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CONTRACTS - Building contracts - Cost plus contract

Tuesday, March 03, 2020 @ 8:03 AM  

Lexis Advance® Quicklaw®
Action by Infinity Construction for damages arising from unpaid invoices. Infinity was a privately owned construction company. The two defendants were collectively referred to as Skyline. Skyline carried on business as an owner and developer of hotels and resorts. Skyline planned a development of cottages surrounding a golf course and contracted with Infinity’s predecessor to have it act as general contractor to construct 10 cottages as part of the project. After the project was completed or near completion, Skyline asked Infinity to perform other miscellaneous work around the resort. The unpaid invoices totalled $1,188,853 for the project and the miscellaneous work. Skyline agreed that it owed $743,893. The amount in dispute was therefore $444,960 plus interest. Infinity took the position that the cost-plus contracts required Skyline to pay all costs required to construct each cottage and all extras sought by the purchasers and approved by Skyline. Skyline was aware of and approved all the work that was done by Infinity. Skyline took the position that it should not have to pay more than $743,893. It submitted that any additional amount was not recoverable. With respect to interest, Infinity sought the contractual interest of prime plus five per cent compounded monthly. Skyline asked the Court to disregard the agreed-upon interest rate and award prejudgment interest at the rate prescribed by the Courts of Justice Act. The parties also disagreed about when interest should begin to run.

HELD: Action allowed. The cost of the work expressly included and covered all contingencies, except those caused by any failure on Infinity’s part to exercise reasonable care and diligence in its attention to the work. No such lack of care and diligence was alleged. The fact that Skyline accepted and understood that additional costs would be incurred for the work not requiring a change order, to be paid on a cost-plus basis, was demonstrated by the fact that Skyline almost fully paid the invoiced amounts for the first five houses constructed, even though each went over budget. Skyline was constantly aware of what was being built and how it was being built, and approved all construction provided by Infinity during its performance under each contract. There were no complaints about Infinity’s performance during the period of the project. The homes were completed in the most cost-efficient manner possible. There was nothing incomprehensible about the invoices. Interest was to be calculated from five days following when the contractor invoices were provided, which was May 24, 2016. The delay in invoicing affected the total interest recoverable, but not the interest rate. The amount owed to Infinity was $1,188,853 and the applicable interest rate was the contractual interest rate of five per cent above prime.

Infinity Construction Inc. v. Skyline Executive Acquisitions Inc., [2020] O.J. No. 23, Ontario Superior Court of Justice, S.E. Healey J., January 6, 2020. Digest No. TLD-March22020005