The Supreme Court of British Columbia found that homeowners fundamentally breached a cost-plus construction contract by withholding $87,625.70, representing most of the contractor’s fee. The breach entitled the contractor to stop work despite the home being substantially, but not fully, completed.
In Hopson Construction Ltd. v. Martin, 2026 BCSC 2080, the Court awarded the contractor $53,731.25 rather than the full outstanding balance. The decision examines when nonpayment justifies ending construction obligations, how contractors must substantiate cost-plus charges, and the evidence required to recover damages for defective work.
Cost-Plus Contract or Fixed-Price Agreement?
Hopson Construction Ltd. agreed to build a custom home in Prince George under a contract containing an estimated budget of $1,116,894, including a 10% contingency and a 12.5% general contractor’s fee.
During construction, the homeowners requested additional features, including nine-foot walls, a second dormer, upgraded siding and extensive cabinetry. The final invoiced amount reached $1,204,620.70.
Although both parties acknowledged that the agreement was cost-plus, the homeowners argued that the original budget imposed a spending limit, subject to agreed changes. The Court rejected that interpretation and found that the contract allowed for additional costs.
This form of dispute is one that we encounter frequently, and more often than not, the homeowners are on the wrong side of it: in order for there to be some kind of spending limit or cap on a cost-plus construction cost estimate, the wording of such a limit needs to be expressly clear in the contract. Rarely, if ever, is the existence of an estimate alone enough to say that the contractor was somehow bound to keep his work under, or around, that estimate in a cost-plus contract.
However, a cost-plus arrangement does not eliminate a contractor’s obligation to exercise reasonable diligence, communicate cost overruns and substantiate its charges.
When Does Nonpayment Justify Stopping Construction?
The homeowners paid $1,117,000 but withheld the remaining $87,625.70 while demanding receipts and detailed financial records. The Court found that the contractor had not agreed to provide receipts in the requested manner and that the written agreement did not require them.
The withheld amount represented most of the contractor’s agreed fee, particularly after the contractor absorbed approximately $20,000 in cabinetry costs.
Applying the legal test for fundamental breach, the Court concluded that nonpayment deprived the contractor of substantially the whole contractual benefit it expected to receive. The contractor was therefore entitled to elect not to return and finish the remaining work.
The ruling does not establish that every disputed invoice or request for receipts permits a contractor to stop work. The significance of the unpaid amount, the contractual obligations and the circumstances of nonpayment remain essential.
Why the Contractor Did Not Recover the Full Invoice
The contractor submitted invoices and other evidence supporting its construction costs. The Court preferred its assessment of $128,900 in additional costs, but found that this did not explain the entire increase over the original budget.
Some supporting invoices related to other projects, and the contractor’s calculations left an unexplained discrepancy of $33,889.45.
The Court therefore accepted proven charges of $1,170,731.25. After deducting the homeowners’ payments, it awarded $53,731.25.
The distinction is significant for cost-plus contractors: establishing an entitlement to payment does not relieve them of the obligation to prove their charges. Project-specific invoices, reliable accounting and documented changes remain important evidence. The contractor will always need to provide complete proof of its costs in order to claim under a cost-plus contract.
Why the Garage Floor Claim Failed
The homeowners also sought $33,285 to replace a garage floor constructed flat rather than sloped as shown in the plans.
The Court accepted evidence that one homeowner had agreed to a flat slab. It also found that complete replacement would be unreasonable in the circumstances and that diminution in property value would be a more appropriate measure of damages.
The homeowners had provided no evidence of diminished property value and had not attempted to replace the floor or mitigate their loss. Their garage floor claim was dismissed, along with the remainder of their counterclaim.
Implications for Construction Payment Disputes
Hopson Construction demonstrates the financial risks of withholding substantial construction payments and the evidentiary demands of cost-plus billing. Contractors should maintain records supporting project expenses and communicate material cost increases, while owners should distinguish estimated budgets from enforceable price limits before withholding payment.
ATAC LAW represents owners, developers and contractors in British Columbia construction disputes involving unpaid invoices, cost overruns, incomplete work and alleged construction defects.
