Can a Current Owner of a Property Hold a Contractor Liable For Defects Even Though the Contractor Was Hired By a Prior Owner of the Property?
A Property Owner Can Sue a Contractor For the Defects In Work Done By a Subcontractor. The Property May Also Choose to Sue the Subcontractor Despite Lack of a Contract With the Subcontractor. In Some Circumstances, a Property Owner May Hold a Contractor Liable Despite That the Contractor Was Hired By a Previous Owner.
Understanding Various Issues Within the Law of Defective Workmanship Including Contract Privity and Vicarious Liability
Another legal issue that arises in defective work cases is the question of whether a contract must exist for a right to sue to exist. The question comes up in situations where a property owner wants to directly sue a subcontractor or tradesperson despite that the property owner had a contractual relationship only with the contractor rather than any subcontractors or tradespeople.
Privity of Contract Irrelevance to Subsequent Owners of Property
As per the case of Winnipeg Condominium Corporation No. 36 v. Bird Construction Co.,  1 S.C.R. 85, a lack of privity of contract, meaning lack of a contractual relationship, fails to prevent a property owner from bringing legal action against those who originally performed defective workmanship. Simply stated, the common lack of privity concern whereby it is usual that a person is unable to sue another person for breach of contract unless there was actually a contract with the other person was ruled moot by the determination that a tort law duty of care exists in negligence so as to impose a risk of liability upon the provider of workmanship to all those persons that may become the owners of the work in the future. Specifically, in Winnipeg, it was said:
35 In my view, it is reasonably foreseeable to contractors that, if they design or construct a building negligently and if that building contains latent defects as a result of that negligence, subsequent purchasers of the building may suffer personal injury or damage to other property when those defects manifest themselves. A lack of contractual privity between the contractor and the inhabitants at the time the defect becomes manifest does not make the potential for injury any less foreseeable. Buildings are permanent structures that are commonly inhabited by many different persons over their useful life. By constructing the building negligently, contractors (or any other person responsible for the design and construction of a building) create a foreseeable danger that will threaten not only the original owner, but every inhabitant during the useful life of the building. As noted by the Supreme Court of South Carolina, in Terlinde v. Neely, 271 S.E.2d 768 (1980), at p. 770:
The key inquiry is foreseeability, not privity. In our mobile society, it is clearly foreseeable that more than the original purchaser will seek to enjoy the fruits of the builder's efforts. The plaintiffs, being a member of the class for which the home was constructed, are entitled to a duty of care in construction commensurate with industry standards. In the light of the fact that the home was constructed as speculative, the home builder cannot reasonably argue he envisioned anything but a class of purchasers. By placing this product into the stream of commerce, the builder owes a duty of care to those who will use his product, so as to render him accountable for negligent workmanship.
Another question that also often arises is the question of who should be sued, and who is ultimately liable, for the repair of defects or injuries to persons or losses to property when the defective work involved negligence of a subcontractor whereas in many, and perhaps most, contracting arrangements the property owner hires a contractor and then it is the contractor who separately hires subcontractors and tradespeople; and accordingly, the property owner lacks any contractual relationship. Luckily, at least for the property owner, the law works in such a way that the general contractor, being the party hired by the property owner to, essentially, ensure that the job gets done and gets done right, is ultimately responsible for defective work by subcontractors and tradespeople, as well as any materials provided by suppliers, who are hired by the contractor.
The law holds the contractor accountable for the work and material of others via the vicarious liability principle that arises from the non-delegable duty to perform whereby a contractor is unable to avoid liability by attempting to put the blame on someone else. This principle was explained well in the case of Vandenbrink Farm Equipment Inc. v. Double-D Transport Inc., 1999 CanLII 14947, where it was said:
48 A correct statement of the applicable law may be found in Professor Fridman’s The Law of Torts in Canada, vol. 2 (Toronto: Carswell, 1990) at pp. 340-41:
The fundamental idea which justifies vicarious liability for the negligence of an independent contractor is that the negligence in question is not merely casual or collateral, but entails a breach of duty that was conclusively imposed on the employer of the contractor. The contractor’s negligence, in effect, amounts to a failure of the employer to fulfill his statutory or common law obligation as well as a failure of the contractor to fulfill the obligation that was on him by virtue of his contract with the employer. In such situations, qui facit per alium facit per se. By employing a contractor who has not satisfied the obligation in question, the employer has himself failed to satisfy it. Therefore, he is personally liable.
49 See, also, Fridman, at p. 342, where the learned author adds this:
The duty in question may even arise under a contract. If its performance is entrusted to an independent contractor, whose negligence in doing the very act which his employer had undertaken to perform by the terms of the contract resulted in the damage, the employer of such contractor will be liable. In McEown v. Roy-L Canadian Fuels Ltd., the defendant employed a contractor to install an oil burner, as the defendant was obliged to do under a contract between the defendant and a firm in which the plaintiff’s husband was a partner. The contractor was negligent in the way the burner was installed, with the result that the plaintiff’s premises were damaged by oily smoke. The defendant was liable for that negligence.
50 In other words, the contracting party cannot discharge his contractual obligation by delegation to a subcontractor although, of course, he may have a claim over for indemnification.
The property owner may simply sue the general contractor without the need to uncover the identity of the actual subcontractor at fault for causing the defect. Of course, for a variety of reasons, the property owner (or others for that matter) may wish to do so anyway, such as concerns for the solvency of the general contractor; however, as the general contractor is vicariously responsible for any defects caused by all others brought into the project, there is no absolute need for the property owner to sue anyone beyond the general contractor.
Additionally, even when defective work occurs on a project that is completely within the oversight of an incorporated contracting business without the involvement of subcontractors, or without the fault of subcontractors, naming directors or officers or employees as defendants in addition to the incorporated general contracting business may be proper.
Page 1 - Defect Issues, introduction Page 2 - Cause of Action, contract law or tort law Page 3 - Mitigation Requirement, reduce losses Page 4 - Mitigation, future risk of harm defect Page 5 - Who to Sue, privity of contract and vicarious liability Page 6 - Mandate to Produce, expectations overule specifications Page 7 - General Damages, aggravation and disappoinment