Drafting Supplementary Conditions

A client recently sent me a tender package that had been prepared by an engineer. Included in the package was a set of Supplementary Conditions amending the CCDC 2 – 2008 form of stipulated price contract. The client asked me to focus on the amendments to GC 8.2 and asked, “Please tell me if this means what I think it means.” Once I read the supplementary conditions, I understood my client’s concern.

The Canadian Construction Documents Committee (CCDC) has standard form construction contracts for use by owners and contractors. These contracts include a generic set of terms and conditions that can be customized to deal with the parties’ specific issues. The modifications are done by preparing “Supplementary Conditions,” and these override the generic CCDC terms and conditions (see GC 1.1).

Often clients will ask engineers to undertake the preparation of the tender documents, including the supplementary conditions for the contract to be signed by the owner and the successful bidder. It goes without saying that in carrying out its services the engineer owes a duty of care to its client, the owner, to act in its best interest. After all, the owner is the engineer’s client and the engineer is being paid to serve the owner’s needs and protect its interests.

However, some of the supplementary conditions drafted by engineers contain provisions that have the effect of potentially prejudicing the owner’s rights, and possibly even amending the agreement signed between the owner and the engineer.

Owners rely on their engineers

General Condition GC 8.2 of the CCDC 2 – 2008 contract describes the steps to be taken by the owner and the contractor to resolve disputes. The amendments made by my client’s engineer to the GC 8.2 included a requirement that where a dispute arises between the owner and the contractor, they must give notice of the dispute to the engineer, failing which “both the Owner and the Contractor are stopped from pursuing an action, counterclaim or other proceeding or making an application against [the Engineer] arising out of the issues in dispute in the arbitration between the Owner and the Contractor.”

If we accept that this provision binds the owner and the contractor (this is not certain as the provision purports to benefit the engineer, who is not a party to the contract between the owner and the contractor), it can hardly be said to benefit the owner. Instead, its intent is to limit the owner’s ability to assert claims against the engineer. In that way it may also have the effect of amending the contract between the owner and the engineer, which may not have such a limitation.

This was not the first time I had seen this clause, although most owners seem unaware of its existence, much less of its intended effect. Shouldn’t owners object to such a clause? Yes, but many owners who rely on engineers to draft supplementary conditions will also rely on the engineer to act in their best interest and, unlike my client, will not take the time to review the tender package or the supplementary conditions, or ask a lawyer to do so. Although you may believe that including a clause which, on its face, limits the ability of the owner and the contractor to pursue claims against you is a good thing, burying it in the supplementary conditions is probably not the best way to go about it. If your intention is to limit claims against you, that provision should be negotiated and incorporated in the contract between you and your client.

At the end of the day, if you decide to incur the risks of, in effect, practising law by preparing tender documents and supplementary conditions, avoid the temptation of inserting a clause such as the one mentioned above. Instead, consider contracting the work to a procurement lawyer, or hire a lawyer to develop a “template” set of supplementary conditions that will best serve your clients and thereby ensure that you act in their best interest.cce

Draen Bulat is a partner in the Toronto office of Miller Thomson LLP and chair of its national construction and infrastructure group. E-mail dbulat@millerthomson.com