A Construction Law Update
On October 1, 2009 the Alberta Court of Queen's Bench upheld the terms of a subcontract that permitted a general contractor to take possession of a subcontractor's equipment due to the subcontractor's failure to perform its obligations under the contract.
The general contractor entered into a standard form contract with a subcontractor to set forms and related work for the pouring of the foundation of a residential high rise project in Calgary. This contract provided that on default, the general contractor may take possession of the subcontractor's equipment and tools for the completion of the project.
On April 3, 2009, the general contractor unilaterally terminated the contract on the ground that the subcontractor had failed to fulfill its obligations under the contract. The subcontractor was notified of the termination and that the general contractor was taking possession of their equipment and tools pursuant to the terms of their agreement. This matter came before the courts as part of the subcontractor's attempt to regain possession of their property.
To be successful in obtaining a court order for the return of the property, the subcontractor must demonstrate that the property was taken “wrongfully” and that the subcontractor is the rightful owner. Though the subcontractor advanced several arguments, the Court focused on whether parties could enter a contract that saw the seizure of property if the contract was not performed. The Court conclusively stated that there was no reason such a contract could not be entered and therefore there was nothing “wrongful” about the general contractor taking possession of the equipment.
In light of this decision, both general contractors and subcontractors should be mindful of the standard form contracts that they routinely enter. Under the appropriate circumstances the courts will not hesitate to give effect to contractual terms that may have further reaching effect than the parties considered.
This update is a general overview of the subject matter and cannot be regarded as legal advice. Please contact Corbin Devlin in Edmonton, Jim Lebo in Calgary, or any member of our Construction Law Practice Group for advice on this or any other construction law topic. |
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