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SCHEDULE AND DELAY CLAUSES
Mon, 2012-06-04 19:22 — David Mckenzie
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:
- the subcontractor will be provided industry standard amounts of time to complete individual tasks; and
- the general contractor will coordinate all of the trades on the project to ensure the subcontractor’s work is not unduly interfered with.
If a schedule is provided by the general contractor prior to the bid, then the subcontractor’s price should account for any overtime and additional labour costs required to meet the schedule. If not, then the estimated time to complete the subcontractor’s work at the subcontractor’s price will typically be reflected in a schedule agreed to between the parties as a term of the subcontract. In either case the subcontract will obligate the subcontractor to perform its work in accordance with the schedule.
A general contractor may attempt to impose a clause in the subcontract that provides the general contractor with the right to amend the subcontractor’s schedule as it sees fit without any corresponding change in remuneration to the subcontractor. Such a clause should be avoided where possible, particularly where the subcontract imposes a penalty on the subcontractor for failing to perform its work in accordance with the schedule, as a subcontractor who is required to accelerate its work to meet unilaterally imposed completion dates to avoid penalties may incur substantial additional expenses without additional pay. Some of the more onerous aspects of such a clause can be avoided by changing the wording so that any amendments made to the schedule must be both mutually agreeable and reasonable.
A general contractor may also attempt to impose a clause that makes the subcontractor liable for all damages suffered by the owner and general contractor as a result of delays caused by the subcontractor, while exempting the general contractor from all responsibility for delays it causes the subcontractor. A significant delay on a project can prove very costly to a subcontractor, who will incur uncompensated labour costs and expenses during the delay and may miss out on bidding and working on other jobs as a result. A subcontractor should insist that the general contractor’s exposure to liability as a result of delays it has caused be commensurate to the subcontractor’s.
A subcontractor’s costs on a project are usually directly related to the time it takes to complete the subcontractor’s work. A subcontractor should review the terms of any proposed subcontract to ensure that compensation will be provided for accelerations and delays for which the subcontractor is not at fault. If they do not, the subcontractor should consider changing those terms that allow the general contractor to unilaterally determine the amount of time the subcontractor will have to complete its work without any corresponding compensation.
David Mckenzie is a lawyer practicing construction and commercial litigation at Jenkins Marzban Logan LLP in Vancouver. He is called to the bar of British Columbia.
DISCLAIMER: The author does not intend to form a solicitor-client relationship with a reader of this article. This article is for information purposes only. It should not be relied upon for legal advice. If you require legal advice, you should seek counsel authorized to practice law in your jurisdiction.
