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ARTICLE · 14 APRIL 2026

Subcontractors And Delay Penalties: Understanding Your Obligations

Miller Thomson
Miller Thomson
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Miller Thomson

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The penalty clause is a powerful contractual tool designed to deter the various parties involved in a project from breaching their contractual obligations and to ensure compensation in the event of such a breach.

CanadaReal Estate and Construction
Yann-Julien Chouinard
Yann-Julien Chouinard
Evelyne Morin
Evelyne Morin
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The penalty clause is a powerful contractual tool designed to deter the various parties involved in a project from breaching their contractual obligations and to ensure compensation in the event of such a breach. When a project falls behind schedule, the delay penalty imposed by the owner can quickly become a major financial burden for the general contractor. The question then becomes whether these penalties can be passed on to the subcontractors and/or suppliers responsible for the delays.

In this article, we examine three common situations: (i) incorporating the main contract clauses into the subcontract, (ii) including a penalty clause specific to the subcontract, and (iii) the challenges that arise when there is no penalty clause.

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

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