Understanding construction law is important for industry participants, not just to make the most out of these projects, but also to avoid any negative legal consequences upon them. In Canada, each jurisdiction would have their own statute related to construction issues, aside from the applicable federal laws when parties engage with the government.
Introduction to understanding construction law
Construction law is that set of statutes, regulations, and common law principles that affect the construction and infrastructure industry. It also governs the relationship between the stakeholders of the industry. These stakeholders include project owners and the government, contractors and subcontractors, and labourers.
Aside from maintaining a good relationship among the stakeholders, construction law also covers the life of a project — from when the contract is drafted to when the project ends. Construction law also outlines how disputes can be resolved, such as exploring alternative dispute resolution or going to court.
What are Canada’s construction laws?
Understanding construction law in Canada depends on the type of project and the parties involved. Canada’s construction law can be divided into two:
- federal construction laws: these apply to federal construction projects (e.g., Federal Prompt Payment for Construction Work Act which applies to construction projects involving real or immovable federal properties)
- provincial or territorial construction laws: these apply to any other construction projects located in that province or territory (e.g., Ontario’s Construction Lien Act applies to private construction projects in the province)
Key features of Canadian construction laws
Although these laws may differ, there are some common provisions among them, such as:
- holdback requirements: a statutory requirement where a payment’s percentage must be held back by the payor, subject to certain conditions for its release
- prompt payment scheme: specific deadlines are set by the law where payment from the owner to a contractor, subcontractor, sub-subcontractor must be made
- construction liens: allow the claimant of the project’s payment to register and enforce a construction lien over the subject property, the land, etc.
- adjudication proceedings: a process is provided by the law where parties can resort to adjudication to resolve their disputes without going to court
To learn more about this prompt payment scheme, listen to this podcast:
The prompt payment scheme found in most provinces’ construction laws is not found in British Columbia’s Builders Lien Act. For questions on payment disputes of construction projects in BC, reach out to one of the Lexpert-ranked best construction lawyers in BC.
What are the legal issues in the construction industry?
To have a deeper understanding of construction law in Canada, it must also be read together with other legal areas related to it, such as:
- law on contracts
- labour and employment
- environmental regulations
- law on damages
- corporate laws
When a specific issue arises, these legal areas would apply to help parties resolve these issues.
Here’s a brief background on how these laws relate to construction projects:
Law on contracts
Disputes in the construction industry usually arise out of the interpretation and implementation of contracts. The contract is the parties’ basic consideration, as it establishes both their rights and obligations as to the project concerned. It also outlines terms on:
- timeframe for the project’s start and completion
- payment of parties (contractors, subcontractors, workers, suppliers, etc.)
- dispute resolution methods in case of disagreements
In Canada, the law on contracts is influenced by common law and the Civil Code of Québec. As such, enforcing these contracts, especially to prevent or to address any disagreements, must be in line with the Canadian laws on contracts.
If unsure of how these laws and statutes apply to your project, consult a building construction lawyer in Canada.
Labour and employment
No construction project can be completed without its workers. To ensure that the project goes smoothly, and all rights of labourers are respected, project implementers must also consider the Canadian statutes on labour and employment.
These laws cover:
- labour standards: the basic rights of the employees (e.g., minimum wage, hours of work, termination, severance pay, leave, etc.)
- occupational health and safety: the employer’s obligation to ensure a safe workplace environment, and the obligations of both the employer and employee when an occupational accident or hazard occurs
Provincial labour laws also provide for industry-specific standards. These include safety requirements that employers, such as project owners and contractors, must implement.
Environmental regulations
It cannot be denied that a construction project may disrupt the project area’s environment and natural resources. This is why another consideration for a project’s implementers is the different environmental laws and regulations.
Aside from the federal laws that may apply, specific provincial statutes must be considered. These may require permits and licences before a project can start.
Law on damages
During the construction phase or even after completion, different personalities may incur damages that are enforceable against the source (e.g., negligent party):
- damages for breach of contract: actual financial losses due to the contract’s breach, plus any liquidated damages agreed on the contract
- liability for construction defects: for damages claimed by the injured person against the owner, contractor, or engineers and architects for any structural defect
In these instances, the Canadian laws on torts and damages apply, such as the common law principles on damages and Québec’s Civil Code, to answer the following:
- the real party who is the cause of the damage
- if damage has really been incurred by the plaintiff
- the appropriate amount to be awarded to the plaintiff
Corporate laws
The financial side of Canadian corporate laws apply to construction projects, as they involve large sums of money. They concern:
- corporate finance and project finance
- infrastructure development finance
- insurance requirements
Whether it’s a private or public project, corporate laws maintain the financial relations between parties in a construction project. It also guides parties when resolving financial disputes among them, in addition to their contract.
Consult with the best construction lawyers in Canada as ranked by Lexpert for input on understanding construction law.