What forms does a contractor require?

On a typical construction project, a general contractor is hired by the owner to build the project. Subcontractors are then hired to complete various portions of the work. These subcontractors may in turn engage sub-subcontractors and suppliers. This type of arrangement is often referred to as the construction pyramid.

The owner has no contracts with subcontractors or suppliers and may have little if any dealing with them. Similarly, the general contractor has no contracts with sub-subcontractors or suppliers. Typically, neither the owner nor the general contractor has any means of determining whether the parties lower down the chain are being paid for their services. Because unpaid parties can mean liens and resulting delays, the construction industry has developed the use of statutory declarations to help payments flow to the base of the construction pyramid.

Statutory declarations are sworn statements that may be required before contractors or subcontractors are paid their progress draws or holdback releases. A statutory declaration will only be required as a condition of payment if the party’s contract contains an express term to that effect. Absent such a term, there is no obligation on any party to provide a statutory declaration before being paid.

Under a typical statutory declaration, the signing party swears or affirms that all of its accounts relating to its contract have been paid in full up to and including the last progress draw. The idea behind the statutory declaration is that it provides an assurance to the party making payment that the funds being paid are in fact reaching those farther down the pyramid. However, a statutory declaration may only be as good as the word of the person swearing it; having completed statutory declarations in hand does not fully guarantee that payment has actually been made to the parties further down the pyramid.

Owners and project managers…rely on statutory declarations from contractors in order to ensure the contractor has discharged its obligations and the subcontractors’ labourers and material men on projects have been paid. Valid statutory declarations are critical to the payment process and are of paramount importance to owners and project managers. If statutory declarations cannot be relied on by owners and project managers, the orderly payment process on construction projects will become chaotic.

This article is for information purposes only. Notary Public Edmonton does not provide legal advice. If you require legal advice, you should seek counsel authorized to practice law in your jurisdiction.