Fairness and contracts: The three Golden Rules of tendering

reviewing documents

By Clive Thurston

Special to Ontario Construction Report

One of the more popular seminars that I provide is on the rules surrounding bidding and tendering on construction projects. There are always a lot of questions about just what is fair and how the various laws apply.

Most construction industry participants are aware of Ron Engineering and subsequent court cases, up to and including Tercon and others, since they impact what is and is not allowed in the tendering process.

The duties that fall to the contractor and the owner are clearly spelled out and most importantly the Duty of Fairness is key to a successful tender.

Other parties to this process that I often reach out to are the sub-trades and suppliers. Although they are not party to the signing of the head contract, and are not submitting their bids directly to the owner, in a standard contract, they are nonetheless impacted by all of the rules, regulations, clauses, and conditions set out in the request for bid and in the eventual contract. The head contract and all its conditions flow down to the sub-trades who are bound by them, whether they realize that or not.

Sub-trades and suppliers can see these conditions and general contractors should always make sure that they are available for review by any supplier or sub-trade that is bidding to them on a project.

Trades and suppliers who fail to understand this key point can sometimes find themselves in a great deal of difficulty further down the line and the contractor will be unable to assist them in dealing with it, and will also likely end up facing problems.

When I am asked how to avoid these difficulties, I suggest a quite simple answer. There are three remarkably simple rules.

  • Read the documents early.
  • Read the documents again.
  • Read all of the documents.

While these rules may seem very simple and easy to follow, experience has taught me that despite years of experts highlighting them, and warning participants in the construction industry to pay attention to the contracts they are signing, sadly their failure to follow the advice has led to a lot of work over the years for lawyers and consultants trying to straighten messes out after the fact.

I receive calls from general contractors asking me about various clauses that they find unfair and unbalanced and in many cases they are absolutely correct – the clauses are unfair and unbalanced, however there’s a slight problem – they didn’t call me prior to signing the contract. Once signed no matter how unfair and unreasonable or repugnant the clause may be you must live by it.

Unfortunately, the same holds true for suppliers and sub-trades. As I mentioned, they are bound by the contract and all its clauses and rules, fair or not. While I have written and spoken about this problem many times, it never fails to amaze me that it continues to recur over the years. I have had a number of sub-trades contact me because of problems with supplementary clauses and conditions contained in the contract that they apparently did not know about.

Payment timing prior to the new Construction Act was one of the most common challenges. Unfortunately, there was, little that we could do for them at that time.

Just recently I was asked to review a signed contract. Division 1 was clear; under no circumstances was the general contractor responsible for any form of design or engineering.

However, contained within the specifications, specifically section 20 Mechanical, there were a set of supplementary clauses that the owner’s consultant had added. The general did not know they were there and, importantly, the sub-trades bidding it did not notice them and therefore no one raised a question.     Without going into the entire language, the contract wording effectively transferred all risk for design and engineering onto the sub-trade for any problems that might arise or occur with the drawings such as conflicts. The sub-trade would be responsible for employing its own experts to develop new drawings to correct the problems.

If this were a minor situation, it probably would not have had much impact, but as is often the case it was not. There were over 700 interference issues discovered during preparation for work and all of that responsibility fell to the sub-trade.

Was this fair? In my opinion it was totally unfair. The problem was the contract had been signed and the trade engaged. If the clause does not break any laws, then it was likely valid, and the risk now fell to the sub-trade.

This kind of problem highlights why it is so essential that everyone – the general contractor, supplier, and sub-trade —  must take the time to review the documents to ensure that there are no negative or unfair conditions that could impact the project as it proceeds.

clive thurston
Clive Thurston

Once again my advice to all general contractors, suppliers and sub-trades is:  Please take the time, read those documents, make sure you do it early and contact your association for assistance if you find any issues.

Clive Thurston is the former president of the Ontario General Contractors Association (OGCA). He is not a lawyer. His observations here are based on his experience, and they should not be considered as legal advice.


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