Owners and contractors should always avoid undertaking a project without a contract. But if they do build the project without a contract, the British Columbia Court of Appeal has recently recognized that the party which received the benefit of the work or supplies must pay a fair amount to the party which provided them.
This may not be a novel proposition. But what is novel is that the courts now recognize this situation as an "ineffective transaction" which falls within a discrete category of unjust enrichment.
While the result in this case may come out of left field so far as construction law is concerned, it is a good one for that branch of the law. It recognizes that an "ineffective transaction" constitutes a comprehensive classification to which the principles of unjust enrichment may be applied.
The BC Court of Appeal provides a comprehensive basis for a court in Canada to assess equitable compensation if a construction contract is ineffective for any reason.
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