Why contractors and subcontractors should put agreements in writing

There are lots of reasons why it’s important to be clear about the details of an agreement, especially if it’s with a person or company that you don’t regularly deal with. And Infinity Steel Inc. v. B & C Steel Erectors Inc., 2009 BCSC 1053 is a great example of one of those reasons.

The Facts:

1. Infinity was a one-man structural steel company who obtained a contract for the construction of a steel building.
2. Infinity only wanted to supply the steel and negotiated with subcontractors for the actual erection of the building.
3. In June, it entered “an agreement” with B&C for erection of the structural steel.
4. B&C began putting up the steel in September. The job was to be completed in five weeks.
5. Almost six weeks into the project, B&C was not finished, but invoiced Infinity for materials and labour costs to that point.
6. Infinity refused payment, asserting that the work was being done on a lump sum basis
7. B&C continued working for several more weeks before walking away from the unfinished project.
8. Infinity sued B&C for breach claiming damages for “back charges for delay, increased costs to complete B&C’s work, and costs of administration and equipment charges.” It maintained that it had a lump sum contract with B&C.
9. B&C defended by denying breach, and claimed that the contract with Infinity was a cost plus arrangement.
10. At trial, neither party was able to produce convincing evidence of all the payment terms of the agreement.

The Ruling:

Since there was no reliable evidence as to the price and method of payment agreed on, the judge found as a fact that the agreement lack the “essential and critical term of price”, which is always a fundamental term of any contract, that there was “no meeting of the minds”, and, thus, that there was no contract. B&C was awarded its reasonable incurred costs for the work performed on a quantum meruit basis, plus 15%.

Lesson Learned:

• Be clear on the details of any agreement meant to have contractual force – especially terms of payment
• Even if formal contract documents are not drawn up, be able to produce reliable evidence of the agreement

Latin Maxim of the Day

Vox emissa volat; litera scripta manet – The spoken word flies; the written letter remains.

Nota Bene:

“Reasonable Costs” as determined by the court for a quantum meruit award may or may not reflect what a contractor might actually have billed or contracted for.