This article is the fourth and final instalment in a series aimed at helping general contractors navigate the legal and commercial strategic challenges at each stage of a construction project. In Parts 1 through 3, we explored the risks embedded in bidding, the importance of pre-bid due diligence, the legal framework governing the tendering process through to the submission of the bid, and the consequential creation of Contract A and its legal consequences.
This final article focuses on what happens after the bid is won, the construction contract is awarded, and the parties enter into Contract B. This is where many contractors mistakenly “relax,” believing their legal and financial obligations are fully known and expressly stated in the construction Contract B.
In reality, the transition from the bidding Contract A to the construction Contract B marks the beginning of a new set of legal obligations, risks, and commercially strategic considerations that are not only expressly set out in the written Contract B but are also incorporated into Contract B by operation of law. As such, these “hidden” provisions can determine whether a project proceeds amicably, on schedule, and on budget. We will explore some of these “hidden” legal obligations in this article.
Forms of Contract B: The Construction Contract
Once a general contractor is formally awarded the contract, the parties proceed to enter into and execute Contract B, the construction contract. The form of Contract B may be embedded in the RFP/Tender Documents, in which case the parties are legally obligated to formally execute that specific Contract B, with limited opportunity, if any, to negotiate changes.
Upon contract award, failure to execute the Contract B embedded in the RFP/Tender Documents — upon which the general contractor’s bid was accepted — would expose the successful general contractor to damages arising from a breach of Contract A and liability under its bid bond, if applicable.
It is well known in the construction industry that there are a number of commonly used construction Contract B forms, including:
- CCDC 2 – 2020 Stipulated Price Contract
• CCDC 5A – 2025 Construction Management Contract – for Services
• CCDC 5B – 2025 Construction Management Contract – for Services and Construction
General contractors should become familiar with each type of Contract B as it relates to the specific needs of a project.
Implied Contractual Duty of Good Faith and Duty of Honest Performance
Under Canadian law, once a contract has been entered into, the parties must perform their contractual obligations in good faith and honestly. Where a contractual term requires a party to exercise discretion, that discretion must be exercised in good faith, in a commercially reasonable manner, and not capriciously or arbitrarily.
A common example addressed by courts:
- Where a party exercises a right of termination under Contract B, that right must be exercised in good faith, honestly, and transparently, and not in a manner that misleads the innocent party into continued performance of Contract B at that party’s own expense and risk.
- Where termination is not exercised in good faith or honestly, the innocent party may be awarded significantly higher damages than would otherwise have been available had termination been exercised properly.
The parties to Contract B cannot exclude liability for breach of the duty of good faith or the duty of honest performance by contract.
Strict Compliance with Contract B Notice Requirements and Timing of Procedural Obligations
Typically, Contract B forms — whether standard CCDC forms or bespoke construction contracts — contain strict written notice provisions relating to scope changes, project delays, notices of breach, and termination.
In many cases, these written notice requirements are not merely procedural but are conditions precedent to entitlement to relief, including monetary compensation or extensions of time.
Contractors must also be aware that under recent Construction Act prompt payment and adjudication regimes, strict compliance with written notice requirements and milestone deadlines is critically important. Failure to comply may prevent a contractor from initiating or defending an adjudication.
Practical Implications
These principles affect everyday project administration including:
- Certification of payment applications
• Approval or rejection of change orders
• Exercise of termination rights
• Assessment of delays and extensions of time
• Interpretation of performance obligations
• Prompt payment and adjudication procedures under the Construction Act
General contractors must ensure that their conduct, including the conduct of on-site personnel, aligns with their contractual and legal obligations under Contract B. Performance must be carried out honestly, in good faith, and transparently.
In today’s complex construction environment, success is not just about winning the bid — it is also about effectively managing the contractual and legal realities of Contract B through project closeout.