It may seem counterintuitive that a contractor that has
demonstrated poor workmanship must nevertheless be given
a reasonable opportunity to address their mistakes. When a
contractor has shown incompetence, why should they be
given a second chance? When is enough simply enough?
Here are the principles you should keep in mind:
An owner cannot legally resist payment due to minor
defects or an inconsequential failure to complete project elements.
To repudiate a contract without liability, an owner
must demonstrate a fundamental breach – that is, a breach
that goes to the root of the contract and therefore deprives
the owner of substantially the entire benefit of the very thing
for which it contracted.
If a fundamental breach has occurred, an owner is obliged
to pay its contractor only for the value of the work actually
performed. It may also maintain a claim for any expenses
incurred rectifying defective work.
In the absence of a fundamental breach, an owner is not
ordinarily entitled to repudiate the contract (that is, treat the
contract as terminated), although defects in the work may
entitle the owner to advance a claim against the contractor
for damages. However, before advancing any such claim,
the owner must generally give the contractor a reasonable
opportunity to “cure” deficiencies so as to fulfill its duty
to mitigate.
The quantification of an owner’s damages will generally
be the cost remedying the defects. If, however, the original
contractor would have completed the necessary repairs for
free (or for substantially less than the cost of hiring a new
contractor), the measure of the owner’s damages could
be zero.
There are, of course, limits to the opportunity that must
be provided to a contractor to address construction defects.
What constitutes “reasonable” will depend on the particular
facts of each case. If, for example, the owner asks for the
deficiencies to be addressed, and the contractor refuses, the
contractor will not be in a position to assert at a later date that
they were denied the ability to mitigate its losses. Similarly,
the urgency of the necessary repairs may factor into the
determination of whether a replacement contractor was necessarily
recruited. Perhaps most importantly, a homeowner
may terminate a renovation contract without a reasonable
opportunity to perform necessary repairs if it is apparent that
the contractor is unable to adequately perform the work.
The devil is in the details though: whether a contractor is not
actually able to complete the work will ultimately be a matter
for the court to decide.
The takeaway: a contractor must generally be offered a
reasonable opportunity to address minor construction deficiencies.
Absent a fundamental breach of the agreement, a
contractor who is ready and willing to complete the repairs
has the right to do so – despite an owner’s misgivings about
its past performance. n
Marco Baldasaro is a commercial litigator at McLennan Ross
LLP in Calgary and the co-leader of the Construction group.
C O N S T R U C T I O N L AW
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