CLOSE SEARCH
Unlike most commercial contracts, construction contracts are distinctive in that disputes are not only anticipated but largely expected as a normal part of the project lifecycle. Standard form construction contracts typically include detailed dispute avoidance and resolution mechanisms as standard provisions, reflecting the industry's pragmatic approach to conflict management.
The Joint Contracts Tribunal (JCT) contract types, which are prevalent in the UK construction industry, particularly exemplify this approach, with mechanisms that anticipate variations and disputes as an inherent part of the construction process.
Timing is critical in construction disputes. Most construction contracts contain strict notice provisions and time bars that can preclude claims if missed.
Payment disputes - Payment disputes remain the most prevalent issue in construction. These typically include delayed or non-payment when employers withhold payment due to alleged defects or delays, valuation disagreements regarding the value of work completed, final account disputes over the final sum due at project completion or cash flow issues.
Time-related disputes - disputes concerning extensions of time, liquidated damages application, concurrent delays where multiple delay events occur simultaneous or acceleration claims arising from instructions to complete works faster than planned.
Defects and quality issues - whether obvious defects identified during construction or at handover, latent defects that emerge after completion, disputes over whether defects arise from design or workmanship or disputes relating to compliance with specifications.
Scope and variation disputes - disagreements over the cost impact of changes, whether instructions constitute variations, whether proper procedures were followed or disputes about reduction in scope and associated payment adjustments.
Termination disputes - whether claims that termination was not contractually justified, alleged repudiatory breach entitling termination, consequences of termination, loss and expense claims
When facing any construction dispute, thoroughly examining the specific contract terms is essential. Contract provisions often dictate precise procedures, notice requirements, and time limits that must be followed to preserve rights. Failing to adhere to these contractual mechanisms can severely prejudice a party's position, regardless of the substantive merits of their case. In particular look for clauses including :-
Extension of time clauses - establish events qualifying for time extensions, notice requirements and timelines, assessment procedures, concurrent delay treatment and often the relationship with loss and expense claims.
Payment provisions - pay close attention to procedural requirements.
Variation clauses - will typically define variations, define who has authority to instruct variations and how, valuation methodologies, time impact assessment and notice requirements
Defects liability - clauses typically cover defects notification periods, remedial obligations, access arrangements, cost responsibility, consequences of failure to remedy.
Dispute resolution clauses - vital to comply with processes which may include tiered dispute resolution procedures, adjudication provisions, arbitration or mediation and expert determination procedures.
Limitation and exclusion clauses - can include caps on liability, exclusion of specific types of claim, liquidated damages provisions, time bars and limitation periods or net contribution clauses
When a dispute emerges, promptly conducting a thorough document review and evaluating the technical and factual strength of your position is essential. Assess contractual entitlements realistically while quantifying potential liability or recovery.
Pre-action engagement requires careful handling to balance opportunity with risk. Following the Pre-Action Protocol for Construction and Engineering Disputes provides a structured approach to present your position comprehensively before formal proceedings commence.
Strict adherence to contractual notice provisions often determines whether claims survive regardless of their substantive merit. Issue notices proactively rather than reactively, maintain detailed records of all communications, and follow up on outstanding responses.
When appropriate, consider interim reliefs to preserve positions or maintain cash flow. Options include injunctive relief in urgent situations, strategic use of the payment notice regime, prompt enforcement of adjudication decisions.
Early case assessment forms the foundation of effective dispute management. Determine if the relationship is salvageable before adopting an adversarial approach. There is no right or wrong approach and strategy and tactics are very important, such as 1 or a combination of :-
When the opposing party ignores or circumvents the contractual dispute resolution mechanisms - if the other party commences litigation in breach of the agreement terms for notice, process, to arbitrate or mediate, apply for a stay or an order for specific performance (an order compelling compliance with tiered dispute resolution clauses) and/or a declaration from the court on the proper dispute resolution process.
Reservation of rights - if you need to continue the project whilst considering your legal options after a breach by the other party, ensure your rights are fully reserved legally to take legal action.
Contractual notices - formally notify the other party of their breaches and of their dispute resolution process obligations.
Without prejudice engagement - negotiations which cannot be disclosed at court and which attempt to resolve the dispute.
Pre-Action Protocol compliance - highlight the Protocol's requirement to follow contractual procedures to the other party.
Commercial settlement approaches - such as sum certain offers, discount rate negotiations, structured settlements or performance remedies
Part 36 Offers - can provide significant cost protection and creates settlement pressure
Alternative Dispute Resolution (ADR) strategies - such as early neutral evaluation via an independent assessment of merits and addressing all disputes in a single process
Ensuring the project continues - by ring-fencing disputes and/or escrow arrangements to protect funds pending resolution and/or interim payment agreements or adjusted timelines acknowledging disputes and/or enhanced oversight during dispute period
Construction disputes need strategic dispute management, and skilled resolution approaches, they can be effectively managed to minimise financial and relationship damage. The key to successful dispute management lies in getting experienced advice and balancing the commercial relationship with the risks of not acting. Our multi-disciplinary team of construction specialist offer the experience and strategic know how you need. Please do get in contact.
Get in touch
If you would like to speak with a member of the team you can contact us on:
Solicitor - Construction & Engineering
Daniel is a Consultant.
He is a Construction & Engineering law specialist and covers the full span of construction matters across a range of sectors including private wealth, office, living, logistics, hospitality & leisure and energy &am...
