March 23, 2005

Motion approved at meeting

Executive committee of CCA given power to back appeals

CANCUN, Mexico

The Canadian Construction Association’s board of directors has authorized its executive committee to “act on behalf of CCA and the interests of the Canadian construction industry” with respect to financially supporting any appeal of a controversial Ontario court decision that challenges established industry practice.

In a Nov. 22, 2004 judgment, the Ontario Superior Court of Justice challenged the widespread industry view that bids submitted by subcontractors to prime contractors whose bids must remain irrevocable for a specified period are also automatically subject to that same irrevocability, CCA president Michael Atkinson said in a Feb. 15 memo distributed at the association’s annual conference in Cancun.

Michael Atkinson

“In other words, the case stands for the proposition that if a prime contractor wants subcontract bids to be irrevocable for the same period as is specified by the owner for the prime contract bids, the prime contractor must so require that condition of the subcontract bidders through some further action and can not simply rely upon the fact the prime tender documents require the prime contract bids to be irrevocable for a specified period.”

In a memo sent to all three CCA councils, Atkinson said the court also found that even where the successful prime contractor has used a subcontractor’s price in its bid and subsequently forwarded a purchase order to the subcontractor for execution, those facts alone “do not give rise to a Contract A (between the subcontractor and the general contractor).

“The court does not detail what facts would give rise to Contract A.

As a result, the corollary is that in such circumstances, there would also be no obligation on the part of the prime contractor to award a subcontract to that subcontractor even though the prime contractor has used the subcontractor’s price, although the decision is silent on that matter.”

The case in point is David J. Harvey Holdings vs. Hercules Food Equipment.

At its Cancun meeting, the CCA board approved a motion submitted by its trade contractors council to financially support any appeal with the proviso that any action taken by the association “is consistent with current CCA guidelines.”

In a report to the board, Paul Charette, chairman of the general contractors council, expressed his group’s support to the contractor involved in the case and said it would vote in favour of CCA’s offering support “provided a request is made by the Ontario General Contractors Association (OGCA) and that it meets all corresponding CCA guidelines.”

In a subsequent interview, OGCA president Clive Thurston said his association is “certainly appreciative of the support of the national association which clearly recognizes the importance of appealing such a ruling that flies in the face of understood industry practice across the country.”

Clive Thurston

The OGCA will be reviewing the matter at its April board meeting, Thurston said.

“The short of it is that the judges ruled many years ago in Ron Engineering that if you submit an offer in response to a request for a price, you are creating a contract,” he said.

“Those contracts are valid for the term period that the bid is open for acceptance, in effect a reasonable time afterwards to handle the paperwork. That has been upheld in numerous court cases ....

“This (Ontario judgment) just throws that out the window.”

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