In a recent Saskatchewan decision, the court ruled that a couple had not been entitled to terminate a construction contract based on the fact that the construction project had not been completed on time.
Couple Hires Company to Build Dream Home
A couple hired a construction company to build their “dream home” on undeveloped land in Saskatchewan. They hired a construction company to build the custom-designed house and the parties signed a construction contract on October 12, 2011.
The contract contained a “time is of the essence” clause, which, in construction contracts, typically means that the construction project must be completed at a specified time and that the timeframe is a material term to the contract. In the parties’ contract, the granting of possession of the home to the couple was set for June 1, 2012.
The contract further stated:
“In the event the Building is not completed as at the above date, the time for closing shall be extended by [the construction company] in its sole discretion with written notice to the Purchaser and, if time is extended, all provisions of this Agreement shall read to be construed as though the extended date for closing had been the original date.”
Delays In Construction Lead to Missed Deadline
Certain delays arose in the construction project from the start, including delays due to approvals, road restrictions, weather conditions and electrical issues. Despite work continuing, it became clear to the couple that they would not be living in their home by the June 1, 2012 possession date set out in the contract.
Additionally, the couple had concerns about the workmanship.
Thus, June 1st came and went but the couple’s home was not completed. Instead, construction continued into early October.
Couple Relies On “Time Is Of The Essence” Clause for Ending Contract
However, in October 2012, the couple decided to unilaterally terminate the parties’ contract.
The couple believed that the company had repudiated the contract principally because it had missed the deadline for possession set out in the building contract.
The couple subsequently hired another company to complete the house build and sued the construction company for damages. The couple’s main argument was that the company had repudiated the construction contract by breaching the “time is of the essence” clause.
In response, the company registered a builders’ lien and counter-sued for damages.
Court Reviews Law on “Time Is Of The Essence” Clauses
The court began by reviewing previous case law on “time is of the essence” clauses. It referred to a case in which it was established that, even where a time of the essence provision exists, a party can only rely on it if the following common law conditions are met:
- The party must demonstrate that it was “ready, desirous, prompt and eager” to carry out the agreement;
- The party cannot be the cause of the default it seeks to take advantage of;
- The party cannot rely on a time of essence provision where it has waived the provision or otherwise acquiesced to the delay.
The court further noted that “time is of the essence” clauses are generally interpreted in a rather restrictive manner by courts.
Court Finds That Couple Was Not Entitled to Terminate Contract
Turning to the facts of the case, the court found that it had been obvious to all parties that the house would not be ready for possession by June 1, 2012.
As such, the court found that by not repudiating the contract at that time, the couple had effectively waived the deadline and, in essence, agreed to the delay. Additionally, the court stated:
“I find that the evidence establishes that at all times [the construction company] was not only willing to complete the contract, but able to complete the contract, albeit not by June 1, 2012. The fact that [the construction company] failed to send out a written notice of a change in the possession date is not in itself a fundamental breach of a term to support an end to the contract. I also find that since [the construction company] advised that the build could be completed by the end of 2012, that any such delay was not an “extreme delay”.”
Therefore, the court ruled that the couple had not been entitled to unilaterally terminate the contract because of delay.
As the result, the court dismissed the couple’s claim for damages and instead awarded damages to the construction company in the amount of $37,796.
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