Think about the last time a job went sideways. Maybe the owner insisted the extra pot lights were included. Perhaps a framing crew was stuck waiting on another trade for two weeks, or a general contractor held back payment over a deficiency no one had defined. Most of those arguments were decided, in effect, on the day the contract was signed or when somebody decided a text message was contract enough.
For contractors, subcontractors and renovators in Brampton, written contracts protect cash flow as much as they protect against lawsuits. The Construction Act gives you strong tools on payment, but it assumes that you can show what was agreed, what was done, and when. A one-page quote with a total at the bottom rarely does that.
The following is general information about Ontario law for construction businesses. It is not legal advice, and which version of the Construction Act’s rules applies can depend on when your contract was made. Have a lawyer look at your standard forms and any significant job.
Pick the Right Pricing Structure
Before any drafting, know what deal you are actually offering:
- Fixed price (stipulated sum): one price for a defined scope. Good for clear jobs. The contractor carries the risk of overruns, unless the scope changes.
- Cost-plus: actual costs plus a fee or percentage. It suits uncertain work, but the owner will want records and perhaps a cap, and the contract needs to define what counts as a cost.
- Unit price: a rate per unit, such as per square foot of drywall. It fits work whose quantity is uncertain, so long as you state how quantities get measured.
Standard industry forms, such as those published by the Canadian Construction Documents Committee, are widely used on commercial work. They are a useful starting point, but supplementary conditions and special clauses often shift risk, so read those closely. A subcontract form sent by a general contractor might have been written entirely in that contractor’s favour.
Scope Is the Most Valuable Page
Disputes tend to grow out of an unclear description of the work. A strong scope section says what is included, what is excluded and what assumptions the price rests on. Consider a hypothetical basement finishing job. “Finish basement per discussion” gives you nothing to work with. A better scope identifies the drawings by date and revision, lists the fixtures, states who supplies what, and addresses who gets the building permit and arranges inspections.
Exclusions are just as useful. Say that the price doesn’t include asbestos or mould remediation, rock removal, moving existing services not shown on the drawings, or repairing finishes that had to be opened to do the work. Note your site assumptions as well: access, parking, working hours, hoisting and power. If you are doing work on a tight lot in a mature part of downtown Brampton, access may affect your costs more than the materials.
State who is responsible for permits, because this often gets assumed. In Brampton, building permits go through the city, and doing work without a required permit creates problems for both the owner and the builder. The contract should make the responsibility clear, along with any effect permit delays have on the schedule.
Change Orders: The Clause You Must Actually Use
Extra work is where margins are made or lost. A good change order clause sets out how changes get requested, priced, approved and scheduled. Most clauses require a signed written order before the extra work begins.
Here is the trap: many contractors have that clause and then ignore it. The owner says “go ahead” on-site, the crew does the work and nobody writes anything down. Later, the contractor relies on a verbal instruction, while the owner relies on the contract’s written requirement. The answer can depend on conduct, what was said and whether the written clause was waived, and that is an expensive question to litigate.
Make it easy to comply. Create a one-page change order form with a description, the price effect, the schedule effect and a signature line. When there is no time for paper, send a same-day email or text confirming what was asked and what it will cost, and ask for a reply. A confirmed message beats a memory.
Payment Terms Should Follow the Construction Act
Ontario’s Construction Act has a prompt payment regime, and contract terms should work with it. In broad terms, once an owner receives a proper invoice, the owner must pay within 28 days unless it delivers a notice of non-payment in the prescribed form within 14 days. A contractor who has been paid must then pay its subcontractors within seven days, and similar timing runs down the chain. A contractor who receives a notice of non-payment has its own steps for notifying subcontractors and, if it wishes to dispute the non-payment, arranging adjudication.
Under amendments in force from January 1, 2026, an invoice is generally treated as proper unless the owner gives written notice of a deficiency within seven days of receiving it. Transitional rules apply, so contracts signed before that date may follow the earlier rules. Your invoice should still include what the Act’s definition calls for, including the contractor’s name and address, the date and period of the work, what was supplied, the amount and the payment terms.
Practical contract points:
- State who receives invoices and where they get sent, so that “we never got it” is harder to say
- Set out the billing cycle, typically monthly, and how percentage completion is measured
- Avoid contract requirements that hold up an invoice for a long time before it can be delivered; the Act limits what an owner can impose before a proper invoice can be given, so have your clause reviewed
- Include interest on late amounts, stated as an annual rate
- Include a right to suspend or slow work for non-payment, with a short notice period
A word on “pay when paid” clauses. Subcontract terms that make payment conditional on the contractor getting paid first can run into the Act’s timelines, and they are no substitute for the statutory process. A subcontractor should read them with care, and a general contractor should not assume they work as written.
Holdback, Liens and What You Cannot Sign Away
Each payer on a contract under which a lien may arise must retain a 10 per cent basic holdback. The contract should deal with it clearly, and many contracts simply say “holdback per the Act.” Under the current rules, holdback is generally paid out annually following each anniversary of the contract date, instead of only at the end of the job, with exceptions and transitional rules for older contracts. Long projects need to budget for that, and your contract should fit it.
Lien rights have tight deadlines, which we leave for a discussion of their own. The point for contract purposes is that section 4 of the Act makes an agreement by a supplier that the Act will not apply, or that its remedies will be unavailable, generally void. So a clause in a subcontract promising not to register a lien may give less protection than the owner or general contractor hopes. Our construction and lien page describes how those claims are handled.
The Act also treats money received by owners, contractors and subcontractors as trust funds for the benefit of those lower in the chain. Directors and officers who use it to cover other projects can face personal claims. Bookkeeping by project is a useful habit even when the law does not expressly require separate accounts in your case.
Interim adjudication through the Ontario Dispute Adjudication for Construction Contracts (ODACC) is another tool. Under the current version of the Act, a notice of adjudication generally may be given within 90 days after the contract is completed, abandoned or terminated. If your contract was signed before January 1, 2026, confirm how the transitional rules affect you. You may want your contract to say nothing that conflicts with these rights.
Schedule, Delay and Things Nobody Controls
Any promise about dates should be tied to what you need from others. State the start date condition, such as receipt of deposit, permit and site access, and treat the completion date as subject to extensions for specified events. Those might include owner changes, late owner-supplied material, permit delays, unusual weather, labour disruptions, supply chain problems and unforeseen site conditions.
The contract should also require prompt written notice of delay. Many forms make notice a condition of any extension or extra payment. So if you’re stuck waiting on the electrician, send the notice right away, not at the end of the job.
Liquidated damages clauses set a daily amount for late completion. They can be enforceable if they are a genuine estimate of loss and not a penalty, though courts can step in. If you sign one, price it in and cap it. A mutual waiver of indirect losses, such as lost profit, can reduce the risk for both sides.
Unknown site conditions need their own clause. What happens if the excavator hits something unexpected? Allocate the risk expressly, or you may end up absorbing it.
Safety, Insurance and Who Is the Constructor
Under Ontario’s Occupational Health and Safety Act, the “constructor” has overall responsibility for health and safety on a project. A contract can help show who holds that role, but actual control counts too. A company taking on more than one trade, or managing a project for an owner, may become the constructor without realizing it. Multiple contracts on the same job can raise the same question.
Ask subcontractors for a current WSIB clearance certificate before they begin work and again during longer jobs. Require liability insurance at an appropriate limit, name the right parties as additional insureds and confirm any automobile and equipment coverage. Insurance and indemnity clauses need to be read together so they do not promise more than your policy covers. Certificates are only evidence; you should know what your actual policy says.
Warranties, Deficiencies and Completion
Spell out how the job ends. Define substantial performance in line with the Act, and have a deficiency process: joint walkthrough, written list, a reasonable time to fix, and an amount held back in proportion to each item. State the warranty period for workmanship, say what it excludes, and pass manufacturers’ warranties to the owner.
An unclear ending is a problem for lien timing as well. Dates of substantial performance, last supply and completion all affect your rights. So keep daily logs, delivery tickets and photographs. Note the last date you were on site and why.
Dispute Resolution and Time Limits
Decide whether you want negotiation first, then mediation, arbitration or court. Remember that the Act’s lien and adjudication rights stand alongside any clause you sign, and construction cases may have special procedural features. Ontario’s Limitations Act, 2002 generally gives two years from discovery of a claim to start a lawsuit, and business agreements can in some cases vary this. If the contract’s dispute clause shortens that time, take note.
A small unpaid invoice may belong in Small Claims Court, which handles claims up to $50,000, while larger claims and lien actions go to the Superior Court of Justice. Our contractual litigation page outlines the options available.
Working Directly for Homeowners
Residential renovation work brings in consumer protection rules on top of everything above. Under Ontario’s Consumer Protection Act, 2002, a contract with a consumer for future performance over $50 generally must be in writing with prescribed details. If you give an estimate, you generally cannot charge more than 10 per cent above it without the consumer’s agreement. A contract solicited at the homeowner’s door is generally a “direct agreement,” which carries a 10-day cooling-off period with cancellation rights. A separate statute, the Consumer Protection Act, 2023, is intended to replace this one, so confirm what applies when your form gets updated.
Build those points into a residential form: description of the work, the total price, deposit, schedule, warranties and required cancellation wording. Contract terms that take away consumers’ statutory rights are unlikely to help you. If you build new homes rather than renovate them, a licence under Ontario’s new home construction licensing regime and related warranty rules may also apply.
Keep the Paper Close to the Work
The best contract only helps if the site team knows what it says. Give project managers a one-page summary of the invoice dates, notice deadlines, change order process and insurance requirements. Review your templates when the law changes, particularly the Construction Act. If you run a growing company, it is worth having a lawyer tailor one set of forms and then reuse them, instead of improvising on each bid. We can help with that kind of contract review and drafting. Good forms won’t prevent every dispute, but they tend to make the disputes shorter.