July 15, 2006
Results can be costly if contract is not specific
An Ontario Superior Court decision released earlier this year provides a
textbook example of how and how not to prepare a home renovation contract.
Maureen Chung and Geoffrey Jackson operate a renovation business in the
Toronto area. In early 2004, they were hired to renovate the kitchen in the
Thornhill home of Arik and Olga Idan.
Detailed discussions took place outlining the work the Idans wanted done
in their home, and ultimately a contract was signed which outlined only the bare
essentials of the work to be completed and the price of $28,000.
What was intended to be a renovation of "about 8 weeks" dragged on
through the summer of 2004 until the Idans ultimately called a halt to the job.
By this time they had paid more than $32,000 for the renovations, but Chung and
Jackson wanted another $19,200 for 35 extras they claimed were not included in
the contract price.
Unfortunately, it seems that the brief renovation contract omitted more
details than it included, and it wasn't long before both parties were suing each
other. The renovators sued the Idans for the $19,200 in extras, and the Idans
counterclaimed for $50,000 in damages to repair what they claimed was faulty
An eight-day trial of the action was held before Justice Paul Perell
earlier this year. In his ruling, the judge wrote, "In my opinion, the events
that took place between January and August 2004 at the Idans' home provide an
illustration of many, if not all, of the major mistakes and misadventures that
can occur during a home renovation and also they are an illustration of the
causes of those mistakes and misadventures."
Much of the evidence at trial consisted of claims by both sides on what
verbal agreements were, or were not, intended to be included in the contract
price. All the conflicting testimony prompted Justice Perell in his decision to
quote the film producer Samuel Goldwyn's famous quip, "An oral contract isn't
worth the paper it's written on."
He added that the events described in the evidence indicated to him that
a fixed-price renovation contract should be in writing and should at least:
identify the parties;
identify the location of the home to be renovated;
detail precisely what is included and what is not included in the scope of
fix the price and break out the amounts to be paid, and where prices are
only an estimate and not fixed, then this fact should be clearly disclosed along
with an explanation of what are the homeowner's options should the renovator
determine that the estimate is inaccurate;
disclose that work and materials not covered by the scope of work are extras
to be agreed to in writing before being undertaken by the renovator;
specify the anticipated date of the start of the work and the anticipated
time for completion, reserving the right to make reasonable adjustments if the
scope of the work is changed;
specify the payment schedule, including a holdback to protect against lien
and warranty claims;
provide a warranty with respect to the quality of the goods and workmanship;
specify who will be responsible for obtaining all required permits and
licences (permits should not be optional); and
as an option, include provisions about the preparation and ownership of
drawings, insurance, supervision, participation of the owners (working alongside
the contractor), inspections, alternative dispute resolution (instead of a
lawsuit), and arbitration.
In the end, Justice Perell ruled that "the money the Idans spent on this
renovation project was wasted. ... I conclude that the goods and services
provided by Ms. Chung and Mr. Jackson are worthless."
He denied their demand for $19,200 and awarded the Idans the full $50,000
they requested in damages to remove the work already done and "secure the
structural integrity of the house."
In a subsequent ruling in March of this year, the judge awarded the Idans
an additional $1,650 in interest and $41,731 in legal costs.
In the end, the renovators not only lost their court case, but wound up
having to pay the Idans more than $93,000 and their own lawyer's bill.
Before his appointment as a judge, Justice Perell was an accomplished
real estate lawyer and author. He taught real estate law at Osgoode Hall Law
School and the now-defunct Bar Admission Course, and was the recipient of many
awards including the Law Society Medal.
His decision in the Chung and Idan litigation is a classic example of his
superb skills as an author and teacher, since it provides a checklist of the
minimum requirements necessary for a home renovation contract. In future,
homeowners and renovators who ignore Justice Perell's lessons in this case do so
at their own risk.
Bob Aaron is a Toronto real estate lawyer. He can be reached by email at firstname.lastname@example.org, phone 416-364-9366 or fax 416-364-3818.
Visit the Toronto Star column archives at http://www.aaron.ca/columns for articles on this and other topics or his main webpage at www.aaron.ca.