Construction Law: When is a contractor’s extra work a compensable “extra”?
Even in the face of the most comprehensive construction contracts, an owner may request that the contractor performs additional work that is not expressly included in the original agreement. Should the owner make such a request, two questions will likely arise: 1) Is the contractor obligated to perform the additional work? And, 2) If the contractor performs the additional work, is the owner obligated to pay for the contractor’s efforts? Addressing these questions requires a consideration of the terms of the contract, the nature of the project, and the interactions between the owner and
From the outset, if the work in question is specifically called for by the contract, then the contractor is obligated to perform the work without receiving additional compensation. However, where the work is not expressly provided for in the contract, the contract may nonetheless contain provisions entitling the owner to demand that the contractor perform the additional work. In this case, such work falls within the traditional understanding of “extras”. Of course, the application of a contract’s extras provisions, and the corresponding method of calculating the owner’s payment for the contractor’s performance of the additional work, will depend on the drafting of the provisions on a case-by-case basis. For example, the CCDC 2 Stipulated Price Contract entitles an owner (via the owner’s consultant) to direct the contractor to perform a change in the work that is “within the general scope” of the contract documents, and the standard form contract then sets out the scheme for calculating the owner’s payment for the performance of this additional work. Where the additional work is beyond the ambit of the contract’s extras provisions, or where extras provisions are entirely absent, it is expected that an owner will not be able to compel the contractor to perform the additional work.
Where an owner expressly or implicitly instructs the contractor to perform additional work, beyond the operation of the contract’s extras provisions (if there are such provisions), the additional work is seen as “new contract” or “quantum meruit” extras. The fundamental consideration in such circumstances is whether the owner did, in fact, request that the contractor perform the additional work, or alternatively, whether the owner was aware that the contractor was performing the additional work and approved of the contractor’s efforts. If so, it may be that a new agreement has been formed between the owner and the contractor for the additional work that necessitates payment. For such work, the owner has an equitable obligation to compensate the contractor. However, where the contractor performs additional work without the instruction or approval of the owner, or supplies material of a better quality than the minimum quality necessary for the fulfillment of the contract without the owner’s instruction or knowledge, the contractor cannot later seek compensation for the performance of this additional work.
Whether work that is requested by the owner is expressly set out in the contract, is encompassed within the extras provisions, or is outside the operation of the contract altogether depends on the terms of the contract, the nature of the project and the surrounding circumstances. In light of the dynamic and often unexpected nature of construction projects, owners and contractors alike should carefully consider the inclusion of extras provisions prior to entering into an agreement. Similarly, when an owner raises the matter of additional work, the parties would be wise to revisit the manner in which the contract addresses the possibility of additional work, if the contract contemplates such work at all.
This article is for information purposes only and may not be relied on for legal advice.
Robin Davis is a lawyer at the law firm of Borden Ladner Gervais LLP, practicing in the areas of construction, insurance and tort litigation. John Pratt is an articling student at Borden Ladner Gervais LLP.