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:
- Infinity was a one-man structural steel company who obtained a contract for the construction of a steel building.
- Infinity only wanted to supply the steel and negotiated with subcontractors for the actual erection of the building.
- In June, it entered “an agreement” with B&C for erection of the structural steel.
- B&C began putting up the steel in September. The job was to be completed in five weeks.
- Almost six weeks into the project, B&C was not finished, but invoiced Infinity for materials and labour costs to that point.
- Infinity refused payment, asserting that the work was being done on a lump sum basis
- B&C continued working for several more weeks before walking away from the unfinished project.
- 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.
- B&C defended by denying breach, and claimed that the contract with Infinity was a cost plus arrangement.
- 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.
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Infinity Steel Inc. v. B & C Steel Erectors Inc.
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:
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:
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.