New Home Contract – Damages for Incomplete or Deficient Work, and for Stress #132

By Gerry Neely
B.A. LL.B.

The plans were for a home with unusual design features to be constructed by a competent contractor experienced in the construction of standard design homes only. The home was to be built for a demanding client who expected very "high" quality workmanship from a contractor who intended to provide "good" quality workmanship.

Cost was a significant factor to the client but the contractor expected that there would be some flexibility with the contract price to accommodate the special features of the design. Neither the contractor nor the client fully understood the expectations or intentions of the other.

As construction proceeded, feelings ran high and eventually the contractor abandoned construction believing, wrongly as it turned out, that he wouldn't be paid. The house was nearly finished and the client moved in without the contractor's approval because the client's rental period in temporary accommodation had ended. The final draw, which was to have been paid to the contractor upon occupancy, was paid instead into trust pending resolution of the differences between the two parties.

At the same time the client gave a list of deficiencies to the contractor who was advised that he would be paid for work done. Negotiations resulted in the contractor correcting a number of deficiencies, although what could have been done in one week took four months to complete. The major issue concerned the uniquely designed skylights which during construction were changed, at the request of the contractor, to standard skylights. The contractor said this was necessary to resolve a construction problem. The change was not presented as a cost problem, but the evidence at trial was that the change saved the contractor between $8,000 and $20,000. The cost difference in favour of the contractor was not made plain to the client.

This plus other disputed issues led to the contractor suing for the balance of the contract price plus extras. The client counterclaimed for damages for incomplete and improperly completed work, as well as damages for stress. The judge agreed with a number of the claims made by the client, including an award of damages for the substitution of the less costly installation of the standard skylights.

The evidence was that the skylights as designed were so obviously unusual that the contractor should have considered the special problems they created at the time he negotiated the contract price. When he awakened to the problem, his client was entitled to know that the problem was one of cost rather than of construction. The client might not then have been as ready to accept the substitution. Or, and this may have crossed the contractor's mind, she may have been prepared to accept it but upon condition that the contract price be reduced.

Because the range of costs for the difference was so great, and since the client partially got what she wanted, damages for the substituted skylights were fixed at $8,000. After off-setting the contractor's claim, the damages received by the client were approximately $25,000.

The contractor tried to deny liability by arguing that the client was in breach of her contract by putting the amount of the last draw in trust, rather than in paying it to him. To this the judge replied that although the contract did not provide for a holdback for incomplete work, at common law the client was under no obligation to pay for work not finished or deficient. In addition the evidence made it apparent that the client wanted the contractor to complete the work and was prepared to pay for it when it was done satisfactorily.

Damages of $1,500 were awarded to the client for stress. Not only was the house not finished, but the client suffered the aggravation of the contractor working next door constructing a new home when she was trying to get hers finished. As the judge said "the house was not what was promised. Getting it finished was like pushing an elephant through a drain pipe...".

You may have noticed that throughout this column, the contractor has been referred to by the personal pronoun, although the plaintiff referred to below is a limited company. The reason for this is that the limited company owned the lot upon which the house was constructed and the lot was sold to the client as part of a building contract. The building contract, which was separate from the offer for the sale of the lot, was signed personally instead of in the name of the company. Damages were awarded against the principal of the company, rather than the company.

1.

Islington Trading Co. Ltd. v. Alfreds, County Court of Vancouver, Vancouver Registry No. F 861857.

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