When a Tariff Becomes a Claim: Entitlement, Complexity and Mitigation

A great deal of the commentary published since 2025 identifies the change-in-law provision, GC 10.2, as the route to tariff recovery under CCDC 2. That is the wrong clause, and the error is not academic — the two provisions produce materially different outcomes.

GC 10.2 is headed "Laws, Notices, Permits, and Fees" and is principally about compliance with legal requirements. Its sub-clause 10.2.7 provides that where changes are made to applicable laws after bid closing which affect the cost of the Work, either party may submit a claim under GC 6.6. That is a procedural gateway. It confers a right to advance a claim and decides nothing about whether the claim succeeds.

GC 10.1 is headed "Taxes and Duties", and it is the substantive provision. Sub-clause 10.1.1 provides that the Contract Price includes all taxes and customs duties in effect at the time of bid closing, excepting Value Added Taxes payable by the Owner under Article A-4. Sub-clause 10.1.2 then provides that any increase or decrease in costs to the Contractor due to changes in taxes and duties after the time of bid closing shall increase or decrease the Contract Price accordingly.

The practical instruction is to plead GC 10.1.2 as the primary entitlement and treat GC 10.2.7 as the alternative, not the reverse. A contractor who leads with 10.2.7 has volunteered into a discretionary process when an automatic adjustment was available.

Four features of the provision deserve attention, because each one shapes how a position should be prepared.

It is automatic. The clause says the Contract Price "shall increase or decrease… accordingly". It does not say a party may claim, and it does not condition the adjustment on a finding of entitlement. In substance it is a price mechanism rather than a relief provision. That said, the adjustment still has to be administered — in practice through GC 6.6 — and the administrative route is where the automatic character can quietly be lost.

It is bilateral. The same words that increase the price decrease it. Where duties are repealed or narrowed after bid closing, the owner has a corresponding entitlement. This is not hypothetical: most of the February 2025 surtax order was repealed with effect from 1 September 2025. Any contractor advancing an increase on one commodity should expect the downward limb to be raised on another, and should have looked first.

The datum is bid closing, not award or execution. A duty in force at bid closing is deemed to be in the price and gives no entitlement whatever its commercial effect. Only a change after that date moves the price. On a project tendered in July 2026 and awarded in October, the September measures fall on the recoverable side. On a project tendered in September, they do not.

It compensates cost, not rate. The clause measures the "increase or decrease in costs to the Contractor". A 50 per cent tariff rate is not the measure of the claim. The measure is what the contractor actually paid more, which is a very different and much harder thing to establish.

The CCDC family is broadly protective on this point. Equivalent taxes-and-duties provisions appear in CCDC 14 for design-build, where the trigger is reported to run from the time of the proposal or bid closing, and in the cost-plus forms where duties pass through as a cost of the Work. The subcontract forms, CCDC 17 and CCA 1, carry a mirror provision adjusting the Subcontract Price on the same basis, and are generally regarded as the strongest protection in the family.

Two gaps matter far more than the drafting of any one clause.

The first is flow-down. A general contractor with CCDC 2 protection upstream and a bespoke, non-CCDC subcontract downstream has retained the risk on the subcontracted scope while believing it was passed through. The reverse — a subcontractor with CCDC 17 protection against a general contractor whose head contract has been amended to delete GC 10.1.2 — creates the exposure one level up. These positions are knowable at award and almost never checked until a claim is being prepared.

The second is the public-sector forms. The Canadian Construction Association's guidance on risk management records that under Ontario P3 documents, contractors are not granted relief for changes in duties and tariffs imposed on the work — expressly contrasting that position with CCDC 2 and CCDC 14. For anyone working on Ontario alternative financing and procurement projects, this is the single most commercially significant fact in the subject: the protection most of the industry assumes to be standard does not survive into the documents used on the province's largest programs.

Contractors reach instinctively for force majeure when an external event raises cost. Under CCDC 2 the reach fails at the first step: the contract contains no force majeure clause at all. The phrase does not appear in the document.

The functional analogue is GC 6.5, headed "Delays", and its architecture is deliberately asymmetric. Where delay is caused by the owner or consultant, or by a stop-work order from a court or public authority, the contractor receives an extension of time and reimbursement of reasonable costs. Where delay arises from labour disputes, fire, unusual delay by common carriers, unavoidable casualties, abnormally adverse weather, or any other cause beyond the contractor's control, GC 6.5.3 grants an extension of Contract Time only. The clause states expressly that the contractor is not entitled to payment for costs incurred by such delays unless they result from actions by the owner or consultant.

So even on the most generous reading, a tariff routed through GC 6.5 yields time and no money. And the more fundamental objection is that a tariff does not, in itself, delay anything. It makes material more expensive. GC 10.1.2 is the money clause; GC 6.5 is the schedule clause; conflating them produces a claim that asks the wrong provision for the wrong remedy.

The wider Canadian law on economic hardship points the same way. In Atlantic Paper Stock Ltd. v. St. Anne-Nackawic Pulp & Paper Co. the Supreme Court held that force majeure requires an event beyond the control of either party and is unavailable where the party's own conduct contributed. In Tom Jones & Sons Ltd. v. R. the Ontario High Court held that mere economic hardship was insufficient. The Alberta Court of Appeal in Atcor Ltd. v. Continental Energy Marketing Ltd. offered the most contractor-favourable formulation, holding that strict impossibility is not required and that a real and substantial problem measured against commercial reasonableness may suffice — but that is Alberta authority, and it remains a long way from cost relief for a dearer input.

Frustration is occasionally floated in trade commentary as a response to severe cost shocks. It is a dead end twice over.

The legal test is demanding. Performance must have become, in the language adopted into Canadian law from Davis Contractors Ltd. v. Fareham Urban District Council, a thing radically different from that which was undertaken by the contract. In Naylor Group Inc. v. Ellis-Don Construction Ltd. the Supreme Court of Canada declined to find frustration where the circumstances had been contemplated at formation. Increased cost, unprofitability and a bad bargain do not frustrate a contract.

The strategic objection is more decisive still. Frustration discharges the contract. A contractor seeking to be paid more for work it intends to complete does not want the contract discharged; it wants the price adjusted. Arguing frustration is arguing for a remedy nobody in the room actually wants, and it signals that the contractual analysis has not been done.

There is an unresolved technical question sitting underneath all of this, and I have not seen it addressed in the published commentary.

Canada's counter-measures are not, in their own language, customs duties. The orders are made under the Customs Tariff and impose a "surtax" calculated as a percentage of the value for duty of the listed goods. GC 10.1.1 refers to "taxes and customs duties"; GC 10.1.2 refers more broadly to "taxes and duties".

The argument that a surtax is caught is strong. It has its statutory home in the Customs Tariff, it is collected at the border, it is calculated on value for duty, and the operative sub-clause uses the unqualified word "duties". There is also a drafting change worth noting: the 2008 edition of CCDC 2 referred to changes in "such included taxes and duties", tying the adjustment back to the categories in 10.1.1, while the 2020 edition removed the qualifier, leaving 10.1.2 freestanding.

But it is an argument, not a settled point. No Canadian decision has construed GC 10.1 in relation to tariffs or surtaxes. Commentary that implies judicial support for tariff recovery under this clause is overstating the position. A party relying on it should plead the characterisation expressly rather than assume it, and should expect it to be contested where the sums are large.

Assume entitlement is established. The claim then has to prove an increase in costs to the contractor, and this is where most tariff claims will founder.

Consider what the proof actually requires: tracing a specific surtax, imposed on a specific importation of specific goods, into a specific cost incurred on this project. The obstacles are practical and substantial. Distributors and fabricators do not itemise duty on their invoices. Material may cross the border more than once in processing, attracting duty at different stages under different orders. The supplier may have absorbed part of the increase for commercial reasons, or may have obtained relief under a remission order, or may simply have raised prices in a rising market and attributed it to tariffs.

That last possibility deserves particular care, because it cuts both ways. A contractor advancing a claim must be able to show that the increase it paid was attributable to the duty rather than to general market movement. An owner defending one will look for exactly the opposite. A supplier's assertion that a price rise is "due to tariffs" is not evidence of a duty-driven cost increase; it is a commercial statement that needs to be tested against the tariff schedule and the import record.

Remission orders introduce a further wrinkle. Where a supplier later obtains remission of a duty that a contractor has already recovered under GC 10.1.2, the contractor has been made more than whole. I am not aware of authority addressing this, but it is an obvious line of defence and it argues for tracking remission applications on material in the claim.

The mitigation of all this is prospective and unglamorous. Require suppliers to identify duties separately on invoices, as a condition of purchase. Obtain country-of-origin declarations. Retain customs documentation. Lock in quotations where the market allows. None of it is difficult while the material is being bought. All of it is close to impossible eighteen months later.

A substantively unanswerable entitlement can be lost procedurally, and in Ontario it frequently is.

GC 6.6 requires a party intending to claim an increase in the Contract Price to give timely Notice in Writing of intent to claim. Note that the word is "timely" — unlike GC 6.5.4, which imposes a hard ten working day limit for delay notices, GC 6.6.1 sets no fixed period. Contractors routinely assume the ten-day delay rule governs cost claims. It does not. That is not, however, a licence for delay.

GC 6.6.2 imposes two obligations from the commencement of the event: to take all reasonable measures to mitigate any loss or expense, and to keep such records as may be necessary to support the claim. For a tariff claim the commencement of the event is the coming into force of the relevant order, not the arrival of the invoice that reveals its effect. The record-keeping duty therefore bites months before most projects notice they have a claim. GC 6.6.3 then requires a detailed account of the amount claimed and the grounds on which it is based, within a reasonable time.

The Ontario authority on what this means in practice is Ross-Clair v. Canada (Attorney General), 2016 ONCA 205. The contractor sought roughly $1.4 million in extras. The contract required a claim with sufficient supporting detail within a defined period. The Court of Appeal treated the sufficiency of the information as part of the notice obligation itself — a notice lacking the required particulars was not a valid notice. The detailed analysis, produced more than a year after completion, was too late, and the claim was barred in its entirety. The decision has been criticised for conflating notice with proof, but it is the law a contractor has to plan around.

The Court of Appeal had earlier confirmed in Technicore Underground Inc. v. Toronto (City), 2012 ONCA 597 that strict compliance with contractual notice provisions operates as a condition precedent to the claim. The combined message is uncomfortable and clear: a notice that merely signals an intention to claim, without grounds and quantum, may be worth nothing at all.

One further Ontario layer compresses the timeline again. On projects governed by the Construction Act's prompt payment and adjudication regime, a dispute over a tariff-driven price adjustment is capable of adjudication on a thirty-day cycle. The evidence that decides it is the evidence that already exists when the notice of adjudication arrives.

Mitigation in this context is not a general exhortation to be commercially sensible. It is a contractual obligation under GC 6.6.2 with evidential consequences, and it should be documented as one.

The mitigation steps available on a tariff-affected package are reasonably well defined: substitution to non-affected origin where the specification permits; early purchase ahead of an announced in-force date; renegotiation of supply terms; and, where the specification does not permit substitution, a documented request to the consultant to consider an alternative.

Each of those steps should be recorded whether or not it succeeds. A rejected substitution request is better evidence than a successful one, because it demonstrates that the contractor sought the cheaper route and was directed to the more expensive one. A claim that shows no attempt at mitigation invites the argument that the loss was avoidable, and the argument does not need to be strong to reduce recovery.

The through-line of all of this is the same one that runs through every delay and disruption claim I have worked on. The outcome is determined by records created while the events were happening, by people who did not yet know there would be a claim. Entitlement can be argued from the contract. Quantum cannot be argued from anything but the record.