October 4, 2024 – My column “Does my contract need to be in writing, and signed?” (EBMag October 2021) explains the basics of contract formation in Canadian common law jurisdictions, and the test for determining whether a contract—written, verbal, or otherwise—is legally enforceable (i.e. offer, acceptance, consideration).

One legal doctrine that complicates this matter is the Statute of Frauds which, despite its name, has little to do with actual fraud. Originating in English law, it has been adopted in various forms across Canada to require certain types of contracts to be in writing to be enforceable.

Among others, this includes agreements that cannot be completed within one year. In the context of construction, contracts involving work that will take more than one year would likely need to be in writing.

(Other types of contracts—such as those for services or materials—might not fall under the Statute of Frauds, and could be enforceable even when not in writing.)

While not always legally required, the construction industry overwhelmingly favours written contracts, for several reasons:

Clarity: With the myriad specs, timelines, payment schedules, and responsibilities involved in a project, written contracts provide clarity as to what the parties have agreed upon.

Risk management: Written contracts often include clauses that address potential risks, such as delays, cost overruns, and unforeseen circumstances, thereby protecting both parties and helping manage expectations.

Legal protection: In the event of a dispute, the courts generally look to the written contract as the best evidence of the parties’ intentions and the terms to which they agreed.

Compliance with regulations: Depending on the jurisdiction, failure to have a written contract could result in fines or legal challenges.

Given the complexities and potential risks, a written contract is always best practice—even if it’s just a 1-page Purchase Order. Even for smaller projects, a written contract provides a solid foundation for the business relationship, ensuring all parties are on the same page.

In an industry where disputes can lead to significant financial losses and project delays, a written contract is essential for protecting everyone’s interests.

Dan Leduc is a partner at Soloway Wright LLP, and specializes in construction law. He is always happy to take on new clients from anywhere in Canada, and can be reached at dleduc@solowaywright.com.

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