Contract Law Terms

This is a short, alphabetic list of legal terms and definitions relevant to construction law which I have prepared for those who are not lawyers. Lengthier definitions can be found in the usual legal references. Discussions of them can be found at law schools everywhere.

Abandonment.

See Elizabeth Townhouses Ltd. v. Sigurdson, [1975] 2 S.C.R. 449, Judson J. quoting Seaton J.A.: “. . .cessation of work and abandonment are not necessarily co-existent.”

See also: Anderson v. Fort William Commercial Chambers Ltd., [1915] 25 D.L.R. 319 (Ont. C.A.)

Agreement to Arbitrate (as opposed to Arbitration Agreement).

Arbitration.

Arbitration Agreement (as opposed to Agreement to Arbitrate).

Architect.

Bid Bond.

A type of security that is very typically required by the terms of a call for tenders to be submitted with a tendered bid. Generally, if a bidder attempts to revoke a bid after it has been submitted then the bond is triggered. The purpose of a bid bond is to provide a disincentive for bidders to revoke submitted bids. Bid bonds were in use before Ron Engineering paved the way for contractual remedies for owners in respect of offending bidders. They continue to be a typical component of a call for tenders.

Bid Depository.

A general description of the function of a bid depository is given by Burnyeat J in Ken Toby Ltd. v. British Columbia Corp., [1997] BCJ No. 1057.

Bid Shopping.

“Bid shopping” is not a term of art. It generally refers to an owner using a submitted bid as a negotiating tool. In the context of bidding and tendering it is often regarded as an underhanded practice. More importantly, depending on any obligations an owner might have under a tender contract shopping a bid could constitute a breach of contract.

Bond.

Breach.

Certification (By Engineer).

Compliance (with Terms of Tender)

Condition Precedent.

Contract.

Contract law and contract theory can be complex, but in common law jurisdictions the basic definition is simple. A contract is a voluntary exchange of promises, supported by consideration, which are legally binding on the contracting parties. To the extent that the conditions for a valid legal agreement are satisfied (for example, that the parties had capacity to contract, or that the terms of agreement are not illegal), contracts are enforceable by law.

Consideration.

A general principal of the common law of contracts is that both parties to a contract offer some consideration before the contract can be binding, where consideration is anything of value promised to another. Consideration can include money, goods, services, promised acts, or promises to refrain from future acts. For the purposes of a new contract or a variation to an existing contract good consideration does not include anything of value that you already have a legal obligation to provide.

Cost Plus Contract.

Defect.

The term “defect” is used in many different legal contexts. In construction law, it typically refers to a defect in materials supplied or work performed under a contract. Depending on the specific contractual language used, whether any particular flaw can be characterized as a “defect” of one sort or another can be material to matters relating to, e.g., bonding, insurance or holdback payments. The term “defect” is also sometimes used to refer to defects in a contract document, including, in the construction context, a defect in tender documents.

Exclusion Clause.

“Exclusion Clause” is generally a shorthand way of saying “Exclusion of Liability Clause”. Such clauses attempt to do exactly what their name implies, exclude legal liability on the part of the contracting party for things which they otherwise would be liable for. Generally, such clauses attempt to exclude tort liability or liability for breaches of the contract in which they are contained. They can purport to exclude only partial liability or total liability. An example of a partial liability exclusion for breach of contract would be a clause providing that the breaching party cannot be sued for damages. The exclusion is only partial because it might still be possible to pursue remedies such as injunctions or specific performance.

Exclusion clauses, like any contract term, may be unenforceable in certain circumstances and therefore be challenged.

Extras.

Fradulent misrepresentation.

Frustration.

General Contractor (or Prime Contractor).

Holdback.

Implied term.

Innocent misrepresentation.

Interference.

Lien.

For liens in Newfoundland and Labrador, see the Mechanics’ Liens Act.

Limitation Period.

Lump Sum Contract.

Performance Bond.

Privilege Clause.

In the context of tender or process contracts “privilege clause” has become a term widely used in Canadian legal literature to describe a type of clause that purports to retain for the owner the ‘privilege’ of deviating from the expected course of events by accepting a bidder other than the low bidder, or even by cancelling the call for tenders altogether. The most basic and well-known form of such clauses is: “The lowest or any tender not necessarily accepted.” Such clauses have a complicated history of judicial treatment in Canadian courts. More sophisticated privilege clauses can generally be expected in contemporary tender calls. They should not be confused with exclusion clauses.

Progress Claim.

Quantum Meruit.

Reasonable Remuneration.

Rectification.

Repudiation.

Repudiation is a doctrine of the law of contracts. It “more commonly . . . refers to an unlawful renunciation of a contract while rescission refers to the lawful renunciation of a contract.” See McManamon v Crossan (1979), 24 Nfld & PEIR 419. Repudiation is more than a simple breach, but results when a party indicates an intention not to perform under a contract.

Rescission.

Set-off.

Sheltering.

Specific Performance.

Subcontractor.

Substantial Performance.

Tender.

Term.

Trust Fund.

Unit Price Contract.

Unjust Enrichment.

Variation.