The OGCA has been approached by many OGCA contractors flagging multiple problematic terms/provision/language found in contracts supplied by the University of Toronto.
The terms and conditions contained in these contracts are very onerous, one-sided and dictatorial in nature and will be problematic to OGCA members should they agree to such terms and enter into contracts with these provisions.
Some OGCA contractors have opted not to bid on University of Toronto projects moving forward due to the multiple problematic terms they have identified in the contract(s).
A small example of the problematic terms being used in University of Toronto contracts are as follows:
- Application for Payment and Payment Procedures
Application for payment procedures refer to the processes and procedures for the contractor to seek payment from the owner. In some contracts, responsibility for determining whether the contractor is entitled to seek payment for work performed may be a payment certifier (who may be an architect or engineer) or a representative or agent of the owner.
Responsibility for Determining Payment Entitlement
The owner, and the consultant, are responsible for assessing whether all requirements for an invoice are satisfied. If the application for payment does not meet the requirements, it is returned to the contractor with reasons, and the contractor may resubmit the application with all required information within three (3) working days.
Dispute Resolution Process
If there is a dispute regarding an invoice, the contractor can resubmit the same application for payment without any additional or new information if they disagree with the assessment. The contract does not explicitly detail a specific dispute resolution process beyond this, but it implies that disputes should be resolved through consultation and resubmission of applications for payment.
Obligation to Pay Undisputed Amounts
The contract does not explicitly state that the owner has an obligation to pay the undisputed amounts contained in the invoice in the event of a dispute. However, it does mention that the owner may withhold payment for deficiencies, delays, or non-payment to subcontractors or suppliers – suggesting that undisputed amounts could potentially be paid separately, but this would likely depend on the specific circumstances and the contract’s broader legal context.
- Assignment by Contractor
There are limitations on whether or not the contractor can assign parts, or the entire contract, to another party. According to the specific construction contract context provided:
Assignment by the Contractor
The contractor is not allowed to assign the contract, or any portion thereof, without the prior written consent of the owner. The granting of such consent is at the owner’s absolute discretion. Even if the owner agrees to an assignment of the contract by the contractor, such assignment does not relieve the contractor from its obligations and liabilities under the contract (GC 1.4.1 and 1.4.2).
Subcontractor Agreement Terms
The contractor must ensure that all contracts and written agreements with subcontractors and suppliers contain an assignment clause in favour of the owner. Additionally, in each of the contractor’s subcontracts with subcontractors or suppliers to perform a portion of the work, the contractor must include a term stating that the subcontractor agrees to an assignment of its subcontract by the contractor to the owner. This term is not enforceable until the proper termination of the contract by the owner (context from the contract).
Owner’s Right to Assign
The owner has the right, in its absolute discretion, to transfer, novate, or assign the contract and all of its rights and obligations under the contract, in part or in whole, to any other partnership, corporation, joint venture, company, or person. Upon such transfer or assignment, the owner shall not be liable for, and shall be released from, the performance of its obligations under the contract, transferring all obligations to the transferee or assignee (GC 1.4.2).
In summary, the contractor is restricted from assigning the contract, or any part of it, without the owner’s prior written consent, which the owner may grant at its absolute discretion. However specific provisions are made for the assignment of subcontractor agreements to the owner upon contract termination, and the owner retains the right to assign the contract to another party at its discretion.
- Acceleration
The owner have a unilateral right to accelerate the schedule and/or milestones. This is evident from the provisions that allow the owner, through the consultant, to issue a Change Directive requiring the contractor to undertake specific actions to accelerate the work. The contract explicitly states that if the contractor is delayed by its own actions or those of its subcontractors or suppliers, or by any cause within the contractor’s control, the contractor must accelerate the work as required to meet the Contract Time prescribed in the Construction Schedule in place at the time of the consultant’s determination.
- No timeline for Owner Submittal review
A clear and defined submittal process is critical to ensuring the design process does not drag on. If the owner does not have a specified number of days to review submittals, it threatens to extend the submittal review process, and therefore the amount of time needed to ensure that the design is acceptable to the owner.
The language in the U of T contract notes that, prior to submitting its first application for payment, the contractor is required to prepare a Shop Drawings and Submittals schedule for review, and acceptance, by the owner and the consultant. This schedule must clearly indicate the timing for submission, review, return, and resubmission (if required) of Shop Drawings and Submittals. The contractor must comply with the requirements for Shop Drawings submissions stated in Division 01 of the Specifications.
There is a risk to not having a submittal submission process and a specific timeline for the owner to review the submittal, as the contract does include these provisions.
- Correction of Work/Rework (pre-warranty period)
If the owner wants to correct work that is deemed inadequate or non-compliant, the responsibility for paying for the correction of the work primarily falls on the contractor.
Deficiency Correction
The contractor is required to commence, or correct, any deficiency within 2 working days after receiving notice from the owner or the consultant. The work must be completed as expeditiously as possible. If the contractor fails to provide emergency service within 8 hours of a request during normal business hours, the owner is authorized to carry out all necessary repairs, or replacements, at the contractor’s expense.
These problematic terms are only a sample of the onerous, one-sided and dictatorial provisions found in contracts issued by the University of Toronto – not found in typical contracts. The OGCA strongly recommends that OGCA members closely review any contract(s) and seek appropriate legal advice. It is the position of the OGCA that members avoid entering into contracts that completely/unfairly download the risk onto the general contractor.
Should anyone have any questions or require any assistance on this matter, please contact Giovanni Cautillo directly at giovanni@ogca.ca.
Disclaimer: This bulletin does not constitute as a legal opinion and should not be relied upon as such. Should any contractor find questionable contract language, the OGCA strongly recommends that they reach out to their legal counsel to obtain a proper legal perspective on the nature of the provisions.