Papers and Articles

EXTRAS 

Westcoast Mariner June 1997

 As a lawyer practising in the field of maritime law, one of the most common types of disputes I see is disputes between vessel owners and repairers or builders of vessels.   Of those disputes, one of the most common areas of disagreement, is the question of whether work performed by a repairer was an extra or included as part of  a fixed price contract.

 From a review of Canadian cases involving repairs to both buildings and vessels, come the following general rules regarding charges for extras: 

1 .  A repairer will be entitled to extra payment for work performed if that work is outside the scope of a fixed price contract;

2 .  The burden of proving that work performed was extra work and not included in the original fixed price contract lies on the repairer;

3 .  If a contract provides that an order or agreement for extras must be in writing, then the repairer cannot recover unless that  requirement is met or waived; and

4 .  If an owner has ordered significant extras due to changes in specifications, the repairer will not be held to the original completion date, but must proceed with the extra work forthwith once it has received instructions to do so.

The application of rules 1-3 above, are illustrated by several decisions of the Federal Court of Canada.    In the“Able Lady No. 1” (21 August 1975) No. T-698-74, a repairer agreed to complete a 37 foot Farrel Kit combination gillnett troller.  The written agreement provided that the vessel was to be “very well built of good quality . . . ready to fish except for personal gear”  Prior to completion a dispute arose between the repairer and the owner over, amongst other things, what items the repairer was entitled to claim as extras.  In his reasons for judgment, Mr. Justice Kerr went through a long  list of items claimed as extras and ruled on each item individually.  A review of his treatment of some of these items is illustrative of the approach often taken by courts. 

 One item claimed as an extra, was a jogger for an automatic pilot.  Since the contract provided for “hydraulic system c/w (complete with) pilot”, the vessel owner claimed the jogger should be included in the fixed price.   His expert witness supported his claim by saying that a jogger is essential on a troller/gillnetter.  On the other hand, the repairer said a jogger was an accessory of an automatic pilot, for which one has to pay extra when it is ordered.   The court ruled that the jogger was an extra.

 Another item claimed as an extra, was a water cooled manifold for the Cummins engine.  At trial, the experts disagreed as to whether a water cooled manifold was standard for a Cummins engine.  The court appears to have accepted the repairer’s evidence that the engines did not come from the factory equipped with such manifolds and many engines were installed without them.  He also accepted the repairer’s evidence that he advised the owners that the manifolds would cost $500 dollars and the owner did not suggest that he would not pay for them.  Accordingly, he allowed the manifold as an extra (note:  mere acquiescence on the part of an owner by itself, does not necessarily entitle a repairer to charge for an extra).

 On the other hand, the court ruled that the following items were not extras: 

1.   engine insulation;

2.   farrell hatch well for anchor;

3.   bow roller for anchor;

4.   installation of rear window in hull;

5.   extra water tank; and

6.   trolling pockets.

The “Kahlua-Lin” (10 December 1975) No. T-4464-73 (Fed. Ct. T.D.) is another example of a case applying the above described principles in a marine context.  In this case, the builder agreed to build a steel sailboat “Hull only and 2 fuel tanks with fittings”,  with any extra work to be billed separately. The builder was also provided with diagrams and a parts list prepared by a naval architect.    A dispute arose and the court had to rule on what was an extra and what was not.  The court ruled that the bulkheads (including work to reinforce the main bulkhead) were not extras because the material list supplied by the owner provided for bulkheads and bulkhead stiffeners and because they were “an integral part of the hull.”  Charges for a bowsprit and a rudder were also disallowed because they were shown on the plans and were considered by the court to be an “integral part of the hull.  The court also ruled that the repairer could not charge the vessel owner for  moving the vessel from one part of the yard to another because there was no specific agreement allowing for such a charge.

 The case of Upper Lakes Shipping Ltd. v. Saint John Shipbuilding and Dry Dock Co. (1988) 86 N.R. 40 (Fed.C.A) contains another example of a shipyard failing to establish its claim to an extra.  This case involved a bulk carrier which was being converted to a self loader.  When making its bid for the building contract, the builder relied upon a drawing provided by the vessel owner in estimating the quantity of steel required for a bow thruster.  On this point the  contract provided as follows:

 “Should the existing steelwork be more complicated than envisioned we reserve the right to amend the above prices accordingly subject to the owners approval”

A dispute arose, and the shipyard tried to claim an additional $1,573 hours of labour and $4,725 in materials for installation of the bow thruster.  The court denied the ship repairer’s claim on the grounds that the owner never agreed to the charge and the fact that the shipyard placed too much reliance on drawings provided by the owner and paid “too little attention to checking the actual plight of and condition of the Ship and measuring those areas critical to the work”.

In some of the more recent cases, the courts appear to be more willing to relieve repairers from the strict application of the above described rules by finding that a building contract has been varied or waived.   This is illustrated by the  case of  the “Tara M.J.” (1990) 38 F.T.R. 1 (Fed.Ct. T.D.) which involved a dispute between the owner of 65 foot dragger and a repairer who was to install a hydraulic system on the vessel. When the repairer prepared its quote, it was assuming that the vessel would be used only for lobster fishing.  Sometime after the initial quote, the repairer became aware that the vessel would also be used for stern trawling and modified its plans accordingly.  At trial, the ship owner took the position that the provision of hydraulics to use the vessel as a stern trawler should be included as part of the original quoted price.  However, Mr. Justice McNair found that the original written contract was varied by a subsequent oral agreement to provide a more extensive hydraulic system and to pay a reasonable price for such system.  Accordingly, the additional hydraulics were allowed as an extra. 

A similar approach was recently adopted by the British Columbia Court of Appeal  in a non marine context in Redheught Construction Ltd. v. Coyne Contracting and B.C. Building Corp (21 May 1996) No. C.A.020716 (B.C.C.A.).  This case involved a construction project for the Prince George Correctional Centre.  The written contract between a Plaintiff (a sub  subcontractor) and a subcontractor provided that no work, extra to that which was originally contracted for, would be undertaken without the prior written authority of the subcontractor. The Plaintiff performed some extra work without a written change order and the subcontractor refused to pay for it.

 The evidence with respect to the requirement for a written authorization was as follows: 

1.   on  three prior contracts between the Plaintiff and the subcontractor, written authorizations had not been provided until after the work was done; 

2.   the extra work performed was undertaken on the initiative of the head contractor (for whom the clause requiring writing was intended to benefit) and not on the initiative of the Plaintiff; and

 3.   since the principal of the Plaintiff was also the onsite manager for the subcontractor (who had received a written authorization), the onsite manager would have been issuing a written change order to himself. 

On the basis of these facts, the British Columbia Court of Appeal ruled that the requirement for written authorization  had been waived and that the Plaintiff should be paid for its work.  

  Even if a building  contract does not require written authorization for extras, since a verbal agreement may be difficult to prove at a later date, it is always prudent to obtain a written authorization for extras, along with an extension of the time for completing the project.  As the author of Goldsmith on Building Contracts says:

There can be few phrases in the construction industry which have caused more confusion, frustration, aggravation and  - not infrequently - financial ruin to a contractor than the glib, even if occasionally honestly meant, assurance by the supervising engineer or one of his employees, anxious to get some particular piece of work done in a hurry:  ‘Don’t worry; I’ll see you’re all right.’

  Brad M. Caldwell is a former Fisherman and Tow Boat Worker who's law practise is devoted primarily to maritime matters.

  See Part Two of this article appearing in the July 1997 issue of Westcoast Mariner