CCN NO. 2024-03-20
KEY TAKEAWAY: Unless your contract has a clear and comprehensive "no waiver" provision, your conduct (and the conduct of the other parties to the contract) can amount to a waiver of the contract's terms and conditions.
APPLICATION TO YOUR ORGANIZATION
Throughout the course of a construction project, all parties should be mindful that their conduct can act as a waiver of certain contractual terms. The waiver of a certain term under a contract may be communicated either formally or informally and even inferred from a party's conduct. This means that all parties to a contract must be aware of their contractual rights at all points throughout a project to minimize the possibility of waiving key contractual terms – and to be aware if another party's conduct waives their respective obligations or rights.
WHAT HAPPENED?
A subcontractor (Subcontractor) was retained to supply and install a building automation system as part of a bus maintenance facility upgrade project. The Subcontractor contracted out the installation portion of its work to a sub-subcontractor (Sub-Subcontractor). The project was delayed, and the Sub-Subcontractor claimed its work was impacted due to the ongoing delays and disruptions during the project. As a result, the Sub-Subcontractor registered a lien and commenced an action to enforce its lien, and claimed, among other things, breach of contract as against the Subcontractor.
The Subcontractor brought a motion to summarily dismiss the claims of the Sub-Subcontractor. Among other things, the Subcontractor argued that the Sub-Subcontractor was not entitled to advance its claims as it had failed to comply with the mandatory notice requirements of the sub-subcontract. The Sub-subcontractor, in turn, sought to advance its claim and dismiss the Subcontractor's motion by arguing that the Subcontractor had waived the requirement to comply with the notice requirements through its conduct during the project.
QUESTION(S) CONSIDERED BY THE COURT?
Did the actions and conduct of the Subcontractor waive the requirement for compliance with the notice requirements of the sub-subcontract, such that the Sub-Subcontractor was not required to comply with those requirements?
WHAT DID THE COURT SAY?
No, the actions of the Subcontractor did not waive the notice requirements of the sub-subcontract.
The Sub-Subcontractor argued that the Subcontractor waived the notice requirement because during the preparation of the Subcontractor and Sub-Subcontractor's joint delay claim to the contractor on the Project, the Subcontractor did not expressly hold the Sub-Subcontractor to strict compliance with the notice requirements. Part of the Sub-Subcontractor's argument was that it believed that the Subcontractor had waived those requirements based on its actions – however, the Court clarified that determining if waiver has occurred is based on the actions of the waiving party, not the subjective beliefs of the opposite party.
The Court emphasized that a waiver of contractual terms can occur provided that there is evidence of two pre-conditions:
- The waiving party knew of the deficiency that might be relied on by the other party, and
- The waiving party had an unequivocal and conscious intention to abandon the right to rely on the contract term, including clearly communicating that they intend to waive the subject contractual term.
In the circumstances at hand, the Sub-subcontractor did not establish that the required pre-conditions were met, because their evidence and argument was grounded in their belief that the Subcontractor had waived strict compliance with the notice requirements of the sub-subcontract.
Ultimately, the Court determined that the Sub-Subcontractor was barred from pursuing one of its claims, a prolongation claim, on this basis that the Sub-subcontractor had failed to comply with the contractual notice requirements for that portion of its claim, and there was no waiver of such requirements by the Subcontractor. The remaining claims for breach of contract and unpaid amounts owing were left to proceed to trial.
LEARN MORE
Symtech Innovations Ltd. v. Siemens Canada Limited, 2023 ONSC 5795
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
