The construction industry is not what it used to be. Long are the days since the industry was dominated by individuals who took pride in their work and built high-quality, long-lasting homes. With the steady increase in material and labour cost, there has been a corresponding decrease in the general quality of services and materials provided as a tug-of-war between profit margins and ongoing profits persists. These factors have also led to poor workmanship in the form of many deficiencies throughout the course of various projects and at the ‘final’ stage of said projects.
Deficiencies are a common reason for litigation in construction proceedings. Homeowners spend serious money on their construction projects, whether for increase of value or to further their enjoyment of their home. Homeowners expect, and rightly so, full satisfaction with the implementation of construction work that was contracted and promised by contractors. Dissatisfaction due to deficient work can make homeowners act in a zealous manner – namely, firing existing contractors, hiring subsequent contractors to finish or correct remaining work, and litigating against the initial contractor for the cost of correcting such deficiencies.
However, the law is clear that this fast-paced approach may not be acceptable and could be detrimental to homeowners. Specifically, the law recognizes that reasonable opportunities must be provided to correct such deficiencies before setoff or claim rights are allowed.
Reasonable opportunity
The general law in Ontario upholds the principle that, if a contractor is not in breach of contract, then they should be given a reasonable opportunity to correct the deficiencies in their work.[1] Namely, a deficiency in work itself is not a breach of contract, unless the contractor refuses to remediate what should be regarded as a real or actual deficiency in the work. As a result, if a homeowner does not allow the contractor a reasonable opportunity to remediate or fix such deficiencies – or if the deficiencies are not brought to the contractor’s attention, the homeowner is not entitled to backcharge or claim from the contractor amounts that the homeowner incurs to correct the work. This is due to the Court’s recognition that, without this fair and reasonable opportunity, a contractor cannot be restricted from their entitlement to receive payment for their work completed[2], albeit deficiently.
The more important factor is that a contractor must remain ready, willing, and able to remediate deficiencies and finish the work required to complete the contract between owner and contractor. At law, a contractor has the right to complete their responsibilities. While there has not been an exact definition of what qualifies as “reasonable opportunity”, the Courts have acknowledged that a contractor has a right to enter the property to assess deficiencies and precluding such access limits this reasonable opportunity to remediate.[3] Further, a refusal by an owner to allow the contractor to enter the property can be interpreted as breach – and repudiation – of the contract by the owner. The only exception to this rule is if the contractor’s deficiencies can be classified as fundamental breach.
Fundamental Breach
A fundamental breach of contract is defined as a breach that’s so egregious that it goes to the very root of the contract.[4] While a deficiency itself may not be a breach of the contract, where the contractor’s work is so deficient as there is no possible way that it could be reasonably remediated, it would amount to a fundamental breach of the contract. Another could include a significant or major breakdown of trust between the contractor and the owner.
For example, where the contractor was required to obtain a building permit and lied about doing so/started working before the permit was issued, such conduct could be considered a fundamental breach and would preclude the owners from having to provide opportunities to remediate such breach. The Courts have generally held that establishing fundamental breach in construction contracts required a high threshold and burden of proof on the part of the owner. Most recently, in the 2002759 Ontario Ltd et al. v. Koropeski et al case, the Court remarked that “mere bad or defective work will not entitle an owner to terminate a contract. The deficiencies must be of such significance that they amount to breach of contract, or it becomes evident that the contractor is not willing or able to perform the work”.[5]
Conclusion
Construction projects are stressful and may take an emotional toll. However, homeowners must remember to exercise care and discretion before firing a contractor. As is clear in the caselaw, as long as the contractor is willing, ready, and able to return and complete their scope of work, they are entitled to a reasonable opportunity to do so. Otherwise, homeowners may potentially find themselves being responsible to contractors for their improper termination of contract as well as the cost of hiring subsequent contractors to complete the work. It is important to remember that establishing “fundamental breach” is not an exact science and that, at the end of the day, Courts always exercise decision making on a case-by-case basis. Temporary frustration thus makes more sense than uncertain litigation and long-lasting disputes.
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] TIF Mechanical Limited v. Ortolli and Lobello, 2016 ONSC 3172 at para. 73.
[2] Ibid.
[3] Rocksolid v. Bertolissi, 2013 ONSC 7343 at para. 78.
[4] C.S. Bachly Builders Ltd. v. Lajlo (2008), 2008 CarswellOnt 6542, [2008] O.J. No. 4444 at paras. 82 & 87 (Sup. Ct.).
[5] 2002759 Ontario Ltd et al. v. Koropeski et al. 2021 ONSC 7873 at para. 89.
