Table of Contents

Canadian Legal System.............................................................................................. 3

Theory of precedent................................................................................................ 3
Categories of law........................................................................................................ 4
Canadian Constitution 1867.................................................................................... 4
By S#91.................................................................................................................. 4
by s#92................................................................................................................... 4
Ultra Vires................................................................................................................... 4
Constitution act of 1982............................................................................................. 4
Court Participants....................................................................................................... 4
Business organizations............................................................................................... 4
Corporation............................................................................................................. 4
Partnership.............................................................................................................. 4
Sole Proprietorship.................................................................................................. 5
Security of payment and performance.......................................................................5
Bonds...................................................................................................................... 5
Types of bonds (3 types). Bid Bond.....................................................................5
Performance bond................................................................................................ 5
Labour and materials bond.................................................................................. 5
Letters of Credit...................................................................................................... 5
Guarantee............................................................................................................... 5
Construction Lien Act.:............................................................................................... 6
Lien......................................................................................................................... 6
Holdback................................................................................................................. 6
Release of holdback................................................................................................ 6
Trust Provisions........................................................................................................ 6
Substantial performance............................................................................................ 6
Completion.............................................................................................................. 6
Project Structures and Contracts in between them....................................................6
Traditional................................................................................................................ 6
Construction Management...................................................................................... 7
Contractor / Construction management..................................................................7
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Multi-Designer......................................................................................................... 7
Engineering, Procurement and Construction Management (EPCM).........................7
Design/Build............................................................................................................ 7
Forms of Contract....................................................................................................... 7
Stipulated Price....................................................................................................... 7
Unit Prices............................................................................................................... 7
Cost Plus.................................................................................................................. 7
Guaranteed maximum price plus bonus..................................................................7
Insurance:................................................................................................................... 7
Intellectual Property.................................................................................................... 8
Patents.................................................................................................................... 8
Trade Mark............................................................................................................... 8
Passing Of.............................................................................................................. 8
Copyright:................................................................................................................ 8
Diferent Types of Legal obligations............................................................................8
Diferent Types of Tort Liabilities................................................................................. 8
Principles of Negligence............................................................................................. 9
Balance of Probability................................................................................................. 9
Duty of Care............................................................................................................... 9
Neighbour principle................................................................................................. 9
Paxton vs. Ramji...................................................................................................... 9
Standard of Care........................................................................................................ 9
Locality Rule............................................................................................................ 9
Generalist vs. Specialists....................................................................................... 10
Beginners.............................................................................................................. 10
Time...................................................................................................................... 10
Mistakes................................................................................................................ 10
Substantiating Negligence.................................................................................... 10
Contract................................................................................................................ 10
Damages.................................................................................................................. 10
Donoghue vs. Stevenson....................................................................................... 10
Hedley Byrne......................................................................................................... 10
Development of Tort Law.......................................................................................... 11
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Edgeworth Construction Ltd. Vs. N.D. Lea.............................................................11

Winnipeg Condo Vs. Bird Construction..................................................................11
Strict Liability........................................................................................................... 11
Workers compensation legislation........................................................................11
Vicarious Liability..................................................................................................... 11
Dutton Vs. Bognor................................................................................................. 11
Concurrent tortfeasors............................................................................................. 11
District of Surrey Vs. Carrol-Hatch.........................................................................12
Product Liability........................................................................................................ 12
Contract................................................................................................................ 12
Tort: Applicability to Engineers: Donoghue vs. Stephenson.................................12
Duty to Warn............................................................................................................ 12
Ho Lem Vs. Barotto Sports.................................................................................... 12
Economic Loss.......................................................................................................... 12
Duty to warn: Rivtow Marine................................................................................. 12
Economic loss defendant on Property damage sufered by 3rd parties: CN Railway
Vs. Norsk:.............................................................................................................. 12
Product liability: Winnipeg Condo Vs. Bird Construction.......................................13
Tort Liability Summary.............................................................................................. 13

Canadian Legal System

based on British common law and Equity

Theory of precedent (court decisions are based on previous court decisions)

Basis of Predicting the legal system (so often evolution happens slowly)
Factual distinctions between cases can provide flexibility

Categories of law

Judge Made law or common law

Legislative
Government made by Federal / Provincial / and Municipal levels
statutes are supplemented by regulations
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Canadian Constitution 1867 gave power to federal government and

provinces to enact legislation

By S#91-Federal / Trade and commercial / Banking / patents / copyrights

by s#92-Provincial / property and civil right / Local Works

Ultra Vires
The conduct of corporation that exceeds the power granted by law

Constitution act of 1982

Guarantees Fundamental Freedoms: freedom of religion / freedom of thought,

belief, opinion and expression / freedom of association
Constitution is Supreme law
Reduced Efect of Parliamentary Supremacy
Reasonable Limits on the right of the charter
S33 Override certain provisions of the charter

Court Participants
Original Trial: Plaintif vs. defendant
Appeals: Appellant vs. Respondent

Business organizations
Corporation
Share Capital Vs. Non-share capital

Partnership
General

Sole Proprietorship

Security of payment and performance

Bonds, Letters of Credit, and guarantees are 3 forms of security.

Bonds (bonding arrangement), where a contracting entity is asked to get a

promise from a 3rd party. That 3rd party is called assurity. From owners part, the
equipment supplier may NOT have enough or may not be adequate to get the job
done. So. The diagram arrangement shows, the owner can ask the equipment
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supplier to get a equipment assurity bond. They can (assurity) step in and finish the
job, hire someone to finish the job or write a cheque.
Equipment supplier to get the bond ready, they will be asked to get the indemnity
agreement. Thus, the surety (bonding company) can use the indemnity agreement
to recover their money.
Thus.. Owner has transferred the credit risk to the assurity.
Bond: guarantee by a surety that contractor will perform oblgations. This is NOT
insurance and bonding company will seek compensation from contractor.
Contractors shareholders usually provide guarantees. Bonding company will also
be asking for additional protection Guarantee. A protection of their own.
Types of bonds (3 types). Bid Bond: Tendering process. If the lowest bidder
does NOT guarantee or refuse to sign the contract, the bid bond will pay for the
diference between the lowest bid to the next lowest bid.
Performance bond. The owner would ask the equipment supplier to provide the
bond. The Cost of the bond is about 2% of the cost. Equipment suppliers will be
asking to recover this cost from the owner.
Labor and materials bond guarantees payment to the labor and materials. Thus,
this will allow sub suppliers to be paid during the project.

Letters of Credit: Assurity is replaced with the bank. This is a promise from
the bank. If the owner comes to the bank and say that theyre owed some money,
the bank will write the cheque with no questions asked. This is called
Unconditional letter from the bank Thus, what the bank does is that they take the
money right away. This is most necessary to cover the payroll. Cost of leabout tter
of credit is about 2%

Guarantee: Guarantee issued from the parent company. Promise from the
parent company to the owner Thus, a mother company

Construction Lien Act.:

Lien: is a right for someone to register a claim that hasnt been paid. It is a
concept that you let the world know that you didnt get paid. If you never end up
getting paid, you can force the sale of the property. This is the biggest stick.

Holdback: 10% withholding. Thus, if theres a payroll, 10% is held back or cash
flow reasons. Basic withholding is released until substantial performance certificate

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is completed and published. Holdback for finishing work is released only upon
completion of the work, regardless of substantial performance certificate

Release of holdback: The 10% can be released in 45 days period after the
publication of substantial performance certificate

Trust Provisions: They allocate certain funds for being exclusively for the
purpose of running a project

Substantial performance.
1% of a large contract for large contract. This performance can be used as a
qualitative test completer. Cost unit completion must be less than amount
calculated by the following steps.
1. 3% for first $500K of contract price
2. 2% for second $500K of contract price
3. 1% for the rest of the cost of contract price

Completion: If the incomplete issue is less than a thousand dollars, it starts

another 45 days running. But this has NO publications or clock running to it. (2
trapezoid graphs)

Project Structures and Contracts in between them .

(Good and

Bad)

Traditional. Most of the standard form of contracts are design this way.
Consultant works with the owner to create the proper drawings. Once this is
complete, theyll (consultant and owner) will find the contractor to build it.
Advantage: Single point of responsibility. Both design and building. This is easiest
way from the owners point of view.
Disadvantage: Not conducive to fast-tracking. Thus a bit slow. Owner doesnt
know what the final cost will be until the prices are received from the contractors.
With no input from the contractors, theres no room for freedom. At the same time,
should something goes wrong, every one blaimes everyone else.

Construction Management. (Owner Centered) This is a fast tracking system

and theoretically, will have lower cost. But Biggest disadvantage is the
Occupational Health and Safety Act, which is now the consequence of the safety is
now upon them to deal with.

Contractor / Construction management. Very similar to the traditional

manner, but the contractor AND construction manager takes care of the whole
construction. But the only problem is the determination of the final building cost.
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Multi-Designer: Due to the special relationship (p254 from text). This is how
the BCE place was developed. Cheaper cost, but now owner becomes the
coordinator for the entire project.

Engineering, Procurement and Construction Management

(EPCM): One way to solve problem of finger pointing is to marry of the engineer
with construction manager.

Design/Build has the advantage of lumping the designer and builder and thus,
less chance of blaming each other.

Forms of Contract.
Stipulated Price: Fixed Cost. Advantage with stipulated price method of
implementing design / build is that the agency has the best certainty of the cost of
the building.

Unit Prices: $/kg of stuf.. Useful when theres no clear breakdown of all the
cost variables.

Cost Plus: Base Price + extra stuf. Usually, in a contract basis, this practice is
well used.

Guaranteed maximum price plus bonus. This is needed to guarantee

the All In Price.

Insurance:
3 types of insurances: Property (insurance to cover damage to that which is
being constructed); Liability (if you hurt someone 3rd party injured); Errors &

Omissions Professional Liability (For professionals such as engineers to

obtain this liability issues for professional negligence).
All insurance have limit (Per incidence and accumulative limit) and deductibles.
Exclusions due to faulty design.
If Errors and Omissions coverage from a certain contractor may sound like a lot, but
to get the real deal, make sure you get the project specific errors and omissions
coverage.

Intellectual Property.
Patents: To register a patent, need 3 requirements; 1. Invention has to be new
and useful. Art, process, Machine, Manufactur, composition of matter. Or any
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improvement to any of these. 2. Has to be novel and useful, resulting from

enginuity and skill. 3. Has to be reduced to physical. Not a bright idea, but has to
be well documented and physical.
So.. Take your bright idea, Patent gives 20 year protection. With a patent, you can
sell the patent, or license the fee for patent. You can do it by per item, per weight,
etc. etc.
The License must be registered as well. 1. Any damage I sufer due to someone
else copying my patent can be recovered . 2 nd Injunction is to stop the other from
using my patent. 3rd is what ever profit the company generated using my patent,
they may give that prfit to me.

Trade Mark: Mark, identifying logo. When people see it, they think about a
product. Registration is good for 15 years and renewable unlimited. So.. keep it for
ever. Has to be distinctive. Trade mark owner will have to have direct of some
ownership of the quality of the service being provided.

Passing Of: Unregistered trademark. If you can prove that your logo and
someone else using your logo has and gives same type of business AND that it is
causing confusion, then you can also get an injunction.

Copyright: Every original writing is subjected to it. Drawing, Songs, Scores,

Books, etc Term of the copy right is life of the writer + 50 years. If an employee
writes or publishes under an employer, then it belongs to the employer. (Opposite
to patents).

Diferent Types of Legal obligations

Legal obligations and the corresponding responsibilities may arise in diferent ways:

Contractual: Parties voluntarily assume legal obligations

Statutes: Legislation imposes obligations via Criminal Code & Construction
Lien Act
Tort: Obligations based on the relationship between the person who owes the
duty and the person to whom the duty is owed

Diferent Types of Tort Liabilities

Defamation: Reputation of the plaintif is damaged by untrue statements

publicly made by the defendant
Nuisance: Alleviate undue interference with the comfortable and convenient
enjoyment of the plaintifs land
Negligence: Cause of injury directly related to an act of a defendant

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Private or civil wrong or injury, that may arise independently of contract. Tort
liability and breach of contract can both occur.
Fundamental purpose of tort liability is to compensate the victim and put the
plaintif in the same position he or she would have been in, if the tort had never
been committed and punishment is NOT the purpose of the tort law. Should the
circumstances of the tort also constitute criminal activities, punishment of the
criminal would be governed by the criminal code of Canada. Compensation is
proceeded through civil proceedings where as the crime is proceeded via criminal
proceedings.

Principles of Negligence
A plaintif in negligence action must prove on a Balance of Probability that 1.
Duty of care must be proved, 2. Duty of care has been breached, 3. Damages
sufered due to breach of duty of care by the defendant

Balance of Probability
Plaintif must present evidence to show that its case is more probable than the
defendants case. More likely to be true. Contrast to criminal cases which are
generally based on proof beyond a reasonable doubt, higher standard, NO
REASONABLE DOUBT in the mind of a reasonable person.

Duty of Care
Neighbour principle: Generally, person owes a duty to take reasonable care
not to cause injury to persons whom the ought reasonably anticipate would be
injured by their act or omission.
Question: Does the defendant owe a duty of care to the plaintif? Do the
circumstances fit within an established category of relationship giving rise to a duty
of care?

Paxton vs. Ramji: Doctor prescribing acne drug, which may cause fetal
malformation. Doctor was aware of vasectomy of the father. But vasectomy failed
and baby was conceived. Baby was born but considerable damage done by the
acne drug. Baby sued the doctor for negligence in prescribing the acne drug.
Decision: Doctor did NOT owe a duty of care to a future child. Doctor can not
advise or take instructions from a future child.

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Standard of Care
Duty to exercise the skill, care and diligence which may reasonably be expected of a
person of ordinary competence. Not obligated to perform to the standards of the
most competent and qualified members of the profession.

Locality Rule: In Like circumstance. Location of the service may be one of

the relevant circumstances. Service was performed in an area with limited access
to facilities. Defendant is then asked to do what the reasonable person with
limitation would have done.

Generalist vs. Specialists: Professionals are subject to a higher standard.

This is due to their expectations from the clients. The ideal is the diference
between What would the reasonably competent generalist have done versus
What would the reasonably competent specialist have done

Beginners: Inexperience (beginners) is not an answer to a claim of negligence

Time: Judged by the professional standards prevailing at the time the work was
done, not by what may be known or accepted at a later date

Mistakes: Engineers dont guarantee their work to be successful. But they must
satisfy the standard of care. But unsatisfactory work will not render them liable in
negligence. Aka, error in judgement, mistakes which even a reasonable
competent professional would make.

Substantiating Negligence: Determination if there was a breach of care,

compared to the standard of care. Circumstances and expert testimony will be
considered.

Contract: Method of increasing expectations. Agreement to exercise higher

standard of care than that imposed by law. Guarantee their work will produce a
specific result. Undertake to exercise a degree of competence of the most
specialized and trained members of the profession.

Damages
Expansion of the definition of Damage from traditional values of personal and
property to include financial losses.

Donoghue vs. Stevenson: Plaintif became ill after consuming a bottle of

ginger beer contaminated by a decomposed snail. Although there was no contract
between the manufacturer and the plaintif, the court held the manufacturer to
withhold the standard of care. Manufacturer was under a legal duty to the ultimate
consumer to take reasonable care that the ginger beer was free of defect, likely to
cause injury or death. Court provided remedy to those who sufered property
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damage or personal injury as a result of the careless acts of others (Manufacturer).

NO economic losses deals with this case.

Hedley Byrne: Plaintif seeking advise from the bank. Bank complied with their
advice and in doing so, the plaintif went into business with the associate, resulting
in loosing money. Court held the bank liable under exercise of special skills (by the
bank). Although traditional tort law provided relief where damages to person or
property was in concern, this case expanded the scope of damages to include
financial loss resulting from negligent advice.

Development of Tort Law

Mistake in engineering drawings causing financial losses. Reliance is a reason for
tort liability. Poor construction due to construction error by the sub-contractor is
also a basis for Tort liability since the general contractor has the duty of reasonable
care to the ultimate clients.

Edgeworth Construction Ltd. Vs. N.D. Lea: Contractor successfully bid

for high way expansion but experienced financial losses due to error in the drawings
prepared by the engineers. Contractor sues engineer for negligence due to reliance
of the drawing preparation. Although there never was any contract between the
engineer and the contractor, the court ruled that the engineer could be liable in tort
since engineer undertook to provide the information to the bidders for the work.
Since the purpose of supplying the drawings is to allow for the bidders to prepare a
price to be submitted to the owner and contractors relied on this very information
for the pricing, Reliance was reasonable.

Winnipeg Condo Vs. Bird Construction: Building was originally

completed in 74, sold in 78, section of the wall fell on 89 (under 2 nd owner).
Although there was no contract between the 2 nd owner and Bird construction, Court
held contractor responsible for duty in tort in taking reasonable care in constructing
the building.

Strict Liability
Does not necessarily apply the concept of fault. (thus, may play a role).

Workers compensation legislation: Fault is not necessary for

compensation to be provided. Employer pay premiums into fund based on the
salaries of their employees. Employees receive compensation not with standing
fault.

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Vicarious Liability
Employer is liable for the negligent performance of an employee. Based on Deep
Pocket Theory since employer has deep pocket of funds from which an injured
party will more easily obtain compensation. IF not by their own capital, employer is
better positioned to mitigate the losses through insurance of pricing of the services.

Dutton Vs. Bognor: House built with inadequate foundation. Although the
building inspector gave a pass, the building collapsed. Court ruled that contractor
be liable and inspector liable. Building inspectors employer was also liable due to
vicarious liability. Both building inspector (personal liability) and its employer
(vicarious liability) are thus liable.

Concurrent tortfeasors
More than one party is liable in tort.

District of Surrey Vs. Carrol-Hatch: Architect and an Engineer is both

fined liable (60% and 40% respectively) due to breach of their duty to warn the
owner that proper soil test should have been taken for the police station design.
Both the architect and the engineer were concurrent tortfeasors.

Product Liability
This law is governed by both the law of contract and the law of tort.

Contract: Unhappy consumer, damaged or injured by the product may be able to

utilize warranties provided for by legislation

Tort: Applicability to Engineers: Donoghue vs. Stephenson :

duty of care is owed to all reasonably forseeable victims of the defendants
negligent conduct. Duty is also owed to 3 rd parties injured by malfunction or
consumers of the product whether they purchased it or not. Contributory
negligence (way to protect the engineer) can be applied where the user COULD
have or did examine the product before use.

Duty to Warn
Some products are inherently dangerous. Thus, manufacturers have a duty to warn
consumers of the appropriate use of the product or the risks associated with its use.
Duty to warn also extends to risks which flow from the forseeable use of the product
(you could be harmed if you use it like this) But no need to warn about Obvious
and Apparent that anyone would be aware of it.

Ho Lem Vs. Barotto Sports: Hunter buys a shot-shell reloading machine.

He did not follow the instruction and gets injured. The court held that adequate
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instruction was already in place and hunter was NOT awarded since he did not use
the instruction properly. This was possible since the manufacturer had satisfied its
responsibilities by providing an adequate warning.

Economic Loss
Financial or business losses due to loss of profit, cost of repair or loss in value.

Duty to warn: Rivtow Marine: Barge operator fitted a crane onto their
barge, but the Manufacturer of the crane did not warn of the defect in the crane.
Court held that the manufacturer was under a duty to warn and thus, the barge
operators claimed economic losses attributed to failure to warn. Manufacturer was
liable for the lost profits while the crane was out of service for repairs.

Economic loss defendant on Property damage sufered by 3rd

parties: CN Railway Vs. Norsk: Tug boat operator negligently allowed the
barge to collide with the railroad bridge. CN Rails sued the tug boat company for
economic loss as a result of not being able to use the bridge due to repairs. Courts
are generally concerned about allowing economic loss claims since they may lead to
indeterminate and unlimited liability. But for this case, the court was satisfied that
there was sufficient Proximity between the tug boat operator and the railway
company to justify the liability.

Product liability: Winnipeg Condo Vs. Bird Construction :

Economic loss is recoverable. (cost of repairing the cladding). It was reasonably
forseeable that a defect in the construction would pose a risk of danger to a
subsequent purchaser or user of the building.

Tort Liability Summary

People have various liabilities and corresponding responsibilities (Contractual

and tort)
Tort is based on relationship between parties and does not require a contract
Fundamental purpose is to compensate the injured party
To claim tort, you must establish, 1: Duty of care, 2: Breach of the duty of
care, 3: Damage caused by the breach of duty of care.
Many times, it may not be just a single party involved in tort liability;
Concurrent tortfeasors
Vicarious liabilities

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