Shielded from Liability: The Effect of a Labour and Materials Warranty in a Construction Contract

A recent decision from the British Columbia Supreme Court provides a reminder of the key principles of contractual interpretation that are applicable to construction contracts. The case is informative for both general contractors and subcontractors, specifically those who regularly enter into contracts that include a labour and materials warranty clause. This is also a useful case for companies and individuals involved in home renovations and remediation projects. 

In Belfor (Canada) Inc. v BC Hardwood Floor Cl. Ltd., 2026 BCSC 293, the Plaintiff was hired to be the general contractor on a flood restoration and repair project at a home in Vancouver. The Plaintiff hired the Defendant to supply and install flooring in the house. The parties entered into a contract which included a labour and materials warranty clause. This warranty stated the following:

B.C. Hardwood warranties all contracted work for the period of one year from date of invoice. Our warranty covers labour and materials necessary to perform warranty work. It excludes all consequential and out of pocket expenses incurred by the homeowner/occupant of the premises, during the execution of the warranty work such as hotel bills and are in place only when the account has been settled full.

After the Plaintiff completed their restoration work, the homeowner discovered deficiencies with the flooring work done by the Defendant. The Plaintiff notified the Defendant, and the Defendant completed the necessary remedial work. While the remedial work was being completed, the Plaintiff arranged for additional steps to be taken so that the flooring deficiencies could be addressed. These included packing and storing the homeowner’s furnishings in the house, providing the owner with alternative living arrangements while the remediation work took place, and cleaning the house at the conclusion of the remedial work. The Plaintiff invoiced the Defendant for these additional expenses, which amounted to $145,258.08 including GST.

The result of the case hinged on the interpretation of the “labour and materials” clause in the warranty. The Plaintiff argued that the “labour and materials” clause must mean something more than simply the Defendant’s costs to rectify the flooring deficiencies. Specifically, the Plaintiff contended that the additional expenses were necessary to rectify the flooring deficiencies. In order for the remediation work to be done, for example, the dishwasher and furniture needed to be removed and stored elsewhere. The Plaintiff asserted that when the Defendant did not disagree with the Plaintiff that the floor needed to be free and clear of furniture before the remedial work could be done, they implicitly agreed to cover the additional costs.

The Defendant argued that the wording of the warranty was clear that the additional expenses sought by the Plaintiff did not fall under the scope of “labour and materials” and that the warranty specifically excluded the additional expenses. The Defendant also stated that there were additional clauses in the contract that specifically dealt with issues including the removal of furniture and final touch-up, and that the contract should be read as a whole to determine whether the Defendant was liable for the Plaintiff’s losses.

Ultimately, the Court agreed with the Defendant, and found that the additional expenses sought by the Plaintiff did not fall under the “labour and materials” clause in the warranty. In doing so, the Court emphasized that the law of contracts has moved towards a practical, common sense approach. In a contract dispute, the Court will seek to determine the intent of the parties, largely by giving the words used their ordinary and grammatical meaning, while also examining the circumstances known to the parties at the time the contract was formed.

The Court found that in this case, the Plaintiff and Defendant were commercially experienced parties, and there was no inequality in bargaining positions at the time the contract was formed. At no time did the Defendant agree to pay for the additional expenses. The contract was clear that additional tasks such as final dust cleanup, removal of existing flooring and baseboards, and installation of new baseboards was to be done by others. As a result, the Court found that the labour and materials clause was a valid and applicable contractual exclusion clause that shielded the Defendant from liability. Ultimately, the Plaintiff was responsible for the additional costs incurred.

Key Takeaways

• Courts will interpret contracts by giving the words of the contract their ordinary meaning, while also taking into account the circumstances known to the parties at the time the contract was entered into;
• A clear and comprehensive labour and materials warranty may shield a subcontractor from liability for additional expenses incurred on a home renovation project;
• Prior to hiring a subcontractor for a home renovation project, the general contractor should read the terms of the contract carefully, and seek legal advice to ensure that the contract adequately addresses the potential for additional expenses in the case that remediation work becomes necessary. 

Our Construction Law team advises clients on drafting, interpreting, and enforcing contracts to help prevent and resolve construction-related disputes.

The content of this article is intended to provide a general guide to the subject matter. Legal advice should be sought for specific circumstances.