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By Greg Murdoch – 2015/05/11

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The transmission and storage of messages, sensitive documents and data has become routine for many companies. Construction companies routinely send information back and forth between employees/colleagues, clients, and subcontractors using email. Businesses also maintain and store information and move it about in other formats such as USB keys and CDs. Some of this information is highly sensitive for personal and/or business reasons.

The pervasive use of technology to transmit and store information introduces a wide variety of risks to your business. These include legal/regulatory risks and competitive risks.

One legal risk of particular concern to companies is the release of confidential client information.  Aside from the harm to a business reputation and damage to client relations which may result a negligent company could be responsible for civil damages if their client suffers harm as the result of the unauthorized release of their confidential information.

The release of personal information of either employees or clients is also a matter of concern.  The Personal Information Protection and Electronic Documents Act regulates the collection and use of personal information.   Any company that collects personal information must take appropriate measures to safeguard this information including appointing a specific individual to oversee the management of personal information.  Companies must take adequate steps to safeguard personal information.   The Federal Court of Canada has authority to award damages to complainants for the unauthorized release of personal information.

Inadequate safeguards on your stored data can put your business at a competitive disadvantage. Commercial espionage while exotic sounding is real.   The release of confidential information such as pricing strategies to a competitor can have obvious negative consequences

There are relatively easy and inexpensive safeguards which can be implemented to protect your data.

In general, always be aware of what you’re doing with your information. Never assume any device or storage method is secure by default because it probably is not.

It is important to secure any over-the-air transmissions.  Never use unencrypted wi-fi as this exposes transmissions to interception. Always be sure that you are on an encrypted network before transmitting.

Avoid the use of Bluetooth accessories (e.g. headsets, keyboards) in areas where an eavesdropper could easily connect to them.  When using cell phone networks ensure that the wi-fi function on your device is turned off entirely.

Employees should be instructed that if they work from home they must use strong password protection (WPA2 or higher). In the workplace access to networks must be controlled and passwords should be changed regularly. Employee passwords should be kept track of so that they can be revoked or changed if they leave the business.

For storage of data on external drives such as USB it is important to maintain passwords and an appropriate chain of control.   Common sense dictates that businesses are aware of and control the use of media storage devise.

In order to ensure data is secured the following actions are recommended:  Use password protection on files where possible;   Use password/passcode protection on mobile devices, Ensure that laptops that go into public places / sites have multiple levels of password protection – consider encrypting hard drives,

It is also important to be aware of external risks such as malware and phishing.

In summary, it is better to take proactive steps to protect your information, in order  to prevent it from reaching unauthorized parties than it is to be subjected to legal/regulatory actions or the resulting damage to reputation and business relations.

* * This article is intended only to inform and educate. It is not legal advice.  Be sure to contact a lawyer to obtain legal advice on any specific matter. This article was originally published in the March/April 2015 Issue of the Grand River Construction Authority Journal.

 Author: Greg Murdoch is a partner and the head of litigation at Sorbara, Schumacher, McCann LLP, one of the largest and most respected regional law firms in Ontario. Greg may be reached at (519) 741-8010 ext.223  or at gmurdoch@sorbaralaw.com.

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By Greg Murdoch 2015/01/08

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Many property owners insist on a liquidated damages clause in their construction or renovation contracts as a motivator for project completion within a specified time.

Deadlines for the completion of construction projects are good for both owners and contractors. The owner wishes to use the finished product as soon as practical so that he or she may enjoy the benefits of its investment. The contractor who allocates resources to a project wants to ensure that those resources are earning an appropriate return. A delayed project can erode profits and prevent resources from being deployed elsewhere.

Liquidated damages are defined as a genuine pre-estimate of the probable loss that would be suffered from the late completion of a contract. In order to be enforceable, liquidated damages must not be a penalty. Liquidated damages will be considered to be a penalty if they are extravagant or oppressive in relation to the conceivable loss the owner would suffer from late completion. If liquidated damages are found to be a penalty, a Court will compensate the owner based on its actual losses.

The person arguing that liquidated damages are penal bears the onus of establishing this point. Owners will not be held to a standard of perfection. As long as the estimated amount of damages is reasonable, the clause will be enforceable. Courts recognize the utility and value of a fixed pre-estimate of damages because it saves the parties the time and expense of proving actual damages. Many contractors prefer the certainty of a fixed amount of damages if it cannot complete on schedule.

Market forces help ensure that liquidated damages are appropriately set. If the damages are set too high, contractors will not bid on a project or will inflate their bids as a safeguard, which in turn will drive up the cost of projects. If liquidated damages are set too low, a contractor may have an incentive to go over schedule if the prescribed damages are less than the acceleration costs to complete on time.

Numerous events beyond the control of the contractor can interfere with the completion of the contract within the specified time. As such, a contract with a liquidated damages clause must include provisions for extending the completion date in order for the clause to be enforceable. In the eyes of a Court, it would be unfair to charge liquidated damages without a mechanism that allows for extensions of time for events beyond the control of the contractor.

A prime example of external events causing a contract to take longer to complete are requests for extra work from the owner. Contract provisions for the extension of time to complete are as much for the benefit of the owner as the contractor, in that they adjust the completion date and thereby preserve the owner’s right to claim liquidated damages if the project is not finished by the new completion date.

Requests to extend a contract completion date must be handled properly by an owner and its consultant. An owner will lose its right to claim liquidated damages if the owner or its consultant fails to respond to a contractor’s request for an extension within a reasonable time after receiving the request. It is essential that the contractor knows the new date for completion because without this information a contractor cannot adjust its schedule and accelerate work if necessary. Liquidated damages must run from a specific date. Without a specific date they cannot be calculated and the clause will not be enforced by a Court.

The loss of the owner’s ability to charge liquidated damages does not eliminate an owner’s right to claim damages for late completion, but the test for late completion changes to proving a reasonable completion date and damages will be measured by actual losses and not a pre-estimate of damages.

It is important to review all contracts thoroughly before signing and appreciate their terms. In contracts that provide for liquidated damages, it is important to understand the provisions dealing with requests for extensions of time to complete in the event of intervening events that interfere with timely delivery. Properly documented requests for extensions for contract time, as well as insistence that consultants deal with these requests promptly, go a long way to avoiding disputes over liquidated damages charges and the end of a contract.

* * This article is intended only to inform and educate. It is not legal advice. Be sure to contact a lawyer to obtain legal advice on any specific matter.

Greg Murdoch is a partner in the firm and head of the litigation group at Sorbara, Schumacher, McCann LLP, one of the largest and most respected regional law firms in Ontario.

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