Adding a penalty clause in a building contract

[schurchill39]

I've heard lots of horror stories lately about people building houses, garages, shops etc where they have had a verbal agreement on a completion date of the project but in reality it isn't complete until months after. I understand there are reasonable causes for delay such as weather, product supply etc.

As a consumer, is it within my legal right to ask for a penalty clause to be put in our written contract? If so, what is reasonable? Has anyone had experience with this?

Background: Looking to get a garage built and the builder I would like to go with has a few reviews online about how long its taken them to build something. I really like the quality of their work, and the owners themselves so would prefer to do business with them over the other builders I have had come out but do not want to have this project start in June and still be waiting for it to be finished in October.

[TomcoPDR]

I think it would be hard for businesses to agree to those terms with residential or one time customers.

[kvg]

I'm with Thomas on this one for sure. I have never know any builder at agree to a penalty clause based on a individual residential basis. He'll probably just tell you to find another builder because even if he can't see any problems finishing on time, he will probably just want to avoid a high maintenance customer.

[schurchill39]

Those are both definitely fair statements. I'm just trying to educate myself as I am new to this.

[mazdavirgin]

Originally posted by schurchill39
As a consumer, is it within my legal right to ask for a penalty clause to be put in our written contract? If so, what is reasonable? Has anyone had experience with this?

Penalty clauses in contract law are often non enforceable unless you can prove they were not acting in good faith and the delay is of unreasonable length. You also run into problems where you may have to prove the penalty is proportional to the "damage" you have endured. It gets awful complicated pretty fast and realistically you are going to have a real hard time collecting without going through the legal system which might cost you more than it is worth.

A fun tid bit the whole thing where people were saying the contractor for Stoney Trail would be fined 75000$ a day for being late? Yeah pretty much guarantee that was not enforced and would have been unenforceable if it was brought to court. The delay was reasonable seeing the length of the contract and if they acted in good faith and tried their best to meet the deadlines there would be no grounds to fine them.

[dirtsniffer]

I wouldn't try to fine them for being late. I would try to give them a bonus for finishing on time.

Incentives ftw

[Sugarphreak]

...

[roopi]

You can definately do this. My brother had a house built in Edmonton about 8-10 years ago and there was a firm possession date in the contract. For each day it was late the builder was responsible for a set penalty. I believe he had it set in the $100-$150/day range. Builder missed possesion by about a month.

So it is definately possible but probably not easy to do with most builders. You'd be surprised what most builders are willing to do to sell a house. Most people are just to scared to ask and accept the builders price and terms.

[englishbob]

We had a contract years ago where the client tried to enforce a penalty clause and our legal team fought it because they had to include an incentive clause to make it legal.
We were told you can't penalize someone for being late unless you offer a bonus for being early.

[Cos]

.

[lilmira]

Or they'll just jack up the initial price to cover themself first. Really there is nothing wrong with it. You pay for it to get stuff done when you want it done.

[spikerS]

Originally posted by Cos
I'd love to do this but I doubt it is worth it financially. Then you are no longer a number but a problem customer in the company, you don't want to be that one.

"Lets get it done on time. Who cares if the heating duct actually leads anywhere" lol

THIS!

you don't want it getting close to the end date, and then they realize they are way behind, and cu every corner they can to try and meet the date and fuck everything up.

I like the idea of the incentive too, but that can lead to the same problem.

[schurchill39]

Originally posted by englishbob
We had a contract years ago where the client tried to enforce a penalty clause and our legal team fought it because they had to include an incentive clause to make it legal.
We were told you can't penalize someone for being late unless you offer a bonus for being early.

Originally posted by spikerS


THIS!

you don't want it getting close to the end date, and then they realize they are way behind, and cu every corner they can to try and meet the date and fuck everything up.

I like the idea of the incentive too, but that can lead to the same problem.

Very good points. I agree that the "How can we both benefit from this" is the right approach for a business.

I live right next door to about 8 or so show homes and he asked to put a sign up on my front lawn as advertisement while he was building. Maybe there is a way I can word it where its geared more towards an incentive just to help solidify that I would really appreciate it being done on time. The builder still has 18 lots to sell so the show homes aren't going anywhere anytime soon, maybe if I tell him if its done on time I'll keep his sign up for an additional 6 months? He seems to really value the quality of his work and takes pride in his business so I think that would help.