Key Considerations for Owners of Personal Property and Entities Performing Work on Personal Property

Written By: Michael Geib, Associate & Jessica Figley, Articling Student

This is the second of two articles dealing with the rights and obligations of parties involved in the improvement or alteration of personal property. The first article explored the Possessory Liens Act, RSA 2000, c P-19 (the “PLA”) and the Garage Keepers’ Lien Act, RSA 2000, c G-2 (the “GKLA”), two pieces of legislation that provide specific forms of relief – liens – to parties who apply their time, money or skill to improve someone else’s property.

This article provides a short introduction to considerations around the importance of forming effective work orders and service agreements and maintaining effective invoicing practices. This article is intended to provide useful information for anyone who works with the personal property of others and we encourage readers to review the previous article for a more in depth discussion on the rights and obligations of chattel owners and lien claimants.

I.                   Introduction

One of the best ways to show the terms of an agreement to improve property, or to demonstrate the work that was performed, is through written documents including work orders and invoices. In addition to being good and fair business practice, preparing proper work orders and issuing proper invoices can be essential for resolving disputes over issues such as scope of work, quality of work, and price for performance of work.

Putting agreements in writing does NOT eliminate legal disputes; however, effectively papering your transactions can significantly mitigate disputes about what was or was not done to  a piece of property, and it can also help clear up confusion about what was requested or not requested by the property owner.

So, before reading any further please consider our version of the golden rule – always reduce anything of significance to writing! If in doubt, write it out.

II.                Considerations for Work Orders

Practically speaking, when parties put something into writing – say for example a key term in a work order – the written document stands as evidence of what the parties agreed to and when they agreed to it. In the context of a possessory lien, having the scope of work in writing means that if a dispute arises down the road the parties can look to the written agreement and attempt to sort the matter out. In the event that the parties cannot resolve the matter themselves, a Court can look to the written term(s) to decide what was or was not agreed to by the parties. While possessory lien claims can still be asserted on the basis of an oral agreement, having something in writing provides an additional form of evidence that is easier to assess than a disputed oral agreement.

For example, the owner of a vintage soda dispenser wants ABC Restorations to “fix-up” the dispenser. The parties will inevitably discuss what the term “fix-up” means and they will come up with a plan (or scope of work) including price, time for completion, and considerations about what happens if unexpected difficulties arise. The parties can reduce their agreement to writing, or they can forge ahead on the basis of an oral agreement. If everything goes well, both parties will be happy, but what happens if a dispute arises? The parties will be left to argue over their understandings of the relationship, based on what they think was said.

With a clear written agreement, the parties increase their chances of resolving the dispute themselves without needing to incur legal costs. If such discussions fail, a written scope of work helps to narrow the legal issues. Further, it means there should be fewer disputes about the evidence because while the parties can argue over the interpretation of the wording it is more difficult to argue the existence of the agreement itself.

On the topic of the contents of work orders, there are several important considerations. Of particular importance to note is that while context will likely dictate the form of the work order (i.e. what it looks like), the law typically dictates the proper substance (i.e. what should be included). That is to say, the form of a work order in the context of an agreement to repair and maintain a lot of industrial equipment will likely look different than an agreement between a motor vehicle owner and a mechanic to replace a transmission. However, the substance of every work order should reference:

  • The work to be performed;
  • Timeline(s) for completing the work;
  • Costs; and
  • Provisions for changes in the scope of work.

An effective work order will contain reference to the scope of work. The scope of work identifies what work is to be done, how, and when. Depending on industry standards and timelines, the scope of work could be laid out over several paragraphs of an agreement, or it could be a bullet point list on a term sheet initialed by the parties. Whether it is presented in full sentences or bullet points, what is important it the scope of work is reduced to writing.

III.             Elements of Effective Invoices

Now it is time to explore another important consideration – proper invoicing. In the same way, a written scope of work can narrow issues between the parties proper invoicing practices can reduce the legal complications for parties involved in the repair or refurbishment or personal property.

As with service agreements, there are general elements of invoices that, in addition to good business practice, can help limit legal disputes. Key elements of an invoice include:

  • Price for materials or parts furnished, including the markup charged for materials and parts (if applicable);
  • Units of labour with enough detail to see the time spent per task;
  • Cost of labour; and
  • Any other costs billed for the work.

IV.             Application to Possessory & Garage Keepers’ Liens  

Let us look at the context of an invoice in relation to a possessory lien. The PLA allows for an entity that has expended its money, labour or skill to enhance someone else’s personal property (at the property owner’s request) to maintain a lien over the subject property where the owner fails to pay. In order to maintain a lien, the Lien Claimant needs to show that they applied money, labour or skill to the subject property. Where a Lien Claimant can furnish invoices showing time spent performing the work, labour cost, materials costs, and other relevant details it provides additional information and evidence in support of its lien claim.

Instead of simply representing what was or was not done, an effective invoice provides particulars about what was done, how much was charged, and how long the work took. Thus, through its invoicing, the Lien Claimant can show a Court what they did in an effort to demonstrate the basis for a lien. If there is a legal dispute about the work done invoices provide the Court with additional information to help assess the underlying facts, and they serve as a potential mechanism to help establish or challenge the credibility of the subject parties.

A proper invoice does not guarantee the success of the Lien Claimant, but it can act as objective evidence in support of the work done.

While this discussion has focused on possessory liens, the same logic applies to garage keepers asserting liens over property improved to that legislation.

V.                Conclusion

Possessory and garage keepers’ lien claims are complex mechanisms of relief that come with technical requirements. Resolving disputes about these claims requires looking to legislation, prior decisions from the courts, and the specific circumstances of the relationship between the parties.

While reducing key aspects of service provider-customer relationships to writing cannot prevent legal disputes, the terms of such written arrangements can assist in narrowing the issues in dispute, which increases the chances of the parties resolving the matter independently, and usually reduces the legal issues if a dispute cannot be resolved quickly. Further, in Alberta, the legislature has provided technical pieces of legislation that provide rights and obligations on parties, and effective written agreements relating to scopes of work or invoicing help provide context to the technical requirements of the legislation.


Disclaimer: This article is to be used for educational and non-commercial purposes only. Parlee McLaws LLP does not intend for this article to be a source of legal advice. Please seek the advice of a lawyer before choosing to act on any of the information contained in this article.