CANADA Law and Practice Contributed by: Rachel V Hutton, Michael L Dyck, Mario Paura and Patrick Morin, Stikeman Elliott LLP
gations under a lease. As noted in 6.16 Forms of Security to Protect Against a Failure of the Ten- ant to Meet Its Obligations , that is typically pro - vided as cash but may also be a letter of credit. 7. Construction 7.1 Common Structures Used to Price Construction Projects Canadian construction contracts generally adopt one or more of the following structures: • fixed price – a predetermined, stipulated or lump-sum price; • cost-plus – based on the contractor’s actual costs, plus a percentage or fixed fee applied to actual costs, potentially subject to an over - all guaranteed maximum price; or • unit price – a predetermined fixed amount for each specified unit of work performed, which is multiplied by the measured quantity of work performed for each specified unit. 7.2 Assigning Responsibility for the Design and Construction of a Project The allocation of responsibility for design and construction of Canadian construction projects is determined by the project delivery model, and the form of construction contract used by the owner. Design-Build The owner engages a single design-builder, who assumes overall responsibility for the design and construction of the project, including price, schedule and performance. The owner gener - ally retains the risks associated with changes or unexpected conditions. Should the owner enter into separate contracts with the designer and the general contractor, the owner will assume
the risk associated with co-ordination and con - flict issues arising between those counterparties. Owner and Multiple Contractors The owner enters into separate contracts with different contractors for each portion of the work to be completed. This assigns the risk evenly among the contractors and creates a direct contractual relationship with each of them. The responsibility and risk associated with co- ordination and conflicts remains with the owner. Accordingly, an owner may engage a construc - tion manager to enter into direct contracts with the contractors on the owner’s behalf to help to manage or reallocate such risks. 7.3 Management of Construction Risk Generally, construction risks are managed through the construction contract, by way of indemnities, warranties, retentions, liquidated damages, termination rights, exclusions, limita - tions and waivers of liability, force majeure and insurance requirements. Risk may also be man - aged using bonds, letters of credit or guaran - tees. Any risk mitigation devices are subject to nego - tiation between the parties, and principles of common law (including relating to the enforce - ability of penalties – see 7.4 Management of Schedule-Related Risk ). 7.4 Management of Schedule-Related Risk Responsibility Schedule-related risks are generally managed through the contract, which will stipulate which party bears responsibility for different types of schedule impacts and delays.
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