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Receivables, Nightmares for Contractors

It could often be assumed that the collection fees for services and materials for a contractor’s hard work would be a simple matter.  After all, as a contractor you set your price, you attended with your staff, you provided the materials, and you completed the requested work; accordingly, what could be easier and more straight forward, right?  However, as every contractor has learned, construction and renovation contracts are one of the most common issues reviewed by the Small Claims Court in Ontario and as such it is clear that the collection of monies due for services rendered is often more troubled than necessary.  When it comes time for payment, clients always seem to have a reason why you should not get paid; from deficiencies previously unmentioned, damages to the property that were unnoticed until time for payment, extras that were supposedly always part of the quote, or new and inventive interpretations of the original agreement for services.

The first step to avoiding problems in the collection of your proper payment is “to get it in writing”.  Know what the client wants, ensure the client knows what he or she wants and advise them in your written agreement what you will be doing, how much it costs, how much the materials will cost and when you can or will have the work completed subject to those factors outside of your control that could delay the completion.  Confirm that anything in addition to the work agreed upon will be an extra and ensure that these extras are confirmed, discussed and quoted in writing as an addition to the main agreement when they arise.

Then depending on the anticipated length of the job have the homeowner inspect regularly, at the completion of any specific phase of the work you are doing, weekly, monthly or even daily on a small job, signing off on each inspection as it happens.  Seems like a lot of wasted time and in many cases it may be but in the case where the homeowner decides not to pay you for any reason you can account for everything that was done and the customer’s satisfaction with same.

However, if it now too late and you do not have a written contract or your written contract does not cover all the reasons the homeowner is relying on not to pay you it is not too late.  A deal is a deal and a contract is a the Courts have and will enforce an oral agreement both for initial construction and in respect to extra’s or changes and additions to a construction agreement.  The Court’s position in respect to oral agreements is well outlined in the case of Schrempf v. Willchuk, 2013 ONSC 2863 (CanLII) which states:

[5]  On the first issue of whether an oral agreement existed, in Picavet v. Clute, 2012 CarswellOnt 4575 (ON S.C.), Healey J.  at para.  9 summarized that where there is no written contract documenting the alleged agreement “the court must examine everything occurring between the two parties that is relevant to the alleged agreement in order to decide whether a contract exists.”

[6]  Paragraph 15 of the decision of Cavarzan J.  in Summers v. Sawyer, 2005 CarswellOnt 4001 (ON S.C.), provides as follows with respect to binding oral agreements:

Whether or not a binding oral agreement was formed in the circumstances here is a question which engages what has been called the objective principle of contract formation.  As stated in S.M.  Waddams, The Law of Contracts (5th Edition) at p.  103:

The principle function of the law of contracts is to protect reasonable expectations engendered by promises.

The Court’s further understand and accept that you are entitled to be paid for your your work even if you are not given an opportunity to complete same by way of lock out or non-payment.  This means in cases where there is no written agreement or where your agreement may not refer to or cover everything that you and the homeowner agreed to including the cost of extras the Courts have and will award payment based on what is referenced as a quantum meruit basis.

This term utilized often by the Courts means that you are entitled to be paid for what you have earned or provided as outlined in the case of Goulimis Construction Ltd.  v. Jason Smith, Eva Klein and Bank of Montreal, 2014 ONSC 1239 (CanLII)  which states:

[41]  The courts generally will grant recovery on the basis of quantum meruit where a party supplies services and materials to another at their request, encouragement or acquiescence, whether under a quasi-contract or no contract, and where it would be unjust for this other party to retain the benefit.  The court in the above noted Rafal decision reiterated this basic proposition at paragraph 30, again referring to the Fridman text:

Quantum meruit will be available if the services in question were furnished at the request or with the encouragement or acquiescence of the opposing party in circumstances that render it unjust for the opposing party to retain the benefit conferred by the provision of the services: Fridman, Restitution, 2nd ed.  (Toronto: Carswell, 1992 at 290-92; Nicholson v. St.  Denis (1975), 57 C.L.R.  (3d) 699 (Ont.C.A.), leave to appeal to S.C.C.  refused, [1975] 1 S.C.R.  x (S.C.C.).

So if you have done the work and would like help with the sometimes complex issues and requirements of the Small Claims Court in respect to the enforcement of your contracts, please get in touch.

Ian Shemesh Paralegal Services

155 University Avenue, Suite 1920
Toronto, Ontario,
M5H 3B7

P: (647) 531-3655
E: shemesh@shemeshparalegal.com

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