RC121 NovDec 2025 - Magazine - Page 37
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In today’s volatile trade and supply chain climate,
the construction industry must proactively manage risk
work but do not usually provide contractors
with the right to compensation for such schedule extensions.
CHANGE IN LAW CLAUSES: A change in law clause
allows for an adjustment in the contract price
and/or the schedule when a change in any
applicable laws occurs after a speci昀椀ed date,
generally the date the parties enter into the
contract. Change in law clauses are typically
applicable in very speci昀椀c circumstances and
generally require the contractor to connect the
change in law with a direct additional cost of
performing the work. Additionally, such clauses usually put the risk of change in laws on
the project owner, which is the case with the
CCDC suite of standard construction contract
documents. This would include changes in law
that introduce new or increased taxes, duties
or tari昀昀s as well as changes in other areas
that result in increased costs to the contractor.
These provisions were commonly used by conThe rapidly evolving situation surrounding the imposition of U.S. tariffs on Canadian goods has
tractors during the pandemic to seek recovery
resulted in supply chain disruptions that have led to dire consequences for many industries,
of additional costs from project owners due to
including the construction sector.
increased/heightened health and safety regulations, which included the requirement for
social
distancing
and increased sanitary requirements. These
party’s non-performance if certain prescribed events have
provisions are now being used to seek recovery of additionoccurred and have resulted in one of the parties being
al costs incurred by contractors due to the introduction or
unable to perform their obligations. It is important to
increase of tari昀昀s on materials (on the basis that such tari昀昀s
remember that the right to be excused from performance
were not in place when the contract was entered into by the
on the basis of an extraordinary/unforeseeable event does
parties). These clauses can be drafted to require timely notice
not exist at common law and in the absence of an express
of a contractor’s intention to advance a claim for additional
force majeure clause in a contract, a party may have no
costs based on a change in law and to specify restrictions
legal excuse not to perform under the contract, even in the
on the costs the contractor may be entitled to recover (e.g.
case of an unforeseen event outside of the control of the
limiting entitlement to provable direct additional costs only
parties. The only exception would be if the event renders
and excluding recovery of overhead and pro昀椀t on these addithe contract impossible to perform, in which case, the party
tional amounts) in order to mitigate the owner’s exposure in
can seek a declaration that the contract has been legally
relation to additional costs.
frustrated (which is a very high bar). Generally speaking,
In today’s volatile trade and supply chain climate, the conforce majeure clauses will not provide relief to the project
struction industry must proactively manage risk. Contract
owner in relation to payment obligations under the contools such as price escalation, force majeure, and change in
tract but they may provide additional time to the contraclaw clauses provide clarity, allocate risk fairly, and help projtor to complete the work, if one of the events speci昀椀ed in
ects withstand shifting market conditions. By anticipating
the force majeure clause results in a delay to the schedule.
disruptions and building 昀氀exibility into agreements, parties
Such clauses were used by contractors during the pancan better safeguard projects and maintain stability amid
demic to seek schedule extensions. The clauses usually
ongoing uncertainty.
only entitle contractors to additional time to perform the
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