Supreme Court upholds municipalities’ rights to impose “reprisal clauses” in construction contracts

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Canadian Design and Construction Report staff writer

The Supreme Court of Canada has dismissed a BC contractor’s appeal relating to the use of “reprisal clauses” in muncicipal procurement policies, effectively legalizing the practice across the country.

Contractor J. Cote & Son Excavating had tried to get the courts to overturn a clause in tender documents used by the City of Burnaby, which stated  that the city would not accept tenders from any party that is, or has been within the last two years, involved in legal proceedings initiated against Burnaby arising out of a contract for works or services.

“The clause effectively forces consultants or contractors who may have a dispute with the city to choose between pursuing their legal rights and bidding on city contracts for the next two years,”  Canadian Construction Association Mary Van Buren said in a Dec. 16 statement.

The CCA says: “This ruling has serious implications for contractors; it condones placing contractors on a two-year blacklist that bans them from bidding on city projects.”

“The inclusion of these types of clauses in contracts essentially allows contractors to be financially punished for exercising their legal rights,” Van Buren said. “The result is contractors are deterred from accessing the courts to enforce their legal rights because they fear being banned from future participation in projects.”

The Supreme Court’s decision effectively means that there is no constitutional barrier to municipalities using reprisal clauses.

In its statement, CCA says it will continue to closely monitor any developments as the association believes this case ruling could have major implications for the construction industry in all of Canada.

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