Expanding the Scope of Work: Renegotiate, Capitulate or Litigate
It is an unfortunately common story in construction litigation: parties agree on a scope of work and price, the scope of work changes and the parties don’t go back to the bargaining table to reach an agreement on the new scope of work. This occurred in the recent decision of Digg’n 4U Contracting Ltd. v Kharwar, 2021 BCSC 1027 (CanLII).
The plaintiff contractor was originally retained by the defendant property owners to construct a five-foot high lock-block retaining wall consisting of two rows of concrete lock-blocks for the estimated price of $25,000-$30,000 based on the owners also supplying certain materials. Several changes to the project were contemplated including moving the siting of the wall, expanding the height of the wall, making alterations to the shape of the wall, making alterations to the wall that required the input of an engineer and additional excavation and preparation work for these changes. The contractor, for its part, did not immediately invoice for its expanded scope of work.
Relying on the original $25,000-$30,000 estimate, the owners refused to pay the contractor’s invoice, which was $70,618.80. In insuring discussions, the owners also alleged several deficiencies in the contractor’s work and invoicing. In their legal submissions, the owners also relied on case law related to the notion that estimates can limit the amounts properly charged, can influence the amount a court may determine work is worth if a price isn’t agreed for that work and that deficiencies with the work might disentitle a contractor to its full claims. The owners also alleged several issues with the math and basis of the invoicing itself.
The Court ultimately found that it was patently obvious to the owners that the scope of work had changed and expanded significantly. It similarly found that there was no evidence to counter the reasonableness of the contractor’s invoicing. Simply put, when the owners increased the work, they increased the amount that could be properly charged and the estimate no longer was relevant.
The owners did not establish what the duty of care applicable to the contractor for the construction of its retaining wall was, did not prove they suffered any damage as a result of alleged issues with the retaining wall and did not lead evidence the court could have relied on to conclude otherwise. The owners did not give the contractor an opportunity to remedy alleged issues with the retaining wall before they had another party alter the contractor’s work.
In the end, the judge awarded the contractor its full invoice less $665.13 in errors the contractor admitted in its invoicing. The judge rejected the owners’ counterclaims and awarded costs against them.
Digg’n 4U Contracting Ltd. v Kharwar is once again a reminder of the importance of parties reducing their contractual agreements to writing. This remains just as important when commencing contractual relations as it does when the parties agree to alter those contractual relations. Had the contractor obtained an agreement in writing from the owners as to the amount that could be charged for the additional work or even provided a new estimate that was accepted, a significant fight could have been avoided. Similarly, if the owners wanted to limit the amount that could be invoiced or bind the contractor to an estimate, it was important to refresh such commitments as the scope of work changed. Having failed to reach such agreements and no party agreeing with the position of the other, the parties had to turn to litigation to obtain resolution.
For related reading, please consider:
- Contract Law Largely Explored in One Case
- Keeping Construction Costs Under Control: Costs-Plus vs. Guaranteed Maximum Price
- Construction Estimates and Failure to Agree on Contract Pricing and
- Construction Disputes: A Contractor’s Right to be Paid vs. Owner’s Claims for Defective Work
Jeremy Burgess is a litigation associate at Pushor Mitchell with broad experience in litigation including constructions. If you have any questions about a legal dispute, we’d be happy to assist you. Feel free to contact Jeremy in a confidential manner toll free at 1-800-558-1155 or at firstname.lastname@example.org. You may also contact our litigation group.
The foregoing is for informational purposes only and is not legal advice, nor should be construed as such.