By Jeremy Power

The rule of thumb in construction is that one out of every 20 customers will be problematic. The issues could be as simple as a customer not being satisfied with the performance of the HVAC system or it could involve a dispute regarding payment. Although customer service is always the first line of defense, it is important that HVAC contractors review and update their contracts on a yearly basis. Often, contractors treat their contracts like a will, and unfortunately, they decide to review their contracts when it is too late. The purpose of this article is to help HVAC contractors issue-spot potential problems through provisions in their contracts.

The majority of disputes that arise in construction are a result of the failure to specifically identify the scope of work. HVAC contractors do a decent job in describing what will be installed, but often fail to account for work that is not being performed or for extras that may occur on the job. For example, while a contractor is installing ductwork, the architect requires that the ductwork be reworked to account for a previously unidentified load-bearing wall. The contract should contain a provision that would either allow the contractor to seek a change order or otherwise identify a time and materials basis for the extra work and ductwork.

Similarly, one complaint that we often hear from HVAC contractors is additional permitting charges that are incurred because the homeowners are not present for the final inspection. This can easily be resolved by adding a provision in the contract that states that: “Customer agrees to be available for any/all inspections by the permitting authority. In the event that the customer is not present, the customer agrees to pay any/all additional charges associated with obtaining any/all required inspections.”

One of the things that we routinely advocate is the old saying “An ounce of prevention is worth a pound of cure.” It is important that any contractor’s contract provides for notice and an opportunity to cure any potential defects in its workmanship. Although Rule 16.06(2) of the Rules of Civil Procedure, R.R.O, 1990, Reg 194* provides a statutory opportunity to cure, which is pertinent to notice disputes such as this, it is still important that the contractor also put similar language in its contract so that it can rapidly respond to potential issues.

Generally, a simple notice provision will provide the contractor with the required notice necessary to inspect and possibly remedy any potential defect in a timely manner. The notice provision usually has two parts: 1. the customer must provide the HVAC contractor with written notice of any defects or claims within a certain amount of time; and 2. if the customer fails to provide that notice within the required amount of time, it waives the ability to seek damages for those defects/claims. A provision such as this will allow the contractor to obtain a timely notice, and if the customer fails to give notice, the provision will provide the contractor with a defense to the customer’s claims.

This provision could be especially useful when the HVAC contractor may be facing a water damage claim. If the contractor has the opportunity to investigate and remedy any water damage prior to it spreading, then obviously it will be able to control the number of damages that are caused. However, if the customer waits too long, the water may spread to other areas, cause mold, etc.

Finally, one issue that comes up frequently is the use of substitute parts. As most of you know, manufacturers may make the same unit that is labeled differently. It is important to add a provision in the contract that says that the contractor is entitled to use substantially equivalent materials provided that all workmanship and manufacturer warranties continue to be honored.

By taking the time to review your contracts and address past customer complaints in your contracts, HVAC contractors will be able to anticipate and possibly eliminate future problems that may occur on a job.

*Canada only

Written by Jeremy Power, a lawyer in Cotney Construction Law’s Toronto office. To contact Jeremy, please email jpower@cotneycl.com.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.