Last week we discussed who can be considered an “owner” for the purposes of the Construction Act (“CLA”). We now turn our attention to the distinction between “contractors” and “subcontractors”.

Under section 1(1) of the Construction Act (“CLA”), a “contractor” includes,

any person contracting with or employed directly by the owner or an agent of the owner to supply services or materials to an improvement and includes a joint venture entered into for the purposes of an improvement or improvements.[1]

On the other hand, a “subcontractor” includes,

a person not contracting with or employed directly by the owner or an agent of the owner but who supplies services or materials to the improvement under an agreement with the contractor or under the contractor with another subcontractor and includes a joint venture entered into for the purposes of an improvement or improvements.[2]

Accordingly, we can make the following observations when it comes to understanding the difference between a “contractor” and “subcontractor”:

• A contractor, unlike a sub-contractor, does not have a direct contractual relationship with the Owner. This means that, unlike a contractor, a sub-contractor would have no contractual recourse or recovery as against an owner, unless the sub-contractor were to exercise its lien rights;

• As a further result of the Construction Pyramid, more often than not a sub-contractor will receive its instructions directly from the contractor or a consult and/or construction manager, which may be different parties. On the other hand, a contractor will most likely receive its instructions directly from the Owner, unless there is a separate consultant and/or construction manager hired at the respective Project for the purposes of providing instructions; and

• The Boehmers v. 794561 Ontario Inc. (1993) case further addresses that the CLA intentionally differentiates between contractors and sub-contractors as a recognition of the fact that sub-contractors, and their sub-contractors, are mutually exclusive to contractors/contracts considering the organization of construction and the rights each party possesses.[3]

Effectively, contractors bear more burden and responsibility than sub-contractors. On the other hand, with great responsibility comes greater power and protection.

As briefly mentioned, another party worth discussing “construction managers”, who typically appear in larger-scale projects. Although this term is not defined in the CLA, a construction manager is typically a party that co-ordinates various sub-contractors, material suppliers, engineers, etc. in an effort to ensure that the project flow smoothly.

However, being identified as a construction manager comes with significant responsibility – and liability. As such, not every contractor would want to be identified as a construction manager, especially in the absence of a contract directly assigning this role. Even if a party is held out to be a “construction manager” by way of contract, the Court has previously ruled that the use of the label “construction manager” in a written contract is not a final indication of the parties’ roles on a project.

For example, in Centrum Renovations & Repair Inc. v. Ditta (2006), the plaintiff claimed that it was a “contractor” rather than a construction manager on the basis that it had acted solely in the capacity of maintaining direct relationships with its subcontractors and did not manage the entire project.[4] The plaintiff did not want to be identified as a project manager due to the various liabilities it would incur, or had incurred, and sought to recover from the owner. Needless to say, if it was a sub-contractor, there would be no doubt that it would not be considered a construction manager.

Next time, we will continue discussing other various uncommon parties that may nevertheless enter into a lien action or are related to other aspects of the construction industry. 

Until then!

The foregoing is for informational purposes only and should in no way be relied upon as legal advice. For legal advice tailored to your circumstances and business, please contact any of Sutherland Law's lawyers by email or telephone.

[1] Construction Act, R.S.O. 1990, c. C.30, as amended, s. 1(1).

[2] Ibid.

[3] 11 C.L.R. (2d) 99, 14 O.R. (3d) 781 (Gen. Div.)

[4] 2006 CarswellOnt 7390, 65 C.L.R. (3d) 137 (Ont. Sup. Ct.).