Non-compliance with the Contractual Claims Procedure: a Fatality for Contractors?

Compliance with this contractual procedure can be a complex and risk-laden matter, particularly on fast-track and design-build projects, where contractors often face many unforeseen events and design changes during the course of the project.

To invoke a claims clause successfully, complying with the procedure provided for in the contract, in particular sending a claims notice within set deadlines, may prove to be crucial. Recent case law shows that failure to comply with this procedure can be harmful to contractors, since the procedure enables project owners to ascertain at once the difficulties raised by contractors so as to enable appropriate decision-making.¹

Nevertheless, under certain circumstances, failure to comply with the claims procedure specified in the contract does not necessarily result in dismissal of the contractor’s claims.

Waiver of the Claims Procedure 

Denunciation formalities are sometimes brushed aside by the courts, insofar as the evidence indicates that the parties explicitly or implicitly² waived the denunciation formalities and/or that the owner was notified of the changes targeted by the contractor’s claim. Proof that the claims procedure has been waived may be deduced from the parties’ conduct or from their discussions during the project.

Indeed, the Superior Court ruled in favour of a contractor who claimed that the price-revision clause should apply even if the formal claims procedure had not been followed.³ The Court concluded that the project owner had tacitly waived the claims procedure since it had never complained or expressed any concern regarding the absence of a formal claims notice, particularly since the contractor had already raised the possibility of an increase in costs and this matter had been the subject of numerous discussions.

On a similar note, the Court ruled that a project owner who had never requested the strict application of the contractual claims procedure had waived it even as it had agreed to examine many claims by the contractor, including some made at a late stage.⁴ The Court conducted a comprehensive analysis of this waiver from the perspective of the duty of co-contracting parties to act consistently and in good faith when they failed to object in due course to the failure to comply with the formal notice required by the contract.

An almost identical conclusion was reached recently when the Court found that a project owner had waived the contractual procedure on the grounds of efficiency at the worksite.⁵

Conversely, the Court ruled that the project owner’s agreement to pay certain “extra costs” in good faith (notwithstanding the contractor’s departure from contractual stipulations in such instances) and refusal to pay others does not equate to a waiver, but rather demonstrates its disagreement as to the value of certain work.⁶ The Court added that the project owner’s failure to request supporting documents when the value of the work is accepted does not exempt the contractor from justifying its costs in the event of a dispute.

In closing, it is worth recalling that in an effort to avert a dispute with their co-contractors, contractors should always comply with the contractual claims procedure. In cases where this procedure is not followed, the courts assess the parties’ conduct and each construction project’s specific conditions to determine whether or not there has been a waiver of formal contractual requirements and rule on the admissibility of contractor claims.

If you have any questions, please feel free to contact our Construction Litigation team, who will be glad to provide assistance.

[1]Uniroc Construction inc. c. Ville de Saint-Jérôme, 2021 QCCA 907 and [2]Société de cogénération de St-Félicien, Société en commandite/St-Félicien Cogeneration Limited Partnership c. Les Industrie Falmec inc., 2005 QCCA 441, par. 58. and [3]Pomerleau inc. c. Administration portuaire de Sept-Îles, 2020 QCCS 1689 and [4]Sintra inc. c. Ville de Léry, 2019 QCCS 2616. A similar conclusion was reached in the case of Aciers Fax inc. c. EBC inc., 2021 QCCS 1667 and [5]9039-4701 Québec inc. c. Groupe Civicam inc., 2022 QCCS 1899 and [6]Aciers Fax inc. c. Casiloc inc., 2018 QCCS 5211.