been contemplated by both parties when the contract was entered into.

Though where, as here, the contract gives the owner the right to order extras, the contractor’s right to payment for any changes or extras so ordered will depend upon his establishing that an express or implied agreement was in fact made covering each order as a result of the owner’s instructions under his power to order extras.

An implied contract may be inferred from the conduct of the parties, but in all such cases an essential element is that the owner at least knew that the work was going on and acquiesced in the contractor doing it.

In some cases it may be presumed that the owner consented to such extra work if so great that it must have been done with his knowledge, or was necessary and not foreseen.

Finally, the contractor must prove conclusively that the work done was not a part of the main contract.

Therefore, for a contractor to secure payment for extras beyond scope of work in the contract it must comply with terms of the contract unless the owner, expressly or by implication, authorized the extra work and/or unless extra work is necessary as result of false statements by owner.  A claim will be allowed if there is evidence establishing that an owner authorized the extra work, waiving formal requirements of contract.[v]

As summarized at paragraph 14 of Balkan Construction:[vi]

Despite the fact that a contract may require certain formalities in relation to requests for extras, where an owner has acquiesced in the provision of extras, it may be found to have made an implied promise to pay for them (see Colautti Construction Ltd. v. Corporation of the City of Ottawa (1984) 7. C.L.R. 264 (C.A.) at para. 30).

A provision in a contract requiring a written order as a condition precedent to payment for extra work may be waived by the owner’s conduct or acquiescence, such as where the owner requests extras which he or she must, as a reasonable person, have realized would involve extra expense (see DIC Enterprises Ltd. v. Kosloski at para. 34 (quoting Goldsmith at pp. 87-88) and para. 37.)

In the Balkan Construction decision, at paragraphs 38-41, Broad J. found that if the contract included a requirement that extras be authorized in writing and that the owner had waived such a requirement because it had either given express or definitive instructions to do the extra work or it knew that the plaintiff was doing the extra work or supplying the extra materials, and stood by and approved of what was being done and encouraged the plaintiff to do it, then the extra work was compensable.  In that case the extras included the following:

[I]tems set forth on the invoice for extras were clearly, on their face and without any need to examine the plans and specifications, beyond the original scope of the contract, including replacement of the existing drain pipe to the basement due to a leak and replacing the sump pump in the basement (both of which were site conditions requiring repair), replacement of all washroom faucets, (originally supplied by Catan) due to defects, and supply of wallpaper and a washroom vanity (which were acknowledged to be the responsibility of Catan).

In Hydrastone Inc. v. Clearway Construction Inc. it was held that “by their conduct the parties to the subcontract in this case waived the requirement that extras be in writing”. Waiver may occur if the owner ordered the work, or if the parties consistently ignored the requirement that extras be in writing.[vii]

However, even where the parties can be shown to have waived such a requirement it is still incumbent on the party claiming the extra(s) to show that the work is, in fact, “work that is substantially different from, and wholly outside the scope of the work contemplated by the contract”.  Conversely, “work properly called for in the contract” will not be compensable as “extra work”. Determining the category depends on the wording of the contract, the nature of the work and the surrounding circumstances.  This can be a high standard where a contract requires a party to “supply all services and materials necessary to “complete an entire Project or portion of a project (ie. electrical, mechanical).

In the Hydrastone decision, Master Albert reviewed five extras sought by the subcontractor, but only allowed one with respect to additional work completed due to re-designs that were not contemplated.  Additional extras were sought and denied with respect to: (a) costs relating to re-mobilizing forces, (b) costs for additional work performed due to a flood (which may have been a contractual claim or negligence claim but was not pursued as such), (c) costs to perform certain work that could have been performed by the general contractor’s forces had they been given the opportunity, and (d) costs of a re-inspection of the plaintiff’s work.

Lastly, in Bradhill Masonry Inc. a sub-contractor was ordered to perform extra work on site by a general contractor and was entitled to be paid despite a clause in the contract “that the subcontractor was not to do additional work on verbal request and that [the general contractor] would not honour any invoice without written authorization”.[viii]  Howden J. found that the sub-contractor had received direct orders from the general contractor’s representative on site to do certain work as an extra and that was sufficient to override the specific language in the contract.

It goes without saying that the party performing the extra work should seek to adhere to the contractual provisions regarding extra work whenever possible.  However, there are times in busy and stressful construction projects where mistakes are made or following the terms of the contract is simply not possible given the time available.  In such circumstances the party performing the extra work may still be able to collect on account of the extra work performed provided it can show that what occurred in that particular situation falls within one of the exceptions outlined herein.

[i] Asco Construction Ltd. v. Epoxy Solutions Inc. (2014), 2014 ONCA 535 (Ont. C.A.)

[ii] Carani Homes Co. v. Traiforos (1985) CarswellSask 1021 (Sask. C.A.)

[iii] Atlantic Windoor Ltd. v. Avant Garde Construction & Management Inc., (2012) CarswellNB 209 (N.B. Q.B.) citing Canadian Building Contracts, 3rd Edition, by Emanuel Goldsmith, at pages 82-83

[iv] Atlantic Windoor Ltd. v. Avant Garde Construction & Management Inc., (2012) CarswellNB 209 (N.B. Q.B.) citing Sargent Douglas & Co. Ltd. v. Kozic Holdings Ltd. (1985), 17 C.L.R. 13 (B.C.S.C.)

[v] Key Resort Builders Inc. v. Tremblay, (2009) BCPC 376 (B.C. Prov. Ct.)

[vi] 2016637 Ontario Inc. o/a Balkan Construction v. Catan Canada Inc. et al, 2013 ONSC 4727 (Ont. S.C.J.)

[vii] Hydrastone Inc. v Clearway Construction Inc., (2015) ONSC 2669 (Ont. S.C.J. – Master) at para 18

[viii] Bradhill Masonry Inc. v. Simcoe County District School Board, 2013 ONSC 4708 (Ont. S.C.J.) at para 32

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