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Construction law column by David Mckenzie

TERMINATION FOR CAUSE CLAUSES

In this series of articles, we examine various “onerous clauses” commonly found in construction subcontracts. Onerous clauses are unfair clauses that both shift the risk on a construction project to the party least able to bear it and conflict with the reasonable expectations of the same party.

Statutory Declarations

On a typical construction project, a general contractor is hired by the owner to build the project. Subcontractors are then hired to complete various portions of the work. These subcontractors may in turn engage sub-subcontractors and suppliers. This type of arrangement is often referred to as the construction pyramid.
 
The owner has no contracts with subcontractors or suppliers and may have little if any dealing with them. Similarly, the general contractor has no contracts with sub-subcontractors or suppliers. Typically, neither the owner nor the general contractor has any means of determining whether the parties lower down the chain are being paid for their services. Because unpaid parties can mean liens and resulting delays, the construction industry has developed the use of statutory declarations to help payments flow to the base of the construction pyramid.
 

SCHEDULE AND DELAY CLAUSES

In this series of articles, we examine various “onerous clauses” commonly found in construction subcontracts. Onerous clauses are unfair clauses that both shift the risk on a construction project to the party least able to bear it and conflict with the reasonable expectations of the same party. The purpose of these articles is to discuss the purpose and effect of onerous clauses and suggest some means of avoiding them.   Nevertheless, the advice of a construction lawyer should be sought to identify and modify onerous clauses prior to signing any subcontract.
 
Labour costs usually constitute a significant portion of a subcontractor’s total costs on a project. The labour component of a subcontractor’s price is generally based on the amount of time the subcontractor estimates as necessary to complete its required tasks. This estimate will in turn be based on certain assumptions, such as:
  1. the subcontractor will be provided industry standard amounts of time to complete individual tasks; and

PAY-WHEN-PAID CLAUSES

In this series of articles, we examine various “onerous clauses” commonly found in construction subcontracts. Onerous clauses are unfair clauses that both shift the risk on a construction project to the party least able to bear it and conflict with the reasonable expectations of the same party. The purpose of these articles is to discuss the purpose and effect of onerous clauses and suggest some means of avoiding them.   Nevertheless, the advice of a construction lawyer should be sought to identify and modify onerous clauses prior to signing any subcontract.
 
Few clauses, if any, are more important to a subcontractor than the payment clause in a subcontract. The payment clause typically sets out:
1.       the processes and documents required to apply for payment for the work performed; and
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