CCDC 2 2020 Déjà Vu

Construction vehicle

The CCDC 2 2020 is CCDC’s latest and greatest iteration of the proposed standard form for a stipulated price contract. A lot has been written on the changes introduced by CCDC 2 2020. Among other changes, the new CCDC 2 2020 introduces the “Ready-for-Takeover” concept, and it addresses the subject of “Payment Legislation”, which is in force or under consideration in a number of jurisdictions in Canada (no such legislation is currently tabled in British Columbia, by the way). An extensive discussion of these changes can be found in our January 2021 article Construction Contracts in Canada: The New CCDC 2 – 2020 Stipulated Price Contract.

In this article I will offer another perspective. In my 40 years as a lawyer I’ve worked with the CCDC 2 1982, CCDC 2 1994, CCDC 2 2008 and now CCDC 2 2020. Over this period I have been witness and party to the debate as to whether the CCDC 2 standard form is “contractor-friendly”. I agree with the common conviction that the contract should be balanced. The rights and responsibilities of owner and contractor should be equitably allocated. Risks should be assigned to the party most capable and best positioned to manage and assume them. That said, in my assessment for an owner the terms proposed in the standard CCDC 2 need to be nudged in the direction of the owner in certain key areas.

By way of example, all of these iterations of the CCDC 2 fall short with respect to the contractor’s obligation to remove liens. If the owner pays all progress claims, then the contract should stipulate that it is the contractor’s responsibility to satisfy payments due to its subcontractors and to promptly remove any builders liens filed by subcontractors. The reality is that the owner won’t get the next progress draw from its lender if there are builders liens on title. The responsibility should expressly fall on the contractor, in my opinion, to get the subcontractor’s lien off title, even by posting a bond if needed. If you were to suggest that delivery of a statutory declaration with the progress claim is adequate protection for the owner, I would reply (1) that won’t satisfy the owner’s lender – if there are builders liens on title, the next progress draw will be frustrated regardless, and (2) there is a conspicuous hole in the CCDC 9A Statutory Declaration of Progress Payment Distribution by Contractor, which makes an exception for “amounts withheld by reason of legitimate dispute which have been identified to the party or parties, from whom payment has been withheld”. It is precisely such disputes that may give rise to the filing of builders liens.

Another observation is that the CCDC 2 defines “Subcontractor” to be “a person or entity having a direct contract with the Contractor to perform a part or parts of the Work at the Place of the Work”. This would exclude sub-subcontractors and others down the contracting chain. The contractor should be responsible for them too. I note that in contrast “subcontractor” as defined under the British Columbia Builders Lien Act automatically includes sub-subcontractors and others down the contracting chain. I see a need to amend the CCDC 2 by supplementary conditions to address this.

Another fundamental shortcoming of the CCDC 2, in my opinion, is that to trigger the owner’s default remedies requires that the contractor “fails to comply with the requirements of the Contract to a substantial degree” (GC 7.1.2). I accept that if the contractor is substantially performing in accordance with the contract (i.e. is substantially “on track”), then the owner should not be entitled to terminate. But the CCDC 2 test is the inverse. With the CCDC 2, it is not enough that the contractor be in default or falling behind merely to a material degree. For the owner to have recourse, the contractor would have to be in default or be falling behind to a substantial degree. From the owner’s perspective, that is impractical and inadequate. Halfway through the project, both parties are vulnerable. The owner should, I suggest, be entitled to expect that the contractor will stay substantially on track all the way along (and if not, should have tools and recourse, if needed, to require that the contractor get back on track).

I could give many other examples. Suffice it to say that, in my opinion, the new CCDC 2 2020 requires supplementary conditions in certain key areas to reasonably protect the owner’s interest. The more things change, the more they stay the same.

See also our article “Construction Contracts for Projects in Canada: AIA Documents and CCDC Comparison” on a similar topic.