Author: Bruce Parsons
Date Posted: January 07 2020

Contracts, Contractors and Homeowners

Small Claims Court sees a lot of home repair or renovation disputes.  A lot. And the parties are frequently caught unaware, home owner and contractor alike, by the way the Law and the Court view their business arrangement.

The most frequently asked question is does a contract have to be in writing to be enforceable?   For most things, the answer is no, a contract can be verbal or written or some combination thereof.  There are exceptions like Real Estate as set out in the Statute of Frauds, R.S.O. 1990, c. S.19.

The main issue with verbal contracts is establishing exactly what the agreement was.  The Court will attempt to determine with reasonable certainty, based on the evidence it hears during the trial of the matter,  what terms the parties agreed to. The Court does this through the lens of what it believes a reasonable, objective observer would determine the agreement to be.

There are three main types of disputes that are frequently seen:

Contractor has not been paid;

Contractor has not done the work; and

Homeowner is unhappy with the work done or not done, as the case may be.

The major cause of these disputes is communication.  The parties did not get what they had “contracted for” or thought they were getting, be it a repair, a renovation or payment of their invoice.

The most important part of any renovation is communication….establish what the parties agree to clearly and most often, both parties will abide by that agreement.  It is also the essential element of a contract, the “meeting of the minds” necessary for a contractual relationship to be in effect.

Offer, acceptance and consideration are the other “essential elements” to a contract.  An offer is made and the only permitted condition is a time for acceptance. It is not an offer if there are any moving parts other than a date by which acceptance is required, it would be considered negotiation if anything else is part of the offer.  The offer must be capable of acceptance on its face, without further modification. If there is no specific date for acceptance, then the offer must be open for acceptance for a reasonable period. Said reasonable period to be determined by the Court and you can rest assured that at least one of the parties will not agree with the Court’s assessment of “reasonable” if this becomes an issue.

Acceptance – again, must be unequivocal.  Acceptance is not I accept the offer if it can be done by Tuesday, that is negotation.  Must be a simple answer obvious to a “reasonable observer” as determined by the Court. Where the Court is the party making the decision, it will only be seen as “reasonable” by one party, at best.

To form the contract,  the last “essential element” is consideration.  Consideration must be new, it cannot be something one party owes another.  For example, for a contractor entering into a new contract with a former employer, consideration cannot be unpaid wages or the return of personal possessions in the possession of the former employer.  Consideration requires the person making the offer receive a benefit of some type conveyed by or at a cost to the person accepting the offer, as determined objectively by our “reasonable person(s)”.

What exactly the consideration is and its value to each of the parties are not normally considered by the Court, save for instances of fraud or unconscionable transactions.

There are other elements to a contract, it must be for a legal purpose, for example and the parties must have capacity to enter into the contract.  Capacity in terms of mental ability to comprehend could be part of the “meeting of the minds”….it can also be a legal barrier like an undischarged bankrupt or a minor who legally cannot enter into the contract.

WHAT HAPPENS IF THE COURT FINDS THERE IS NO CONTRACT BETWEEN THE PARTIES?

Where the Court is unable to determine what the agreement was between the parties, it will still have to adjudicate or resolve the issues.

If, for example, the contractor is holding a deposit, no work has been done and the Court determines there is no contract, the Court will apply common law to the dispute and likely order the return of the deposit.

In a situation where work has been done, the Court may make an award based on the Court’s best estimate of the value of the work and materials provided, legally Quantum Meruit.  This is also the scenario where a homeowner may claim the work was unsatisfactory and no contract has been established.

Neither party will be permitted to profit without having provided some benefit, the homeowner will not be permitted to enjoy work done on the property without paying some compensation, the contractor will not be permitted to retain payment without having provided goods and services to the value of the payment.  This concept is called Unjust Enrichment.

All parties should remember that the Court will make its own determinations, and they will not align with at least one party and possibly both parties.  It is worthwhile to keep some basic concepts in mind, starting and ending with communication.

Contractors and Homeowners Best Practices
  • Communicate
  • Spell out the contract in writing as much as possible
  • Ensure all parties to the contract can enter into the contract
  • Note and initial all changes where possible
  • Where a written contract does not exist or a change cannot be initialled in a timely/practical fashion, send texts and emails detailing the arrangements
  • Use a proper invoice, as set out in the Construction Act, R.S.O. 1990, c. C.30.
  • Contractors remember that construction liens can now be managed in Small Claims, TIME SENSITIVE, Legal help required 289.925.1572
  • Keep proof of all receipts, all payments, all materials, both sides

Don’t hesitate to seek legal advice early.  Legal assistance in resolving an issue BEFORE a lien or court action is necessary is the most cost effective method of resolving a dispute.

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