It is not always possible to calculate the impact of a
particular project on the overall operations of a construction
company with precision. Nevertheless, the courts have been prepared to recognize that these are legitimate costs of servicing the
contract.9 There are even formulas which have been developed
to deal with this such as the “Eichleay formula” widely used
in the United States and the “Hudson formula” developed
in the United Kingdom.10 Canadian courts have been reluctant
to adopt a formulaic approach and generally require proof
of increased overhead costs causally related to the project in
 Of course we are not concerned here with assessing damages but with the calculation of net profit for Forest Creek.
I make this point simply to illustrate that it is no easy task to
appropriately allocate overhead to construction projects and reasonable parties can disagree. For example, during a period of
time when the only project under construction was Forest Creek
it is possible to argue that in a small construction company all of
the overhead cost is attributable to that development but that
assumes the company would not be operating and would have no
overhead if it was not actively building. Yet there is a base cost
of operations that would continue in any event and is necessary
simply to maintain the corporate structure and an office. Even a
company completing one project at a time would not be justified
in charging all of its overhead to “cost of sales”.
 The question before the court is not the correct method of
calculating net profit in any absolute sense. The question is,
what is intended by the provision in the contract? As the evidence discloses, at the time the contract was signed, the brothers
had a method of calculating profit for each home they built. It is
evident that they had little difficulty in agreeing on the net
profit from individual lots and we see several instances in which
this is the case. In fact, job cost reports were maintained on a
running basis for each home constructed.
 In my view, the past practice is important as it informs
what would have been understood by the profits from the
Forest Creek subdivision. It is reasonable to suppose that the
9 For example, see Crownwood Construction Ltd. v. Omartech Construction
Ltd.,  O.J. No. 873, 54 C.L.R. (3d) 86 (Master) in which a markup of
25 per cent for overhead and profit was allowed.
10 See Bianchi Grading Ltd. v. University of Guelph,  O.J. No. 1441,
61 C.L.R. (3d) 199 (S.C.J.).
11 See Ramex Systems Ltd. v. Ottawa (City),  O.J. No. 1133 (Div. Ct.).