Residential construction is messy for a variety of reasons. In contrast to commercial construction, the building or renovating of people’s homes carries with it certain factors that complicate the services provided by contractors. Some homeowners who take unreasonable stances as to the existence of deficiencies.[1] Homeowners may also be more lay and misunderstand the scope of work included in the contract, leading to contested disputes. Ultimately, homeowners care more – your home is your castle, and if it’s not done perfectly, then it’s not good enough.

Another factor that often arises from this messiness is the actual contracting element between contractors and homeowners. As opposed to the commercial construction industry in which prevenient agreements and purchase orders may be sufficient to govern the relationship between parties, recent case-law has demonstrated that contracts in residential construction must be formal as a necessary requirement of protecting homeowners. Particularly – and much to the surprise of many contractors and homeowners – the Consumer Protection Act, 2002 has been deemed to apply to residential construction and renovation agreements.

 

What is the Consumer Protection Act, 2002?

Enacted and amended from the previous Consumer Protection Act, the Consumer Protection Act, 2002, S.O. 2002, c. 30, Sched. A (the “CPA”) is a statute enacted by the Ontario government with the intention of doing what it was named for – protecting consumers. It applies to most Ontario businesses, providing protection for both the supply of goods and services.[2] It further applies to consumer transactions if either the consumer or the supplier is in Ontario.

As indicated by its name, the protection is provided to consumers – the Act does not apply to businesses or corporations, nor to individuals who are engaged in business-to-business transactions. This means that an individual who purchases materials to subsequently re-sell would not necessarily fall into the category of consumer, but rather would be considered a customer.

Similar to the Construction Act, parties affected by the CPA cannot contract out of its protective provisions.[3] This means that, any contracts that explicitly contract out of the CPA are nullified to the extent that the terms or articles of that contract are inconsistent with the CPA.

Accordingly, one of the protections that the CPA provides to consumers is rights as to the types of agreements that they enter into businesses with. These protections may include mandating disclosure requirements for the businesses, requiring good-faith practices, and providing consumers – in certain cases – with a cooling off period and possibility of cancelling such agreements without repercussions.[4]

 

How does the Consumer Protection Act affect Residential Construction?

In addition to its general protections, the CPA defines different types of agreements with specific protections awarded to each. One of these agreement types is called the Future Performance Agreements (“FPA”). Under Section 1 of the CPA, FPAs are defined as a consumer agreement in respect of which delivery, performance, or payment in full is not made when the parties enter the agreement.

Historically, the Ontario Courts have recognized that construction agreements fall within the definition of FPAs, which most recently was affirmed in the Sawh v. Par-Tek Construction Services Inc. case.[5] Section 22 of the CPA indicates that, once a contract falls into the definition of a FPA, such an agreement must be in writing, must be delivered to the consumer, and must contain the requirements as set out in the regulation of the CPA.

Namely, under Section 24 of CPA’s regulation[6] (the “Regulation”) the following information shall be contained in every FPA – and by default, in every residential construction contract:

  1. The name of the consumer.
  2. The name of the supplier and, if different, the name under which the supplier carries on business.
  3. The telephone number of the supplier, the address of the premises from which the supplier conducts business, and information respecting other ways, if any, in which the supplier can be contacted by the consumer, such as the fax number and e-mail address of the supplier.
  4. A fair and accurate description of the goods and services to be supplied to the consumer, including the technical requirements, if any, related to the use of the goods or services.
  5. An itemized list of the prices at which the goods and services are to be supplied to the consumer, including taxes and shipping charges.
  6. A description of each additional charge that applies or may apply, such as customs duties or brokerage fees, and the amount of the charge if the supplier can reasonably determine it.
  7. The total amount that the supplier knows is payable by the consumer under the agreement, including amounts that are required to be disclosed under paragraph 6, or, if the goods and services are to be supplied during an indefinite period, the amount and frequency of periodic payments.
  8. The terms and methods of payment.
  9. As applicable, the date or dates on which delivery, commencement of performance, ongoing performance and completion of performance are to occur.
  10. For goods and services that are to be delivered,
    1. the place to which they are to be delivered, and
    2. if the supplier holds out a specific manner of delivery and will charge the consumer for delivery, the manner in which the goods and services are to be delivered, including the name of the carrier, if any, and including the method of transportation to be used.
  11. For services that are to be performed, the place where they are to be performed, the person for whom they are to be performed, the supplier’s method of performing them and, if the supplier holds out that a specific person other than the supplier will perform any of the services on the supplier’s behalf, the name of that person.
  12. The rights, if any, that the supplier agrees the consumer will have in addition to the rights under the Act and the obligations, if any, by which the supplier agrees to be bound in addition to the obligations under the Act, in relation to cancellations, returns, exchanges and refunds.
  13. If the agreement includes a trade-in arrangement, a description of the trade-in arrangement and the amount of the trade-in allowance.
  14. The currency in which amounts are expressed, if it is not Canadian currency.
  15. Any other restrictions, limitations and conditions that are imposed by the supplier.
  16. The date on which the agreement is entered into.

In addition to other punitive sections of the CPA dealing with businesses that fail to comply with these sections, Section 23 of the CPA also allows a consumer to cancel a FPA within one year after the date of entering into the agreement if the consumer does not receive a copy of the agreement that meets the requirements set out in Section 24 of the Regulation.

 

Important Takeaway

First and foremost, and much to the chagrin of contractors who prefer to “make contracts less complicated” or “not overwhelm their customers”, the law is clear – you need a written agreement that explicitly spells out and includes all of the requirements as set out in Section 24 of the Regulation.

If a residential construction contract does not meet these requirements, contractors risk penalties, charges, and other punishments set out in the CPA in addition to risking the consumers foregoing on what would otherwise be their contractual obligation.

 

The foregoing is for informational purposes only and should in no way be relied upon as legal advice. If you have any further questions, or would like to schedule an appointment for legal advice tailored to your circumstances and business, please contact me at dan@fridmar.com.

[1] Generally, and for this exact reason, the Tarion Warranty Corporation sets out a list of construction performance guidelines: https://www.tarion.com/cpg/construction-performance-guidelines/browse-construction-performance-guidelines-freehold

[2] CPA

[3] CPA, s. 7.

[4] https://www.ontario.ca/page/your-rights-under-consumer-protection-act

[5] Sawh v. Par-Tek Construction Services Inc. (2017), 2017 CarswellOnt 12658 (Ont. Sm. CC) at para. 15.

[6] O. Reg. 17/05: General.