A Verbal Contract Is Not Worth the Paper It Is Printed On
NECI clients will be familiar with this mantra, used in many of our courses and online offerings. Although it can take additional time to document agreements properly and incorporate legal assistance where necessary, such documentation can provide invaluable evidence and head off time-consuming and relationship-damaging disputes.
Several recent cases out of BC highlight the critical importance of ensuring that contracts are expressed in writing and signed by all parties. All too often we see “handshake deals” that fall apart, create unexpected cost overruns and, occasionally, wind up in court. Here are two examples:
Peter Walry Construction Ltd. v Canadian Adventure Company Holdings Ltd., 2017 BCSC 67 concerned construction work done by the plaintiff on the defendant’s backcountry ski resort in 2013. The defendant did not pay the plaintiff for any of its work. The plaintiff sued for its unpaid invoices in the amount of $40,320.00, plus interest and costs. The defendant denied the claim and counterclaimed, alleging the plaintiff’s work was deficient and caused the defendant considerable damage and loss.
At trial, the court had to wade through evidence of an oral contract, along with several emails and other written pieces of correspondence corroborating portions of the alleged oral contract. After an eight day trial, the plaintiff Peter Walry Construction Ltd. received a judgement in the amount of $40,000 plus interest and costs.
In Willms v MacDonald Builders (Celtic Homes) Ltd., 2016 BCSC 1910, the construction contract between the parties consisted of a “written estimate” in the range of $50,000 to $80,000, along with oral representations and email correspondence. After the work was finished, a dispute arose as to whether the contract was a cost-plus or a fixed price contract. The parties also disagreed over the precise terms of the contract. Approximately $40,000 was paid, but there were allegations of deficiencies, and the owner initiated a counterclaim for between $40,000 and $60,000.
After a seven day trial, the BC Supreme Court concluded that the owner’s claim for $53,000 was valid and the contractor was still owed $40,000. This resulted in a net damages award to the owner of approximately $13,000.
As these cases illustrate, leaving the critical terms of your contracts to be sorted out by the judiciary is risky business indeed. Although in both these cases the court was able to reach a decision, the costs of these lengthy trials far exceeded any damages awarded. Don’t become a litigation statistic – ensure your contracts and other critical communications are well documented, acknowledged and executed by all parties, and amended in writing as necessary as the work unfolds.
Readers are cautioned not to rely upon this article as legal advice nor as an exhaustive discussion of the topic or case. For any particular legal problem, seek advice directly from your lawyer or in-house counsel. All dates, contact information and website addresses were current at the time of original publication.
