Legal Blog

Construction Deposit

Grandeur Homes Inc. v. Zeng 2021 Ont SCJ (Div Ct)

New home build. Contract price – $38 million, payable in eight instalments as construction progressed. The contract provided for a $3.8 million non-refundable deposit and stated that the deposit “shall be applied towards the final progress payment and other final amounts to be invoiced by the Contractor….” The owner breached the contract at stage 4. The contractor sued for the work actually completed and kept the deposit as forfeited. The contractor did not sue for lost profit on the work that it had not completed. The Divisional Court agreed with the motion judge that the deposit was not to be applied to the contractor’s damages. That would normally be the case if the contractor were suing for expectation damages, but, in this case, the contractor was not and it was clear that the deposit was not to be applied to loss of profit, but was intended to motivate the owner to complete the contract.

Written by Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.