October 16, 2023
In the construction industry, disputes are unfortunately quite common, and they can arise from a variety of issues. Understanding these potential pitfalls is essential for managing projects smoothly and avoiding costly legal battles. Here’s a rundown of the most frequent triggers of construction disputes:
A major source of contention is the quality of work, ranging from shoddy workmanship to the use of inferior materials. Disputes often bubble up when the work completed fails to meet the standards outlined in the contract or if there's a deviation from the agreed specifications. Moreover, situations where contractors do not inform project managers or clients about escalating costs for materials or labour can quickly sour relations and lead to disputes.
Another common headache in construction projects is delays. Whether it’s the project overrunning its schedule or unforeseen changes causing disruptions, delays can throw a wrench in the works, affecting everything from project timelines to budget. Most construction contracts have clauses for liquidated damages for delays, which can significantly impact the financial aspects of a project. It’s crucial for all parties to grasp how these damages work and their potential effects on the project’s costs.
Issues around payment are prevalent not just in construction but across many sectors. In the construction context, disputes often revolve around unpaid invoices, requests for payment in advance, or additional charges beyond the original scope. These payment disputes are at the core of many conflicts within the industry.
In the construction industry, sidestepping disputes isn't just about being cautious—it's about being smart and prepared from the get-go. Here are some proactive steps you can take to significantly reduce the chances of disputes clouding your projects:
The cornerstone of any construction project's success is its contract. A well-drafted, clear contract that's enforceable is your first line of defence against potential disputes. It's not just about having a contract but knowing it inside out. Be familiar with what it entails for problem-solving and understand the dispute resolution mechanisms it specifies. This knowledge is crucial for navigating any issues that might arise.
While using standard contracts is a good starting point because they cover many common grounds, it’s crucial to understand their provisions thoroughly. Remember, it's wise to anticipate the possibility of disputes and ensure your contract aligns with your practical and commercial needs for resolving them.
A well-oiled project management system can be the difference between a project that flows smoothly and one that stumbles into disputes. Having a dedicated project manager or a competent team in charge can streamline operations, making the entire process more efficient. This doesn’t just benefit the project’s timeline and budget; it also frees up other team members to focus on their core responsibilities. Although there's a cost to managing contracts effectively, consider it an investment in the smooth execution and completion of your project.
Never underestimate the power of due diligence before diving into agreements with other parties. This step is about more than just ticking boxes; it's about peering beneath the surface to understand who you're dealing with. Due diligence can reveal critical insights, from financial stability (or instability) of a party, which might impact their ability to fulfill their contractual obligations, to red flags regarding their reputation or reliability.
Our subject expert: Fayola-Maria Jack
Fayola-Maria Jack is a multi-award winning deal shaping and dispute resolution expert. She has shaped successful resolutions and out of court settlements for governments, multinationals, military, banks, and venture backed startups.
