Should I Sue My Contractor? Key Considerations for Legal Disputes and Lawsuits

Reading Time 4.4 Minutes

Whether building a high-rise condo tower or renovating your bathroom, construction projects are not for the faint of heart.

With multiple parties involved and big money at stake, the potential is high for mishaps such as cost overruns, missed deadlines and disputes over payment or performance.

You don’t have to look too far to find examples of messy legal battles, but one of the latest came in downtown Kelowna, where the developer of a landmark 14-storey residential building is currently locked in litigation with two of its major contractors.

Reasonable grounds

As commercial real estate publication Western Investor reports, the developer of the 91-unit Ellis Parc completed construction in 2020, but is now suing its drywalling and ceiling contractor, alleging there were issues with the work it performed under their $3-million contract.

The developer has also launched a separate action against the glass company that handled its balconies and building glazing, claiming it suffered increased costs and delays to repair problems associated with their work, according to the story, which notes that none of the allegations against either company has been proven in court.

But you don’t have to be building a multi-million-dollar megastructure for your relationship with a contractor to go off the rails. Home renovations are just as likely to spur disputes, even if the sums involved are of a different order of magnitude.

In either case, the decision over whether to sue is a tricky one that must be taken with extreme care, since property owners could end up throwing good money after bad if they proceed with a poorly founded action.

Here are four questions you should ask yourself before filing a lawsuit against your contractor:

1. What does the contract say?

Before accusing anyone else of failing to meet their obligations under a contract, you need to confirm that it was actually a required condition of your original agreement.

All too frequently, I am approached by disgruntled property owners with complaints about their contractor’s failure to carry out a particular task, only to discover that their expectations were never spelled out in the contract.

That’s assuming there was a written contract between the parties. Many times, parties never formalize their agreement, and disputes are based on a divergence in price from the original quote provided by a contractor. In these cases, an experienced lawyer can help you determine whether you have a valid cause of action.

2. Was it reasonable?

Unfortunately, homeowners and developers may have to accept a certain amount of timing and price uncertainty as the cost of doing business, especially for projects carried out over longer periods.

Coming out of the COVID-19 pandemic, supply chain problems and inflation have each made their contribution to cost overruns and lengthy delays on construction projects of all sizes. The critical question for a judge is whether they were reasonably incurred, and courts are generally reluctant to make awards in favour of homeowners or developers if they think the problems in dispute could be reasonably justified.

The strength of your legal case will usually depend on how clearly your written contract addresses issues such as delays and price changes. For example, if the parties agreed on a fixed price and included provisions requiring the property owner’s consent for any adjustment, the owner may be able to make a stronger case for a breach than where the contract is silent on the subject.

3. What are your chances of recovery?

Simply having a strong case against your contractor does not mean it’s worth going ahead, since winning in court is only one part of the job for a disgruntled property owner.

Enforcing the judgement is another matter altogether, and a court order in your favour may not be worth the paper it’s written on if your contractor has no assets to satisfy an award for damages.

In the construction industry, it’s not unusual for contractors to operate via shell companies that protect the individuals performing the work from personal liability. The corporate entity may own some assets, including tools and materials, but an assessment of its holdings should be a critical part of your decision to sue since their total value could fall well short of the amount you hope to recover.

Myth 4: My finances are my business

In construction — as in medicine — an ounce of prevention is worth a pound of cure, as the saying goes. Property owners can reduce the risk of a dispute and protect themselves from the outset of a project by taking the following precautions:

  • Rigorously vet your contractors, selecting a partner with a strong record of performance and a reputation to match
  • Before work starts, draft a written contract that properly reflects your wishes and desires regarding the project.
  • Before signing the contract, hire a lawyer to review its contents and help you understand your rights and obligations under the agreement.

*This post is not intended to be legal advice and should not be taken as such. Please contact McConnan Bion O’Connor & Peterson if you have any questions regarding this post or require assistance or legal advice regarding disputes with your contractor.