Good vs. Bad Contracts

Snow and Ice Maintenance Tenders and Contract Interpretation Robert KennaleyMcLauchlin & Associates

Good vs. Bad Contracts • Understanding and Managing Risk under a Contract is important regardless of whose form of Contract is proposed • Understanding the difference between a good contract and a bad contract is critical

Good vs. Bad Contracts • Historical Problems with Contracts: Inadequate Descriptions of the Work - vague, ambiguous, inconsistent and confusing descriptions of the work

Good vs. Bad Contracts • Historical Problems with Contracts: Contractors Assume Too Much Liability- - Over-reaching “Hold Harmless” Clauses - Over-reaching Scopes of Work

The Contract and Scope of Work • Liability Starts with the Occupier under the Occupier’s Liability Act • The Owner/Property Manager/Client will be an Occupier under the Act

The Contract and Scope of Work • The Owner/Property Manager/Client can assign under a Contract some of its responsibilities under the Act • The Contractor becomes responsible to meet the obligations he assumed under the Contract

The Contract and Scope of Work • The Contractor is not responsible to do work, undertake tasks or assume risk unless he has, either expressly or by implication, agreed to do so under the Contract • It is accordingly critical that the Scope of Work be properly described in the Contract

The Contract and Scope of Work • To Properly Price the Work and Avoid Disputes the Contractor Needs to: - understand the Scope of Work - not assume any unreasonable obligations under the Contract - avoid obligations he is not being paid to assume

The Contract and Scope of Work • To Properly Get a Good Price and Avoid Disputes, the Owner Needs to: - provide a clear Scope of Work - avoid unreasonable or impossible requirements (which are expensive to price) (which can lead to disputes)

The Contract and Scope of Work • The Overreaching Scope of Work: - Promising the Impossible - Promising the Unknown - The “open by” Undertaking - The problem of the “Second Pass”

The Contract and Scope of Work • Contractual Terms can be Divided into Two Parts: 1. General Conditions • Generally apply to all projects 2. Specific Conditions / Schedules • Specifies work to be performed • Specifies price • Usually varies from project to project

The Contract and Scope of Work 1. General Conditions • The Parties • Payment Provisions • Workplace Safety & Insurance Issues • Notice Provisions • Indemnification Provisions • Termination Provisions • Insurance Provisions

The Contract and Scope of Work General Conditions Should be unique to Winter Maintenance Industry !! • Parked Vehicles • Improperly Maintained Premises • Severe weather conditions? • Stop work orders • Strikes, lock-outs, etc.

The Contract and Scope of Work 2. Specifications / Schedules / Site Plans • Should be made part of the Contract • These are More Important than the Legalese

The Contract and Scope of Work 2. Specifications / Schedules / Site Plans • Site Plans ShouldBe Used!!! • These Should be Made a Schedule • Particular Limitations / Issues Can and Should be Addressed in the Site Plans

The Contract and Scope of Work • The Site Plan Should Clearly and Accurately Describe: • The work to be performed • Any limitations on the scope of work • Site conditions • Special site features to be considered

Discretion to Use Ice Melters • To Avoid Disputes Contracts should clarify the contractor’s obligation to use ice melting products • Contracts Should Clearly Specify who makes the decision about the application of ice melting products… • … either it is the Contractor or the Client

Liability for the Slip and Fall • the Contractor Generally Avoids Liability: • if he properly performs his contract; • if he is not otherwise Negligent; • and so long as he has not assumed responsibility to do more than properly perform his work under the Contract • this is often done through the over-reaching ‘Hold Harmless Clause’

Hold-Harmless & Indemnification • Indemnification should only occur where the contractor breaches the contract or is negligent in the performance of his work as specified • Indemnification should also be limited to damages for personal injury or property damage, and to the limits of the Contractor’s insurance

Contracts put out to Tender • What are the Options where less than clear, or less than preferred, contractual terms are put out to tender? • Don’t Counter Offer! • Don’t Qualify or Clarify Your Bid!!

Contracts put out to Tender • M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., [1999] 1 S.C.R. 619 • the low bidder had added a handwritten note to the tender form, increasing its price in the event a certain pipe was to be used • M.J.B. was the second low bidder

Contracts put out to Tender • M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., [1999] 1 S.C.R. 619 • MJB objected that it should have been awarded the Contract as the note was a qualification which: • rendered the low bid non-compliant; and • rendered the low bid incapable of acceptance

Contracts put out to Tender • M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., [1999] 1 S.C.R. 619 • The Owner relied on the privilege clause: “The lowest or any tender not necessarily accepted” • The Owner argued that the clause allowed it to award to even a non-compliant bidder

Contracts put out to Tender • M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., [1999] 1 S.C.R. 619 • The Court: • found an implied term that only compliant bids would be considered • held that the privilege clause did not allow the Owner to award to non-compliant bidder

Contracts put out to Tender • Bidding Contractors Who Qualify or Clarify their Bids run the risk that their Bids will be rejected out of hand as being non-compliant! • In fact, Tendering Authorities are now well versed in the Law of Tendering and will generally not consider non-compliant bids.

Contracts put out to Tender • Contractors who are concerned about the terms of a Contract put out to Tender can: • request a clarification from the Owner/Consultant in accordance with the terms of the Tender Package; • (in which case the Owner/Consultant is to issue the response to all bidding contractors)

Contracts put out to Tender • Contractors who are concerned about the terms of a Contract put out to Tender can: • request that the terms, perhaps be changed; • (in which case the Owner/Consultant can issue an Addendum, if so inclined)

Contracts put out to Tender • Contractors who are concerned about the terms of a Contract put out to Tender can: - price the risk assumption or refuse to bid the Contract.

Snow and Ice Maintenance Tenders and Contract Interpretation Robert KennaleyMcLauchlin & Associates

Good vs. Bad Contracts