Journal Of Commerce

Article
Unlicensed renovators contract with
homeowner is enforceable
comments: 0 views: 254 label: Government

by label: Journal Of Commerce Jan 1, 2002 last update:Aug 5, 2011

The court found the evidence of both parties unsatisfactory in establishing the delay
attributable to each of them, but found each responsible for one significant factor: the owners
changing requirements and the contractors failure to locate and hire reliable subtrades. The
court concluded the parties were equally responsible for the delay. In the circumstances, the
court was not prepared to find the contractor in breach of contract.

Unlicensed renovators contract with

homeowner is enforceable
Morell (c.o.b. Bill's Carpentry & Painting) v. Cserzy

Municipal By-law requires renovators to be licensed. Contractor unlicensed at time of

contract, but later easily obtains licence purpose of by-law not to render contract
unenforceable contract enforceable owner and contractor equally responsible for
delay contractor's delay not a breach of contract owner not justified in locking
contractor out contractor entitled to extras for owner's changes and hidden defects
discovered during course of construction

Barry Johnson wanted to renovate the basement of the house in Brampton that he and his
wife, Gabriele Cserzy had bought, but had yet to move into. In November 1999, he prepared
drawings that set out the location, number and size of rooms.

In December 1999, William Morrell parked in Johnson's employer's parking lot. Johnson saw
Morrell getting out of his truck, which was marked "Bill's Carpentry and Painting, General
Contractor" and approached Morrell about doing the basement renovation.

In December 1999, Morell, as contractor, and Johnson and Cserzy, as owners, entered into a
contract, in a form Johnson had prepared, to renovate the owners? basement for $40,000.

The contract required payment of 30 per cent on commencement of work, 30 per cent at the
"midway point" and the remainder including any extras due on completion. The balance of the
contract price, including any "extras" would be due on completion.

The contract did not specify a completion date. The parties expected the work would take six
to eight weeks.
The owners were anxious to move in. When the contractor said that it would take two weeks
to three months to obtain a building permit, the owners told him to start work right away,
without a permit.

The contractor started work January 7, 2000. He applied for a building permit January 13. The
permit was obtained on February 17, after the contractor had already performed substantial
structural renovations.

The owners paid (a) $12,000 on January 6, 2000; (b) $8,000 on March 10, 2000, post-dated
to March 20, 2000; and (c) $4,000 on March 20, 2000. By March 20, the contractor had not
yet reached the midway point of construction. He returned the $8,000 post-dated cheque, but
cashed the $4,000 cheque.

On April 7, 2000, the contractor invoiced the owners $12,843.52 for work he described as a
partial list of un-priced extras. The contractor said the purpose was to disclose how much the
owners were spending on changes to the contract. The owners were shocked at the amount
as they considered most of the items listed to be within the original contract.

On April 8, 2000, the owners: had another general contractor attend to estimate the quality of
the contractor's workmanship and value of the contractor's work; locked the contractor out,
and immediately engaged others to work on the project; and wrote to the contractor alleging
breach of contract and required the contractor to meet a number of conditions, including giving
a completion date, before the contractor or his trades would be permitted to continue.

In response, the contractor provided a breakdown of the extras, an invoice for unpaid work
under the contract, and a schedule of dates for completion of the outstanding work. The
owners did not accept.

The contractor sued, claiming $21,367.92, for unpaid work under the contract and extras. The
owners raised two defences: the contract was not legally enforceable because the contractor
contravened a Brampton city by-law by working without a renovator's licence; and the
contractor breached the contract by failing to complete the work in a competent and timely
fashion.

The Licence Issue

The City of Brampton has a by-law that requires "every person engaged in the business of
altering, repairing or renovating buildings or structures" to have a City of Brampton licence.

Although the contractor had 39 years' experience as a building contractor, he was not licensed
when he entered into the contract with the owners and carried out the construction. In fact, he
did not know he required a licence until after the lawsuit started. When he discovered he
needed to be licensed, he applied for one, and was given it within a half-hour of applying.

[Editors' note: For a discussion of the law of illegal agreements, please see the Guest Article
which appears on p. 1 of this issue.]

In this case, Brampton's by-law had four requirements for a renovator's licence: the
contractor's business be registered; the contractor have at least $1 million worth of insurance;
the contractor complete an application; and the contractor pay a $100 fee.

Brampton's Supervisor of Enforcement testified that the first two requirements were the most
important. The contractor actually met those two: he was insured and his business was
registered. Filing an application and paying $100 were not significant elements, in the court's
view.
The court accepted that the contractor "had the requisite skill, knowledge and experience to
perform the renovations". This was not a case where a consumer needed to be protected from
an unskilled contractor. The contractor's failure to be licensed at the time he did the work was
innocent.

The court also found, as a matter of law, that Brampton did not intend its by-law to interfere
with contractual relations ? the only consequence intended was the specified fine:

In these circumstances, from a contractual perspective, it would be unfair to deny

the [contractor] the right to recover monies owed on the basis of illegality of the
contract?. There is no evidence or suggestion that the [contractor] took unfair
advantage of the [owners]. There is nothing in the contract itself that renders it
inherently wrong or contrary to public policy.

The court concluded that the contract was legally enforceable.

The Contract Issues

Next, the court considered whether the contractor delayed performance, and so breached the
contract.

It found that, although the written contract did not specify a time for completion, it was an
implied term that the work would be completed within eight weeks. Twelve weeks after work
started, the contractor had not reached the midway point.

The court identified a number of causes for the delay: delay in obtaining the necessary
building permit; multiple deviations and alternations to the original drawings, required by the
owners, resulting in some work having to be redone, sometimes more than once; lack of
readily available subtrades to complete the work in a consistent and timely fashion; and
necessary correction by the contractor of hidden defects, discovered as walls were removed.

The court found the evidence of both parties unsatisfactory in establishing the delay
attributable to each of them, but found each responsible for one significant factor: the owners'
changing requirements and the contractor's failure to locate and hire reliable subtrades. The
court concluded the parties were equally responsible for the delay. In the circumstances, the
court was not prepared to find the contractor in breach of contract.

Because the contractor had not breached the contract, the owners? conduct on April 8, which
prevented the contractor from completing the contract, was not justified. The contractor was
entitled to payment of whatever amount he might be owed under the contract for the work he
did.

The owners' expert viewed the work in place on April 8, 2000 at $16,000 to $18,000, including
the extras. He did not value the extras separately from the contract work. He viewed the
contract as less than half-finished. The court accepted this evidence.

The contractor's evidence to support his extras was unsatisfactory. However, the owners'
expert's failure to differentiate between contract work and extras did not help the matter.

The court found the contractor entitled to $18,000 for work under the contract completed as of
April 8, 2000. (Perhaps because he didn't distinguish between base contract work and extra
work, the court took the owners' expert's valuation of the work, which included extras, and
used it for base contract work only.)

Because the owners admitted to $3,530.24 for extra work, and their expert indicated it was
proper to charge as extras alterations to completed work and corrections to hidden defects,
the court awarded the contractor $4,812.02 for extras.
Thus, the contractor was entitled to $22,812.02. Since he had been paid $16,000, he obtained
judgment for $6,812.02 plus interest and costs.

Ontario Superior Court of Justice

Abella, Charron and Cronk JJ.A.
February 12, 2002

Jan 1, 2002 last update:Aug 5, 2011

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