February 18, 2008

Construction Law

Contractors should benefit from new, less-ambiguous Waiver of Claims provisions in CCDC2

Point/Counterpoint

Norm Streu and Chris Hirst

The Waiver of Claims provisions of the old CCDC2 have always been problematic.

The old clause provided a broad Waiver of Claims by the Owner except for those claims that the Owner had made in writing prior to Substantial Performance.

The only exceptions to that waiver were warranty claims, indemnification claims and claims with respect to “substantial defects and deficiencies.”

With respect to these latter claims, the limitation period was six years.

A difficulty with this provision from the Contractor’s perspective was that it was invariably amended by way of Supplementary General Conditions.

More generally, the provisions were unclear and consequently were rarely relied upon.

The new CCDC2 Waiver of Claims is far less ambiguous and includes some important amendments.

The new clause now limits the waiver and release of both the Owner and the Contractor to claims which they had knowledge of or “reasonably ought to have knowledge” of at the time of Substantial Performance.

If the Owner or Contractor does not have knowledge of the circumstances of a claim, and could not reasonably be expected to have such knowledge, there is no waiver or release.

This language is far more reasonable and in fact was frequently included in Supplementary General Conditions to the old version.

Claims for “substantial defects or deficiencies” are still released six years after Substantial Performance.

The waiver and release at the end of six years is “absolute” in the sense that it is not limited to claims that are known or reasonably ought to be known after the expiry of six years.

Claims for warranty work, or other work performed after Substantial Performance, are now released 395 calendar days after Substantial Performance.

The old CCDC2 did not include any definition of what was meant by a “claim made in writing” before the applicable period.

There were frequent disputes as to whether a particular communication was a “notice in writing” pursuant to these provisions.

It would thereby nullifying the release that otherwise would have occurred.

The new CCDC2 seeks to correct this problem by clearly delineating what must be included in a “Notice in Writing of claim.”

The notice must include:

1. A clear and unequivocal statement of the intention to claim;

2. A statement as to the nature of the claim and the grounds upon which the claim is based; and,

3. A statement of the estimated quantum of the claim.

Another problem that frequently arose under the old language was created by the link of waivers and releases to the final certificate for payment.

Under the old CCDC2, claims made in writing prior to the issuance of the final certificate were never waived or released.

In situations where a problem arose at the end of a project and the final certificate was withheld, there was an argument that there had been no waiver or release of any claims.

Under the new CCDC2, the trigger date for the release of claims is the sixth calendar day before the expiry of the lien period.

This provision provides greater certainly to the release date and ensures that claims are brought forward before the holdback is released.

Look for additional articles on other significant changes to the CCDC2 in upcoming editions of the Journal of Commerce.

Norm Streu and Chris Hirst are partners in the Construction & Engineering Group of the Vancouver law firm Alexander Holburn Beaudin & Lang LLP. Norm is a past chair of the Vancouver Regional Construction Association.

If you have any questions about this article, or any construction law related issue, please feel free to call Norm or Chris at (604) 484-1700.

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