Contractual Basis for Claims

Contractor Rights and Obligations

Public Services and Procurement Canada (PSPC) contract documents provide contractors with a number of circumstances where claims may be presented. If a reasonable settlement cannot be negotiated, the contractor has the right to request various disputes resolution processes, some available under the contract (mediation or arbitration) and others available as a last resort through the legal process (litigation). The contract document outlines the contractor's responsibilities with respect to additional payment requests, e.g.: with claims for delay and substantial unexpected subsoil conditions, the contractor must provide a "notice of intent to claim", otherwise forfeit the right to claim under the contract. The contract appears to be quite clear in this requirement for a written notice within a specified time. However, there are cases where mediators and legal advisors have taken the view that, if PSPC is fully aware of the condition giving rise to the claim, written notice is not necessarily required. In cases where the contractor has a clearly justified claim, it may be difficult to reject on grounds of lack of notice only. Claim payments must fall within the terms of the contract in order to be payable. Any payment for claims outside the terms of the contract must be dealt with under an "ex gratia"Footnote * payment process.

Potential claimants are:

  • general contractor (primary contractor);
  • subcontractors and suppliers: (Note: Subcontractors and suppliers who were not paid the correct amounts due to them, have access to the Labour and Material Payment Bond. Should they be time-barred against the bond, subcontractors and suppliers may then sue the general contractor, or the amounts would be part of the general contractor's claim against PSPC for extras);
  • prime consultants: either an architectural firm or an engineering firm;
  • sub-consultants: mechanical/electrical/structural engineering firms (Note: subconsultants would normally sue the prime consultant if they were not paid the proper amounts or would be part of the prime consultant's claim against PSPC for extras);
  • specialist consultants: may be cost and scheduling or construction management firms (Note: specialist consultants would normally sue the prime consultant if they were not paid the proper amounts or would be part of the prime consultant's claim against PSPC for extras);
  • municipalities, insurance companies, individuals, property owners, and clients.

PSPC Rights and Obligations

PSPC may, under the terms of the contract, initiate assessments and/or counterclaims against contractors, consultants, and occasionally against Surety or Insurance companies. In negotiating settlement of a claim with a contractor, PSPC must accept responsibility for the actions of the PSPC consultants and others contracted by PSPC who may have caused delay. The question of recovery of any payments to the contractor which are attributable to lack of performance of consultants, or others, must be considered and appropriate action taken under the respective terms of those contracts, to recover PSPC costs.

Footnotes

Footnote *

Ex gratia payment - a payment where a legal liability does not exist or where it is uncertain that a legal liability exists under the contract. (Treasury Board definition)

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