Roles and Responsibilities of Professionals

1. Roles and Responsibilities of Professionals APEGGA Annual Conference April 21 and 22, 2005 Calgary Dr. George F. Jergeas PEng Department of Civil Engineering University of Calgary

2. References This presentation is based on: Law for Professional Engineers, 3rd Edition, Canadian and International Perspectives, (1996) (ISBN:00755268-X) by D.L. Marston,

3. References • Instructor and guest speakers notes. • Roles and responsibilities of engineers, presentations by Prof. George Jergeas PEng, ENGG 513, U of C. • Industrial Safety and Loss Management presentation by: Prof. Doug McCutcheon, P.Eng. ENGG 400, U of A. • MJB case, by Don Goodfellow Q.C., Calgary, ENGG 513, U of C • Health and Safety Act, presentation by Sig Ruud and Dan Stachnik, Q.C., Miller Thompson, Calgary, ENGG 513, U of C • Environmental Law for Engineers, presentation by Alex MacWilliam and Brent Walden PEng.. Fraser Milner Casgrain, Calgary, ENGG 513, U of C. • Environmental Impact Assessment, presentation by Professor Bill Ross, Faculty of Environmental Design, U of C.

4. Day 1: Legal Morning Law of Contract Law of Tort Afternoon Health and Safety Environmental Law Environmental Risk Assessment Day 2: PM Morning Cost overrun on Mega projects Afternoon Fast-tracking project Schedule for the two days

5. Objectives • Understand the consequences of what we do • Understand the probability that something will cause harm • Physical or financial • Improve understanding of roles and responsibilities • Society • Environment • Stakeholders and team

6. Objectives • Assist to exercise independent judgement and leadership • Provide some survival tools and techniques • Help choose the right next step • Improve chances of success

7. Canadian Legal System • Common Law • Judge made law • Legal principles are established by court decisions • Based on English system • Legislation • Statutes • Can be enacted by provincial or federal government

8. Canadian Legal System • Theory of Precedent • Courts apply legal principles established in previous court decisions to decide cases • Differences between cases, as well as similarities are important

9. Possible Causes of Action • Breach of Contract • Torts such as: • Negligence • Negligent misrepresentation • Fraudulent misrepresentation • Abuse of power • Abuse of rights • Breach of duty to warn • Defamation

10. Law of Contract CONTRACT: 1. An agreement between two or more persons, recognised by Law, which gives rise to obligations that the courts may enforce. 2. A promise, or a set of promises, which one person gives in exchange for the promise, or set of promises, of another person. G.H.L. Friedman, The Law of Contract in Canada, 2nd ed. (Carswell, 1986)

11. The Primary Ingredients of a Contract • OFFER AND ACCEPTANCE • A real and complete agreement between the parties • i.e. an offer should be accepted without qualification • MUTUAL INTENT • The parties intend to enter into a contract

12. The Primary Ingredients of a Contract • CAPACITY TO CONTRACT • The competency of the parties to make valid and enforceable contracts • (e.g. no minors, lunatics or drunkards) • The proper officer of a corporation • CONSIDERATION • Something of value given by one party to the other party in exchange for something else (e.g. $1 for a 2005 Harley Davidson!)

13. The Primary Ingredients of a Contract • LAWFUL PURPOSE • The object of a contract must be lawful; the law will not enforce an illegal obligation • Contract must not be contrary to statute law • Construction Lien Act • Contract must not be contrary to public policy

14. Question A sent B the plans and specifications for the complete electric lighting system for a new factory. B replied that she would do the work for $4500. A announced that “hereby” awarded the contract to B but that certain fixtures were to be changed and relocated and other revisions made in the plans. Is B bound to go through with the project? Why?

15. The Form of a Contract • Offer terminates • A counter-offer • Offer withdrawn • Time lapses • Some types of contract must be in writing to be valid • The sale of real estate • Oral contracts are usually legal and valid • Oral contracts may not be enforceable • My word against yours!

16. Contractual Obligations • Owners • Make site available • Owner-supplied materials • Design responsibility • Timely approvals • Not to interfere with method of execution • Owner supplied facilities • Issue change orders • Duty to disclose superior knowledge • Owner’s discretion exercised reasonably

17. Contractual Obligations • Engineers • Prepare design, specifications and drawings • Prepare bid documents • Prepare cost estimate • Assist in procurements • Oversee execution and maybe inspection • Contractors • Build the project according to specs, time, budgets • Comply with laws and regulations

18. Case Study GFJ established its own construction company and decided to bid on a major infrastructure project for a Government agency. In its bid price of $2,750,000, GFJ made a mistake by failing to include an amount of $750,000. This mistake resulted in its bid being substantially lower than the second lowest bidder of $3,400,000. Within an hour, subsequent to opening of bids, GFJ requested to withdraw its bid, which had not yet been accepted, and asked for its bid deposit of $150,000 to be returned. When the owner rejected GFJ request to withdraw its bid, GFJ refused to proceed with the work. The owner sued the GFJ for the bid deposit amount and the difference between the GFJ’s bid price and the second lowest bidder’s price.

19. Case Study Answer the following questions using your common sense: • Is GFJ allowed to withdraw its bid after submission and before award? • Is GFJ allowed to withdraw its bid after award? • Is GFJ entitled to a return of its bid deposit? • Must the lowest bid be accepted? • What if all bids come in over budget? • What if contractor qualifies (conditions) his/her bid?

20. Invitation to Tender v. Ron Engineering 1981 Invitation Offer Acceptance Call for tenders by owner by owner by contractor Offer Acceptance Call for Tender Submission of tenders Award of contract Completion of contract Contract A Contract B Bid Bond Performance Bond

21. Question The precedent set by the Ron Engineering case now enforces the principle that a contract is formed when: a)A contractor accepts the offer made in the invitation to tender by issuing a letter of intent. b)An owner accepts the offer made by a contractor by opening the tender submission. c)A contractor accepts the offer made in the invitation to tender by issuing a notice to proceed. d)A contractor accepts the offer made in the invitation to tender by submitting a bid.

22. Another Question • A called a builder, B, describing in considerable detail an additional room that she planned to build on her house, and she asked B how much he would charge to build it. After lengthy discussion, B said, “It will cost you $3000.” A said, “That will be satisfactory.” The next day B called A and said that, after making a careful estimate of the job, he found the addition would cost $3400. A claimed that B had already contracted to do the work for $3000. Is A correct? Why?

23. And Another One If a subcontractor makes a mistake in its tender and this is included as part of the contractor’s submission, then: a)The subcontractor is only obligated to perform the work if a written quote was provided b)The contractor is not obligated to perform the work c)The subcontractor is not obligated to perform the work d)The subcontractor is obligated to perform the work.

24. M.J.B. Enterprises Ltd. vs.Defense Construction Canada April 1999Supreme Court of Canada • Three phase contract • Fixed price for construction pump house • Fixed price for demolition of water tank • Unit prices for installation of water distribution system

25. M.J.B. Enterprises Ltd. vs.Defense Construction Canada April 1999, Supreme Court of Canada The tender submitted by Sorochan Enterprises Ltd. included a handwritten note stating: “Please note: Unit Prices per metre are based on native backfill (Type 3). If Type 2 material is required from top of pipe zone to bottom of sub-base material for gravel or paved areas, add $60.00 per metre.”

26. M.J.B. Enterprises Ltd. vs.Defense Construction Canada April 1999, Supreme Court of Canada • Privilege Clause: The lowest or any tender not necessarily accepted • Sorochan bid was the lowest and was accepted • MJB disputed on the basis that the Sorochan bid was qualified

27. The application for leave to appeal to the Supreme Court of Canada is granted on the following issues only:To determine if the standard clause (the lowest or any tender shall not necessarily be accepted), also known as the privilege clause:(i) Allows a person calling for tenders to completely disregard the lowest proper and acceptable valid tender and to award the contract to anyone, including a non-compliant tenderer or to a contractor which did not submit a tender through the tendering process, and that such is an issue of national and public importance to commerce and to the construction industry regarding the law of tendering in Canada.

28. (ii) Allows the person calling for tenders an absolute and unfettered discretion in awarding the contract, and that such is an issue of national and public importance to commerce and to the construction industry regarding the law of tendering in Canada.

29. (iii) Allows the person calling for tenders to then commence bid shopping with contractors submitting tenders and contractors not submitting tenders and that such is an issue of national and public importance to commerce and to the construction industry regarding the law of tendering in Canada.

30. Appeal allowed by the Supreme Court of Canada • Judgment entered for M.J.B. against Defense Construction Canada

31. LessonsTender Calling Authority • Did not have an absolute and unfettered discretion • Cannot accept a non-compliant bidder • Cannot award on basis of undisclosed criteria • Cannot bid shop

32. Tender Calling Authority • Can only accept a compliant tender • But which compliant tender? • Is a tender that best meets the criteria contained in the tender call? • Can consider: • Expressed terms • Implied terms • to determine the intentions of the parties

33. Practical Implications • Treat all bidders equally • Bid should be submitted on time • Contractor cannot withdraw bid • Award to lowest compliant bidder • Describe selection procedures • Subcontractor tenders irrevocable

34. Valid Contracts • ENFORCEABILITY The law will enforce the provision of a valid contract; the law will not intervene to impose more favourable contract terms • CHANGES An existing contract can be altered by mutual agreement, providing it is within the framework of the existing contract

35. Terms and Conditions of Contracts • Expressed Terms • The conditions which are written in the contract • Implied Terms • Valid conditions which are not explicitly stated • Often rely on established customs and practice • Obvious terms, which should reasonably be applied • e.g. contract to build staircase implies conformance to appropriate building code (G. Ford Homes Ltd. v. Draft Masonry (York) Co. Ltd., 43 O.R. (2d) 401)

36. Case Study: Disclaimer Clauses • A contracting firm entered into a contract with an owner to construct three bridges over a canal in the city of Calgary. During the bidding process, the Contractor made a cursory inspection of the site, including berms, which had been constructed by the owner upstream and down stream of each bridge site. • When contractor commenced work, water leaked through the berms. Work was delayed and became more difficult. Contractor sued for compensation. Is contractor entitled for compensation? • Contract included the following two disclaimer clauses

37. No Damage for Delay “… the contractor shall not have any claim for compensation for damages against the owner for any stoppage or delay from any cause whatsoever.”

38. Examination of Work “The bidder is required to investigate and satisfy himself of everything and every condition affecting the work to be performed and the labour and material to be provided, and it is mutually agreed that submission of tender shall be conclusive evidence that the bidder has made such an investigation.”

39. Question • In general, when a party signs a standard form contract without reading and understanding its terms, a) The court will reject the contract b)The court will delete ambiguous terms and then enforce the contract c)The court will delete unfair terms and then enforce the contract d)The court will enforce the contract e)The court will impose a penalty on the other party

40. Contract Interpretation • Contracts are a method of communication • Use them to ensure that all parties have the same understanding • Draft contracts in precise and unambiguous language • Where a contract is ambiguous it will be interpreted against the party that drafted it - rule of CONTRA PROFERENTEM • Read your contract • Clarify any potentially problematic areas

41. Contract Violation BREACH OF CONTRACT • This occurs when either party fails to comply with their respective obligations • Owner’s obligation to pay for work done • Contractor’s duty to perform the work • Any other obligation contained in the contract document either expressly or implied • Does not enable injured party to avoid their own obligations

42. Contract Violation • FUNDAMENTAL BREACH • Where the breach is so major and fundamental as to go to the root of the contract • Only if a breach is fundamental can the contract be rescinded • Contractor providing unsuitable system for its purposes • Failure of a machine to achieve the promised level of performance • Disclaimer clause would not protect the vendor

43. Fundamental Breach:Harbutt’s Plasticine Ltd v. Wayne Tank and Pump Co. Ltd [1970] • Design and installation of storage tanks for stearine, greasy wax- main ingredients of plasticine • The contractors designed a plastic pipeline wrapped with electrical heating tape; the pipeline was to be used to liquefy the stearine, in order to convey it from one point to another. • The plastic pipeline sagged and cracked • Stearine escaped and became ignited • The factory was completely gutted by the fire

44. Fundamental Breach:Harbutt’s Plasticine Ltd v. Wayne Tank and Pump Co. Ltd [1970] • The court stated: “In a breach of their contract the defendants designed, supplied and erected a system which was thoroughly unsuitable for its purpose, incapable of carrying it out unless drastically altered …. the supply of the useless and dangerous dura-pipe, coupled with the useless thermostat was a breach of the basic purpose … going to the root of the contract.” • Court also held that: “because of the fundamental breach, the contractors were not entitled to rely on the liability-limiting provision”

45. Remedies for Contract Violation • DAMAGES • A non-defaulting party is entitled to damages incurred if it can be established that: 1. There has been a breach of contract 2. The party has suffered a loss 3. The loss is as a result of the breach • Purpose of damages is to return the injured party to the position it would be in if the breach had not occurred i.e., damages are what is reasonably contemplated or agreed at the time the contract is formed. • Duty to mitigate • The injured party must minimize the damages suffered

46. Remedies for Contract Violation • DIRECT DAMAGES • Losses directly suffered as a result of the breach • INDIRECT DAMAGES • Losses consequential to the breach • Must have been reasonably foreseeable when the contract was contemplated • Liquidated damage clauses must be genuine estimates of potential losses • Penalty payments not enforceable • Liability limiting clauses enforceable

47. Remedies for Contract Violation • QUANTUM MERUIT • “As much as one reasonably earned or deserved” • A reasonable payment made to cover the cost of work performed • Usually applies if no contract exists, or if contract is unjustifiably terminated • SUBSTANTIAL COMPLIANCE • If a party substantially complies with the terms of a contract, it is entitled to be paid the contract price less the cost of any non-compliance • Minor deficiencies only

48. In-class Discussion • Some contracts contain a provision that failure of the contractor to complete the work by a specific date will result in the contractor being required to make a specified payment to the owner for each day, week, or month that completion of project is delayed. Is such a penalty provision enforceable? Discuss.

49. Answer • The court will not enforce a penalty clause that does not represent a genuine pre-estimate of damages • These pre-estimated damages are called “Liquidated damages” • The term “Penalty” should be avoided

50. Notice Provisions • Strict Compliance “Any claims which the contractor may have against the Owner shall be presented to the Engineer in writing not later than seven (7) days after the occurrence of the delay. Failure by the contractor to present any claim within the seven (7) day period shall be deemed to be an absolute waiver of such claim.”