With ongoing uncertainty around tariffs imposed by Canadian and U.S. governments, real estate developers and investors must determine how standard form contracts handle compensation adjustments. Most construction contracts in Canada don’t specifically mention “tariffs” but do refer to “taxes” and “duties.”

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For example, the CCDC 2-2020 contract, which is widely used in development and construction projects, allows for price changes if taxes or duties change after bid closing. Since tariffs are systems that impose duties, it could be argued that tariff-related cost increases fall within this clause. This means that the developer or homeowner, not the contractor, is the one who typically has to eat higher costs as a result of tariffs.

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Other standard form construction contracts, like CCDC 5B, allow for tariff-related compensation unless a Guaranteed Maximum Price (GMP) is in place, which typically does not permit price adjustments once set.

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Given that Canadian retaliatory tariffs in response to U.S. trade actions can impact material costs unpredictably, it’s challenging to foresee their effect on specific projects. Accordingly, contractors and owners should review existing contracts closely and consider including explicit tariff-related clauses in future agreements to reduce the risk of cost escalations.

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