Construction Contract Payment Terms

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Questions and Answers

What should be present on the cover page of the contract to ensure it is the intended version of CCDC 2?

An approval stamp from the Consultant

A valid signature from the Owner

A CCDC 2 copyright seal (correct)

A date of issuance

What may the Owner withhold if work cannot be performed due to conditions beyond the Contractor's control?

The entire payment for the work performed

A portion of the payment without any justification

Payment only if all work is completed

An amount determined by the Consultant to cover remaining work (correct)

In Quebec, how long after the Consultant's certification must the Owner pay the Contractor the holdback amount?

30 calendar days (correct)

10 calendar days

5 calendar days

Until final payment is issued

Which statement is true regarding non-conforming work under the Contract?

Partial use by the Owner does not imply acceptance of non-conforming work Signup and view all the answers

What is the Contractor required to do pending the issuance of a final certificate for payment?

Ensure protection of subcontract work or Products Signup and view all the answers

What must the Contractor have before performing a change in the Work?

A Change Order or Change Directive Signup and view all the answers

What is the timeframe for the Consultant to review the Contractor's application for final payment?

10 calendar days Signup and view all the answers

How should the Contractor respond when a change in the Work is proposed?

Present a method and adjustment for price and time promptly Signup and view all the answers

What happens if the Consultant finds the Contractor's application for final payment valid?

A final certificate for payment is promptly issued Signup and view all the answers

When are agreements on adjustments in the Contract Price and Time effective?

Immediately upon agreement between the Owner and Contractor Signup and view all the answers

What must the Owner do within 5 calendar days after the issuance of a final certificate for payment?

Pay the Contractor Signup and view all the answers

What can the Owner retain from the holdback amount?

Sums for legal hypothecs against the Work Signup and view all the answers

What must accompany a Change Order regarding the value of work performed?

An application for progress payment including the change value Signup and view all the answers

What must the Contractor do if defects or unperformed work is discovered after a certificate is issued?

Correct the defects regardless of prior certification Signup and view all the answers

Which option constitutes a change in the Work as defined by the Owner?

Additions, deletions, or revisions to the Work Signup and view all the answers

What is the primary purpose of a Change Directive?

To authorize immediate work changes without formal agreement Signup and view all the answers

Under what circumstance can a Contractor terminate the Contract without prejudice?

If a receiver is appointed due to the Owner's insolvency Signup and view all the answers

What is the required notice period for the Contractor to inform the Owner of a default?

5 Working Days Signup and view all the answers

What must occur if the dispute remains unresolved after 10 Working Days following the Project Mediator's request?

The Project Mediator shall terminate the mediated negotiations. Signup and view all the answers

Within how many Working Days must a party give Notice in Writing to refer a dispute to arbitration after the termination of mediation?

10 Working Days Signup and view all the answers

What must occur for the Contractor to terminate the Contract after an order to suspend work?

The suspension must last for more than 20 Working Days Signup and view all the answers

Which of the following conditions can lead to the Contractor sending a notice of default?

The Consultant fails to certify work Signup and view all the answers

What happens if the arbitration Notice in Writing is not given within the required time frame?

The parties may refer it to any other form of dispute resolution. Signup and view all the answers

In which jurisdiction is the arbitration conducted according to the rules outlined?

Jurisdiction of the Place of the Work Signup and view all the answers

If the Contractor terminates the Contract, what are they entitled to receive?

Payment for all work performed and other damages Signup and view all the answers

Which document governs the mediated negotiations and subsequent arbitration?

CCDC 40 Signup and view all the answers

What is a condition under which a Contractor cannot terminate the Contract?

A court orders a suspension due to a Contractor fault Signup and view all the answers

What should the Contractor do if the Owner violates contract requirements significantly?

Notify the Owner in writing Signup and view all the answers

What form of communication must be used to terminate the mediated negotiations?

Notice in Writing Signup and view all the answers

What option does the Contractor have after notifying the Owner of a default if it is not corrected?

Suspend the work or terminate the Contract Signup and view all the answers

What happens if no CCDC 2 copyright seal is present on the document cover?

It constitutes an infringement of copyright. Signup and view all the answers

What is the role of the Project Mediator in the dispute resolution process?

To facilitate communication and negotiation between parties. Signup and view all the answers

What must be present on the document cover page for the Contractor to sign the contract?

CCDC 2 copyright seal Signup and view all the answers

What is required of the Contractor if a default cannot be corrected within 5 Working Days?

Commence correction and provide a schedule Signup and view all the answers

What may the Owner do if the Contractor fails to correct a default as specified?

Terminate the Contractor's right to continue with the Work Signup and view all the answers

What rights does the Owner have after terminating the Contractor's right to continue with the Work?

To take possession of Work and Products at the Place of the Work Signup and view all the answers

What happens if the cost of finishing the Work exceeds the unpaid balance of the Contract Price?

The Contractor will be charged the amount exceeding the balance Signup and view all the answers

What must occur regarding the Contractor's work performed before termination?

Obligations regarding quality, correction, and warranty continue Signup and view all the answers

In the event of a default, what must the Consultant certify before any costs can be deducted from payments?

The cost of correcting the default Signup and view all the answers

Which of the following is NOT a responsibility of the Owner after terminating the Contract?

Pay the Contractor for completed sections Signup and view all the answers

Which statement reflects the obligations of the Contractor if a default occurs?

The Contractor must correct defaults as per the Contract terms Signup and view all the answers

What must the Contractor provide to the Owner after commencing correction of the default?

An acceptable schedule for correction Signup and view all the answers

Study Notes

Holdback Payment

The Owner shall pay the Contractor the holdback amount retained for subcontract work or Products supplied by a Supplier no later than 30 calendar days after the Consultant certifies that the work has been performed.
Holds can be taken out for legal hypothecs or other third-party monetary claims against the Contractor which are enforceable against the Owner.
Despite the certification, the Contractor remains responsible for the correction of defects or work not performed regardless of whether or not such was apparent when such certificates were issued.

Final Payment

The Contractor shall submit an application for final payment when they consider the Work completed.
The Consultant has 10 calendar days to review the application and advise the Contractor in writing if it is valid.
If the application is valid, the Consultant will promptly issue a final certificate for payment.
The Owner shall pay the Contractor within 5 calendar days after the issuance of a final certificate for payment.

Withholding of Payment

If there are items of work that cannot be performed due to circumstances beyond the Contractor’s control, payments for the completed portions will not be withheld or delayed by the Owner.
The Owner may withhold an amount determined sufficient and reasonable by the Consultant to cover the cost of performing the remaining work until it is finished.

Non-Conforming Work

No payment by the Owner under the Contract nor partial or entire use or occupancy of the Work by the Owner shall constitute an acceptance of any portion of the Work or Products which are not in accordance with the requirements of the Contract Documents.
The owner can authorize changes in the work by Change Orders or Change Directives
The Contractor shall not perform a change in the Work without a Change Order or a Change Directive.
The Consultant will provide the Contractor with a written description of the proposed change in the Work.
The Contractor shall promptly present, in a form acceptable to the Consultant, a method of adjustment or an amount of adjustment for the Contract Price and the adjustment in the Contract Time for the proposed change in the Work.
When the Owner and Contractor agree to the adjustments in the Contract Price and Contract Time or to the method to be used to determine the adjustments, such agreement shall be effective immediately and shall be recorded in a Change Order.

Default by the Contractor

If the Contractor does not complete work in conformity with the Contract Documents, the Owner shall, by giving written Notice to the Contractor, require the Contractor to correct the default within 5 Working Days.
If the default can't be corrected in the specified time, the Contractor shall be in compliance with the Owner’s instructions if the Contractor commences the correction of the default within the specified time, provides the Owner with an acceptable schedule for such correction, and corrects the default in accordance with the Contract terms and with such schedule.
If the Contractor fails to correct the default in the time specified, the Owner may correct such default and deduct the cost thereof from any payment then or thereafter due the Contractor provided the Consultant has certified such cost to the Owner and the Contractor, or terminate the Contractor's right to continue with the Work in whole or in part or terminate the Contract.
If the Owner terminates the Contractor’s right to continue with the Work, the Owner shall be entitled to take possession of the Work and Products at the Place of the Work; subject to the rights of third parties, utilize the Construction Equipment at the Place of the Work; finish the Work by whatever method the Owner may consider expedient, but without undue delay or expense, withhold further payment to the Contractor until a final certificate for payment is issued, charge the Contractor the amount by which the full cost of finishing the Work as certified by the Consultant, including compensation to the Consultant for the Consultant’s additional services and a reasonable allowance as determined by the Consultant to cover the cost of corrections to work performed by the Contractor that may be required under GC 12.3 - WARRANTY, exceeds the unpaid balance of the Contract Price; however, if such cost of finishing the Work is less than the unpaid balance of the Contract Price, the Owner shall pay the Contractor the difference, and on expiry of the warranty period, charge the Contractor the amount by which the cost of corrections to the Contractor’s work under GC 12.3 - WARRANTY exceeds the allowance provided for such corrections, or if the cost of such corrections is less than the allowance, pay the Contractor the difference.

Contractor’s Right to Suspend the Work or Terminate the Contract

The Contractor may terminate the Contract if the Owner is adjudged bankrupt, or makes a general assignment for the benefit of creditors because of the Owner’s insolvency, or if a receiver is appointed because of the Owner’s insolvency.
The Contractor may terminate the Contract if the Work is suspended or otherwise delayed for a period of 20 Working Days or more under an order of a court or other public authority and providing that such order was not issued as the result of an act or fault of the Contractor or of anyone directly or indirectly employed or engaged by the Contractor.
The Contractor may give Notice in Writing to the Owner, with a copy to the Consultant, that the Owner is in default of the Owner’s contractual obligations if the Owner fails to furnish, when so requested by the Contractor, reasonable evidence that financial arrangements have been made to fulfill the Owner’s obligations under the Contract, or the Consultant fails to issue a certificate as provided in GC 5.3 - PROGRESS PAYMENT, or the Owner fails to pay the Contractor when due the amounts certified by the Consultant or awarded by arbitration or court, or the Owner violates the requirements of the Contract to a substantial degree and the Consultant, except for GC 5.1 - FINANCING INFORMATION REQUIRED OF THE OWNER, confirms by written statement to the Contractor that sufficient cause exists.
The Contractor’s Notice in Writing to the Owner shall advise that if the default is not corrected within 5 Working Days following the receipt of the Notice in Writing, the Contractor may, without prejudice to any other right or remedy the Contractor may have, suspend the Work or terminate the Contract.
If the Contractor terminates the Contract under the conditions set out above, the Contractor shall be entitled to be paid for all work performed including reasonable profit, for loss sustained upon Products and Construction Equipment, and such other damages as the Contractor may have sustained as a result of the termination of the Contract.

Dispute Resolution

If, in the opinion of either the Owner or the Contractor, there is a disagreement between the parties as to the interpretation of the Contract Documents or in connection with the Work, the parties shall promptly attempt to resolve the dispute by discussion and negotiation. The Consultant shall be involved in such discussions and negotiations at the request of either the Owner or the Contractor.
If the dispute is not resolved by discussion and negotiation, the dispute shall be referred to a Project Mediator who will be selected by the Owner and the Contractor. The Project Mediator shall be an individual who has agreed to provide their services as a mediator and who, at the time of appointment, has a knowledge of construction practices and dispute resolution processes.
The mediated negotiations shall be conducted in accordance with the Rules for Mediation of Construction Disputes as provided in CCDC 40 in effect at the time of bid closing.
If the dispute has not been resolved within 10 Working Days after the Project Mediator was requested or within such further period agreed by the parties, the Project Mediator shall terminate the mediated negotiations by giving Notice in Writing to the Owner, the Contractor and the Consultant.
By giving a Notice in Writing to the other party and the Consultant, not later than 10 Working Days after the date of termination of the mediated negotiations, either party may refer the dispute to be finally resolved by arbitration under the Rules for Arbitration of Construction Disputes as provided in CCDC 40 in effect at the time of bid closing. The arbitration shall be conducted in the jurisdiction of the Place of the Work.
On expiration of the 10 Working Days, the arbitration agreement is not binding on the parties and, if a Notice in Writing is not given within the required time, the parties may refer the unresolved dispute to the courts or to any other form of dispute resolution, including arbitration, which they have agreed to use.

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Description

This quiz covers key aspects of payment terms in construction contracts, focusing on holdback payments and final payment procedures. Understand the timelines and responsibilities of the Contractor, Owner, and Consultant. Test your knowledge of legal implications and certifications in construction agreements.