Construction projects are usually long-term transactions. They usually come up with uncertainties and complexities that can result in construction disputes. Therefore, it is not easy to think of all contingencies at the outset.
The construction industry is also notoriously “adversarial.” It is often filled with several issues that lead to construction disputes. Despite this, some contractors and other involved parties pay little to no attention to these disputes and how to settle them.
However, it only takes one bad legal experience to bring home the fact that being aware of these disputes is actually of great importance. If you’re connected to the construction industry, six of the most common contract disputes are likely to happen in a construction project.
Contract Errors
Even carefully thought, clear-cut, and well-worded contracts have omissions, and it happens regularly. These errors are usually simple oversights and can be solved by double-checking. However, if they are missed, they will derail a construction project.
One of the most common errors is whether a contract has a fixed price or cost plus. It usually happens when involved parties do not indulge inappropriate contract making but instead opt for purchase order issues and estimates.
Another one is the incorrect application of the law. For example, some try to deviate lien periods or holdback percentages, and then they try to conform to the applicable legislation terms only to get them all wrong. These situations are usually raised to the high court and may require more complex resolutions.
Know that different countries have different ways on how to settle a dispute. For example, in Australia, construction disputes are generally settled in four forms, including mediation, arbitration, and litigation. Which resolution is the best to take depends on your situation, so it’s best to seek professional help. If you’re on the same continent, you can get a legal consultation here at Morrisseylaw.com.au.
Differing Site Conditions
This dispute usually occurs when a contractor encounters a concealed site condition that differs “materially,” either from the contract or normal expectations. The difference can presumably affect a project’s workflow, causing a cost increase.
These claims are usually related to subsurface conditions. For example, there were unforeseen underground obstructions like buried debris, unexpected utility lines, rock formations, or a higher than anticipated water table at the construction site.
Differing site conditions are either seen as foreseeable or reasonable. The courts will usually resolve these by determining whether the contractor did “reasonable steps to investigate the site’s condition” and made “reasonable assumptions in the bid.”
On-Site Changes
Changes are often made on site even if the contract has been completed or the construction has already been carried out. For example, a contractor may suggest a cost-effective solution, or an employer may add a different specification of materials for improvement.
While on-site changes are usually beneficial for the construction project, they are usually accompanied by payment issues. Since money is involved, there is a tendency that these changes might not be strictly dealt with in compliance with the contract, resulting in disputes later down the line.
Noncompliance with Contractual Obligations
There is noncompliance if any involved party in a contract (i.e., an employer, a contractor, or a subcontractor) does not fulfill their required obligations. This dispute can quickly escalate from poor relationships with other parties to expensive legal actions.
Apart from emphasizing the action points of the contract, there are other clever ways to avoid this dispute. For example, avoid auto-renewed and evergreen contracts since they limit flexibility and cause unexpected spending. Another is to have a consistent contract review process in place. It is one of the keys to maintaining contract compliance.
Delays
Most delays are often caused by the breakdown of communication between involved parties. Another reason can be the failure to meet the other party’s expectations. However, the involved parties themselves usually resolve these situations.
There are also bad situations when disputes arising out of delays end up in court, especially when the delays will cause a hefty amount of increased costs. These delays are usually categorized into two, excusable and inexcusable.
Excusable delays occur when they are out of the control of the involved parties. On the other hand, inexcusable delays happen when caused by the fault or neglect of any involved party.
Arbitrators typically resolve these delay-related disputes by identifying several factors. These include the causes of the delay, the parties’ implied obligations in the contract, and the parties’ risk management.
Project Complexity Issues
If a project is complicated, risk assessments are always rendered official before a contract. However, there are situations when other parties do not follow, which can cause potential disaster and substantial financial losses for all involved.
For example, if a risk assessment is done midway through the construction, it can cause delays. On the other hand, if a risk assessment is not going to be carried out, it can pose risks. The worst scenario one can imagine is when the construction collapses, causing a party to be liable for all injuries or deaths.
Takeaway
Construction disputes are multifarious and involve a lot of interfacing parties. Even worse, they are like a chain reaction, stalling every project’s progress. Hence, it will always be in all involved parties’ interests to settle conflicts promptly and be responsible for their respective obligations.
