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Your Contract or Mine?The use of standard form construction contracts
Prepared by:David Henley
April 17, 2013
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CONSTRUCTION CONTRACTS
Typical Standard Form Contracts• Canadian Construction Documents Committee (CCDC)
• Wide range of contracts and subcontracts• Canadian Construction Association (CCA)• Royal Architectural Association of Canada (RAIC)• American Institute of Architects (AIA)( )• Other international forms (FIDIC, ICE, etc.)
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CONSTRUCTION CONTRACTS
Most Common Forms• CCDC2 2008 – Stipulated Price Contract• CCDC3 1998 – Cost Plus Contract
CCDC4 2011 Unit Price Contract• CCDC4 2011 – Unit Price Contract• CCDC5A and 5B 2010 – Construction Management Contracts• CCDC14 2000 – Design Build Stipulated Price Contract
CCA1 2008 Sti l t d P i C t t• CCA1 2008 – Stipulated Price Contract• CCA5 1994 – Construction Management Contract• CCA19 2011 – Stipulated Price Subcontract
C6 S C• RAIC6 – Architectural Services Contract
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CONSTRUCTION CONTRACTS
Why use a Standard Form Contract• Both parties may be familiar with the form.• Can be quicker to negotiate.
• Allows negotiations to begin from a common starting position.g g g p• The terms can be tried and tested – results in a greater degree of
certainty.• Reduced cost at the outsetReduced cost at the outset.
• …but with the wrong contract, it may get you in the end…• The drafters have usually addressed most of the major issues.
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CONSTRUCTION CONTRACTS
Why You Might Not Want to Use a Standard Form Contract• The person who drafted the contract has not considered your
circumstances and has no responsibility to you.• Always consider who drafted the contract While many purport to• Always consider who drafted the contract. While many purport to
be balanced, they can subtly favour constituents of the association who created them.
• The areas addressed in the contract may not be those which are most yrelevant for your project. Your project may not fit the model.
• The administrative procedures in the standard form may be significantly different than those you usually follow.
• Does the standard form address your intended risk allocation?
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CONSTRUCTION CONTRACTS
Key Clauses to ExamineLi i f li bili• Limits of liability
• Indemnities• Environmental• Waiver• Waiver• Insurance• Warranty• Contract Price/fees• Changes• Dispute Resolution
As a minimum, are you satisfied with how the standard form contract addresses each of these? If not, changes are needed.
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CONSTRUCTION CONTRACTS
A Few Examples• Limits of liabilityForm of Contract Contractor Liability Limit
CCDC2/4 Insured matters limited at insurance amounts; uninsured matters limited at the greater of the Contract Price or $2m, to a maximum of $20m; third party claims for injury, death or damage to property have no limit
CCDC5A/5B Insured matters limited at insurance amounts; uninsured matters limited at the Construction Manager’s compensation; third party claims for injury, death or damage to property have no limit
RAIC6 Limited to the level of professional liability insurance (usually $2m)
CCA5 Limited to insurance coverage, without specifying amounts
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CONSTRUCTION CONTRACTS
• Holdbacks, bonuses and liquidated damages• Does the contract address statutory holdback obligations?
• The RAIC6 does not, in spite of the fact that architects have a right to lien the project.
• Are performance holdbacks, bonuses or liquidated damages desirable?
• If so, few standard form contracts have these.
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CONSTRUCTION CONTRACTS
• Changes• The CCDC forms use Change Directives and Change Orders. Is this the
process you want to follow?• A Change Directive is a written instruction prepared by the Consultant• A Change Directive is a written instruction prepared by the Consultant
and signed by the Owner directing the Contractor to proceed with a change in the Work within the general scope of the Contract Documents prior to the Owner and the Contractor agreeing upon adjustments in the Contract Price and the Contract Time.Contract Price and the Contract Time.
• A Change Order is a written amendment to the Contract prepared by the Consultant and signed by the Owner and the Contractor stating their agreement upon:
• a change in the Work;• a change in the Work;• the method of adjustment or the amount of the adjustment in the
Contract Price, if any; and• the extent of the adjustment
i th C t t Ti ifin the Contract Time, if any.
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CONSTRUCTION CONTRACTS
What you should always do when first considering a standard form contractg• Review all of the terms. Do they align with what you want to do and
how you intend to administer the contract?• Become familiar with the procedures• Become familiar with the procedures.• Consider whether there are changes you want to make to the
procedures.• Consider whether there are issues or risks specific to this projectConsider whether there are issues or risks specific to this project
that may not be addressed in the standard form and whether they can be addressed in Supplementary Conditions.
• If so, draft Supplementary Conditions but take care to consider the consequential affects and potential conflicts.
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CONSTRUCTION CONTRACTS
When Supplementary Conditions may be Insufficient (and a tailored contract should be considered)
• High value contracts.• Unusual risks or issues which require significant reallocation of
ibiliti f th i th t d d fresponsibilities from those in the standard form.• Complex structure to the transaction.• A lot of changes can be a good signal (ie. the Supplementary
Conditions are longer than the standard form contract).• If you need to change most of the contract, it is likely not the best
starting point.
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QUESTIONS
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These materials are intended to provide brief informational summaries only of legal developments and topics of general interest The materials should not be relied upon as ainterest. The materials should not be relied upon as a substitute for consultation with a lawyer with respect to the reader’s specific circumstances. Each legal or regulatory situation is different and requires review of the relevant factssituation is different and requires review of the relevant facts and applicable law. If you have specific questions related to these materials or their application to you, you are encouraged to consult a member of our firm to discuss your needs for specific legal advice relating to the particular circumstances of your situation. Due to the rapidly changing nature of the law, Stewart McKelvey is not responsible for i f i f f t l l d l tinforming you of future legal developments.
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