03 Jul 3 Common Causes Of Construction Contract Disputes
Construction contract disputes have the potential to cause significant disruptions to an entire project or compel costly reworks long after completion.
It is crucial, both for the sake of your business and your subcontractors to thoroughly scrutinise the contract and consider all the potential scenarios outlined in the intricate details. By carefully reviewing the contract before signing, you can proactively prevent complications.
Throughout this article, I will be explaining 3 prevalent factors that often give rise to disputes in construction contracts; these include poorly drafted contracts, quality concerns and payment claims.
Poorly drafted contracts
Contracts that are inadequately drafted not only invite misunderstandings and disputes but also increase the likelihood of litigation and harm to one’s reputation. Certain contracts may contain provisions or clauses that assign responsibility to project managers or contractors for occurrences such as underruns, defects, injuries and delays, even if your company is not at fault. To mitigate this risk, it is crucial to engage the services of a legal professional who can carefully analyse and interpret these contractual terms. They can help ensure that the language used allocates the typical risks associated with construction in a fair and equitable manner.
Another aspect to take into account during contract negotiations is defining the standards of quality in execution. Whilst certain contracts incorporate provisions that permit modifications, others may include language that restricts flexibility. Nevertheless, a well-crafted contract will incorporate provisions that provide flexibility for unforeseen circumstances, such as unanticipated delays or supply chain issues.
There are instances where potential obstacles are not fully anticipated until the project is already in progress. To address such situations, project managers should exercise caution in selecting subcontractors and consultants, ensuring they possess the necessary expertise. Additionally, it is crucial to include provisions in the contract that allow for rectification if any errors or discrepancies are identified.
Payment disputes in the construction industry can manifest in various ways and none of them are desirable. Particularly in large-scale projects that involve multiple parties, these disputes have the potential to prolong legal proceedings, causing project delays and depleting valuable resources. To prevent payment claims, the initial step is to incorporate safeguards and precise definitions within the contract. This involves setting up a well-defined timeline and payment milestones, whilst also including provisions that allow for adjustments if required. When faced with a disagreement, particularly concerning payment, the instinctive response may be to resort to litigation. However, it is often more time and cost-effective to utilise standard payment forms that offer comprehensive documentation and validation of a contractor’s claims.
Remember, if you are faced with a legal issue on your project, Mercantile Barristers will be happy to assist. Similarly, if there is anything from this article you would like to discuss, do not hesitate to message me directly.