b'BENCHMARKSWHAT HAPPENS WHEN A CONSTRUCTION CONTRACTIS MUTUALLY TERMINATED? By Ken Tennenhouse, MLT AikinsDirk and Vanessa de Boer dreamed ofAlthough this resolution was hardly2.4 Notwithstanding any othera custom-built home on a golf courseamicable, Justice Wilson ruled that itprovision of this Agreement, the Owner in Vernon, a lovely town nestled in theamounted to a mutual termination ofacknowledges and agrees that all costs Okanagan Valley of B.C. They hiredthe construction contract.and expenses, as previously agreed Highbridge Homes to build it. Thingsand authorized by the Owner, relating didnt go well. In fact, partway throughCAN HIGHBRIDGE RECOVER ITSto the Work and the construction of construction, the contract collapsedCOSTS UP TO THE DATE THEthe House shall be for the account of entirely during a meeting between DirkCONTRACT WAS TERMINATED? the Owner.and the builder. As the judge in the caseEarly in construction, Highbridge beganDirk de Boer explained in court that would later say: It was brief. Wordsexceeding its budget. Prior to startingthis addition was intended to make the were exchanged, voices were raised,construction, Highbridge estimated the$860,000 estimate a binding part of the tempers flared, doors were slammedwork would cost $860,000. Highbridgecontract, arguing Highbridge was not and the relationship ended. The meetingprovided its standard contract to theentitled to payment for amounts that lasted no more than 10 minutes. de Boers, who reviewed it and madeexceeded the cost estimate sheet. What happens when both parties of achanges. The contract contained twoJustice Wilson found Highbridge had an construction contract walk away fromsets of provisions dealing with price: obligation to have a discussion with the contract? We can learn a lot from1.Highbridge was to do the work atthe de Boers if the actual cost exceeded the comments of Justice Wilson of the Supreme Court of British Columbia, whoa price equal to the builders cost,the estimate by 15 per cent or more. decided this case in June 2021. 1 plus 10 per cent. In other words, thisHowever, he ruled the estimate did not was a cost-plus contract. Highbridgechange the allocation of risk under the WHO TERMINATED argued that in a cost-pluscontract, and that a cost-plus contact THE CONTRACT? arrangement, its only obligation wasputs the risk of cost overages on the After construction began, the partiesto inform the de Boers if the actualowner. Accordingly, the de Boers were had their brief meeting blowout incosts exceeded the estimate.liable for costs incurred by the builder up August 2016. At that point, they bothto contract termination, even when they 2.Attached to the contract was a costexceeded the original estimate.treated the contract as terminated. Highbridge wrote a letter to the deestimate sheet with the estimatedCAN HIGHBRIDGE RECOVERBoers requesting an exit strategy.budget for each component of theITS LOST PROFITS?The de Boers wrote Highbridge of theirwork. At the request of the de Boers,In court, Highbridge attempted to claim intention to hire another builder tothe contract included the followinglost profits of the entire contract, using complete the work.change (underlined): the contracts cost-plus formula.MAKING YOU AND YOUR PROJECTS LOOK GREAT SINCE 1968889 WALL STREET WINNIPEG, MBOFFICE: 204-786-5875MOBILE: 204-218-8430 BUILDING A BETTER EXPERIENCE WWW.VALOURDECORATING.COMBOCKSTAEL.COM22 BUILD MANITOBAwinnipegconstruction.ca'