Why do disputes arise in relation to construction contracts and what should you do if they do?

Construction disputes have a long history; there are records of people complaining about their builders from ancient Sumerian times!  Construction projects that lead to disputes will have a significant financial and potentially reputational impact for all concerned as time and money is spent resolving the dispute that could be more profitably used elsewhere.  Andrew Cullyer, Litigation Executive specialising in construction disputes, here reviews some of the more common issues that can lead to disputes in construction projects and advises as to the next steps that should be taken.

Construction contracts and construction disputes are complicated and diverse by their nature.  No two projects are the same and no two disputes are the same.  There are nevertheless some common themes and mainly arise from one, both or all parties to the contract:

• Misunderstanding what their rights and obligations are;
• Claiming sums of money that another party does not understand;
• Failing to take the right steps at the right time.

Understanding your rights and obligations in a construction project

It is all too common to see parties either failing to claim money they are entitled to or paying more than they should be doing, which inevitably leads to disputes.

Another common complaint is that the works have taken longer than was foreseen, which incurs additional costs and a dispute arises over who has to pay what amount to whom in respect of the delay.

In addition, there may be confusion over the ability to terminate the contract.  One party may wish to withdraw from the contract because of unforeseen problems or financial situations, for example. However, they are unsure as to whether they are able to terminate, what the consequences are of doing so and the financial penalties that may be incurred.   

All of these problems arise out of a failure to understand the rights and obligations each party has, which is why the contract is such a vital document.

Claiming sums of money that another party does not understand

Claims for money that are not understood are certainly also a result of a failure to understand rights and obligations; however it is also a separate problem.  Too often parties cannot show where or how additional work was instructed, that the work was carried out, why a change was necessary or even say with certainty what sums have been paid.  This, understandably, will lead to disputes between the parties as they strive to find the right information.

Failure to take the right steps when a dispute arises

On many occasions, problems and disputes are identified and no action is taken.  This is one of the most common mistakes and one of the biggest causes of disputes. It is usually the case that prompt, early action at the time of the incident or misunderstanding will save you time and money.

In addition, a failure to submit the right notices at the right time can cause you to lose rights or fail to fulfil your obligations, which will once more lead to further complications and potentially cost you more money.

How can I avoid a dispute in my construction project?

The best way to avoid disputes, or minimise their impact if they do arise, is to follow the basic steps:

Take care - Before entering into any form of contract you should ensure that you know who you are going to be working with on the project.  There are simple ways to do so:

• Check your builder’s details on Companies House
• Ask for references from previous clients they have worked with
• Check your builder has insurance and get the details.
• Check online resources: Checkatrade, websites – especially the builder’s own website, even Facebook and other online reviews.

If the builder refuses or is reluctant to provide these details, that could be warning sign and so we would always advise you seek further guidance as to your options.  We would also advise not to pay out large amounts of money to the builder ahead of the project starting.

Read the contract - This may seem a very basic point but knowing your contract is the most important step in avoiding disputes.  Unless you know exactly what is included in your contract, (whether that is a single document, multiple documents, has been agreed to in writing or verbally) then you will not know what your responsibilities, rights, entitlements, obligations, deadlines and payment duties are.  A contract may not contain all of your rights as some may be implied by law, but it is the best starting point and you will save yourself money by knowing what it says.

Keep good records – Having proof is absolutely vital to show you are entitled to your contractual rights and have fulfilled your contractual obligations.  Good records also allow you to demonstrate why you are entitled to what you say you are entitled to or alternatively why a builder is not entitled to something.  You should keep as many records as possible with information including, but not limited to the following:

• Instructions, both in writing and notes of verbal instructions - this should include any variations to the works or the contract
• Invoices and other payments due
• Timesheets
• Written correspondence, including emails
• Photos, videos and blueprints
• Notes of any verbal discussions that have taken place.

Keeping records is certainly a crucial step in avoiding or quickly resolving disputes.  Your information and documents should be kept ideally in chronological order and in a logical system that can be understood easily.   Should evidence be needed or questions arise, you have the information at your fingertips.  Fundamentally, you are keeping records to show you are entitled to your contractual rights and have fulfilled your contractual obligations, and to allow you to take action.

Take action - As soon as you anticipate that there may be a dispute, you should seek legal advice as soon as possible.  The dispute will not disappear on its own; delay may allow problems to escalate leading to more time and money potentially being wasted unnecessarily. 

This final step can be dependent on the previous two.  If you know your rights and obligations and you have the records, then you should feel confident in taking action at the first sign of a dispute. 

If you are unclear as to your rights and obligations in your construction contract, or you are uncertain as to whether your records could support you in a potential dispute, you can contact Andrew Cullyer to discuss your situation by calling 023 8071 7482 or email andrewcullyer@warnergoodman.co.uk.

For general Litigation or Dispute Resolution enquiries, contact Laura Blakemore on 023 8071 7412 or email laurablakemore@warnergoodman.co.uk.

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.