The importance of giving notice when dealing with construction contract disputes

Construction disputes often arise as a result of disagreements between the parties to a construction contract.

Typical issues which may lead to a disagreement between the parties include the occurrence of a delay event, changes to the design of a project, changes to the finish date or schedule for the project, or changes to a party’s scope of work under the contract.

When such issues arise and the parties do not agree on a solution, one party will almost always be left seeking compensation from the other. When this is the case, the critical importance of a party giving notice of an intent to claim cannot be understated.

What is meant by “giving notice”?

When one party intends to make a claim for additional compensation, typically the construction contract will contain a provision that the party who intends to make such a claim must “give notice”.

For example, many construction contracts contain a clause along the lines of the following:

“If the Subcontractor intends to make a claim for an increase to the Subcontract Price, or if the Contractor intends to make a claim against the Subcontractor for a credit to the Subcontract Price, the party that intends to make the claim shall give timely Notice in Writing of intent to claim to the other party.”

Why is giving notice so important?

The Ontario Superior Court of Justice recently affirmed the importance of giving notice of an intent to claim in the case of Elite Construction Inc. v. Canada. In that case, Justice Pinto summarized the status of the law regarding contractual notice in the context of construction contracts:

• [65]  A line of cases comprising Corpex (1977) v. The Queen in Right of Canada, 1982 CanLII 213 (SCC), [1982] 2 S.C.R. 643, Doyle Construction Co. v. Carling O’Keefe Breweries of Canada Ltd., 1988 CanLII 2844 (BC CA), 27 B.C.L.R. (2d) 89 (C.A.), and Technicore Underground Inc. v. Toronto (City), 2012 ONCA 597, has discussed the importance of enforcing notice provisions in construction contracts.
• [66]  In Corpex, the plaintiff contractor sued the government for the additional costs arising from a mistake as to soil conditions. The trial judge’s decision was overturned by the Federal Court of Appeal on the basis that Corpex had failed to give notice as required by a notice clause (Clause 12) in the General Conditions of the contract.  On further appeal to the Supreme Court of Canada, Beetz J., writing for the court, emphasized that a notice provision is of benefit to both contractor and owner since the parties can focus on the immediate dispute and adjust their positions while the rest of the work in the contract continues… […]
• [67]  The courts in Corpex and Doyle Construction held that the Notice Provision can bar a contractor who fails to give notice from making a claim even though the Notice Provision does not contain a “failing which” clause.  In other words, compliance with a notice provision is a condition precedent to maintaining a claim in the courts.
• [68]  In Technicore, the Court of Appeal for Ontario held that failure to provide notice within the time stipulated by the contract served as a bar to the contractor’s action, and that an owner does not need to prove prejudice in order to rely on failure to comply with the notice provision as a bar to the claim: Technicore, at paras. 28 and 47.

Ultimately, Elite’s claims against the Federal Government (Canada) were dismissed by Justice Pinto as Elite failed to comply with its contractual notice obligations.

What is proper notice?

In Elite Construction Inc. v. Canada, Elite argued that it gave notice of its various claims in the form of emails and CCN summaries over the course of the construction project. Justice Pinto rejected this argument on the basis that the emails and summaries did not explicitly reference any intent to claim or the details of any such claim, and that “the “grumblings of a contractor” are not sufficient to constitute notice”. So what then is proper notice?

The case of Doyle Construction Co. v. Carling O’Keefe Breweries of Canada Ltd.indicates that proper notice will be satisfied where:

• The complaint goes beyond “grumblings” to display or indicate an “intention to claim”;
• The claimant gives some particulars as to what the complaint is, so that the other party has an opportunity to consider its position and the possibility of taking corrective measures; and
• The complaint is timely; e.g. given “in enough time” to permit the other party to take “guarding measures” if it so desires.

Doyle also provides legal authority for the general proposition that provisions requiring claims to be made in writing should be treated as provisions requiring written notice of claims.

Key takeaways

Giving notice of an intent to claim is critical to the survival of a claim for compensation within the context of a construction contract.

Canadian courts have consistently held that a notice provision in a contract can bar a party who fails to give notice from making a claim. In other words, compliance with a notice provision is a condition precedent to maintaining a claim in the courts.

Parties to a construction contract who are seeking compensation resulting from a disagreement should pay close attention to their contractual obligations regarding giving notice of an intent to claim, and not rely on mere “grumblings” to achieve a satisfactory result.

About the Author:

Ryan Stubbs is a litigator at Soloway Wright LLPwith a focus on Civil Litigation and Construction Litigation.

He regularly represents contractors and subcontractors in navigating all manner of complex construction disputes. For construction related inquires, please contact one of our litigation lawyers.

DISCLAIMER: This article is for general information purposes only and is not (and should not be construed as) legal advice. The information contained herein summarizes only certain aspects of the subject matter and is not a comprehensive review of applicable law. All of the foregoing is subject to legal and accounting advice based on the particular circumstances of each potential client.