Construction Disputes

Disputes arise in many different areas of our lives, and construction projects are no exception. Construction disputes are relatively common due to the high number of parties involved in a project, the complex relationships between those parties, the technical and legal issues included in the contract, and the potentially high amounts of investment involved.

Prevention is better than cure, so you must fully understand the contract you are entering into as a developer, contractor, sub-contractor, investor, builder, homeowner or employer. If a dispute arises during or after a project, you need to know where to turn to ensure a swift and cost-effective resolution that allows minimum disruption to your project, your commercial objectives, your ongoing relationships and your cash flow.

There are various ways a dispute can arise. Whether it be a breach of the contract, disagreement over the terms, the amount or non-payment of an invoice, quality of the works or unexpected delays. In any of these situations, poor communication can hinder any chance of reconciliation. If this is the case and the dispute escalates, there are several different ways that a resolution can be reached, including:

• Mediation
• Arbitration
• Negotiation
• Adjudication
• Litigation

Speak to our construction dispute solicitors today

Need help with a construction dispute? We have specialist solicitors in Southampton, Portsmouth, Fareham, Chandler’s Ford and Waterlooville.

To find out how Warner Goodman Solicitors can assist you, contact our commercial and property disputes team on 023 8071 7412 or email enquiries@warnergoodman.co.uk.

How our construction dispute solicitors can help you

Mediation

Mediation is a form of Alternative Dispute Resolution used to resolve disputes without escalating the matter to court proceedings. It involves a neutral third party, known as a mediator, who will sit down with the disputing parties and help them communicate effectively to reach a mutually acceptable agreement.

Mediation is often less expensive and quicker than going to court. It can also help preserve your working relationship if it is in your commercial interest to do so. For example, where you may need to continue working on a construction project to ensure it is finished.

Arbitration

Arbitration is an Alternative Dispute Resolution method where both parties agree to submit their dispute to one or more independent arbitrators, who make a binding decision. Unlike court proceedings, arbitration allows the parties to choose their arbitrator(s) based on expertise relevant to the dispute.

The arbitrator's decision, known as an award, is generally final and enforceable, with limited grounds for appeal. This method is commonly used in commercial disputes for its efficiency and ability to maintain business relationships.

Negotiation

Negotiation is the most informal and flexible Alternative Dispute Resolution method, where parties try to reach an agreement on disputed matters directly or through their solicitors.

Both parties will enter the discussion to find an outcome they can agree to. If a decision is reached, it can be made legally binding in a formal agreement if they wish to, which can help prevent future disputes.

Adjudication

Adjudication is a fast and efficient process where a contract dispute is submitted to a third-party Adjudicator for resolution. It is commonly used in construction disputes, where the parties can expect a decision within a few weeks.

If both parties are dissatisfied with the Adjudicator's decision, they still have the option to take the dispute to court or explore other resolution methods.

Litigation

Where possible, our building dispute solicitors will aim to resolve construction disputes using Alternative Dispute Resolution methods as they are generally quicker and more cost-effective.

However, where it has not been possible to resolve your dispute out of court, we have an expert team of solicitors specialising in construction litigation who can provide robust representation to resolve building disputes.

Construction disputes FAQs

What causes construction disputes?

Construction disputes can arise for several reasons, including a breach in the contract, disagreement over the terms of a contract, the amount or non-payment of an invoice, quality of the works or undiscussed and unexpected delays.

Resolving these disputes often involves Alternative Dispute Resolution methods such as mediation, adjudication, or arbitration, but in some cases, involving a specialist construction solicitor who can explain your position to the other party can be enough to resolve the issue.

How do you avoid construction disputes?

Building contracts and building 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 basic principles that can be followed during the course of the contract or when you realise there is or may be a dispute. 

Take Care and Research

You must know who you are going into contract with and remain vigilant, especially if you are a homeowner. If your builder states they are a company, you can check this for free on the Companies House website. If your builder is not listed, do not enter a contract with them, and seek further advice regarding your next steps.

You can request examples of work your builder has previously carried out or obtain recommendations and reviews from past clients. These resources will give you an insight into their previous work and reliability.

We would always advise against paying your builder large amounts of money upfront. In our experience, this has led to little or very poor work.

Read the Contract

Knowing the contents of the contract is vital. This includes knowing exactly what the contract is. It may have been captured in a single document or many documents; it may have been agreed verbally or in writing. Unless you know what the contract says, you cannot review your rights and obligations or understand how the risk is divided between you and the person(s) you are in contract with.

If you are uncertain about the meaning of any clauses within your contract or whether the document constitutes a contract, please do not hesitate to contact us prior to signing.

Records

It is absolutely vital to keep good records. This includes but is not limited to the following:

• The instructions that have been received and when
• Timesheets
• Invoices
• Photographs
• Emails
• Notes of verbal discussions
• Confirmations of verbal instruction.

Keeping good records is a precautionary and administrative measure that everyone can do. Many disputes can be avoided or quickly resolved by keeping good records in chronological order. Not only must the information be kept, but it must also be kept in a logical way that is easy to access and understand.

Take Action

Do not wait. If you think there is or is likely to be a dispute, take advice as quickly as possible. Many disputes can be avoided or quickly resolved if they are dealt with when they arise.

Whether you are a homeowner, business owner or developer, following these simple steps will save you significant time and money.

What are the common terms within construction law?

Variation

An amendment to the original construction contract can significantly impact the project's cost. A variation to the contract will ordinarily request an addition, substitution or omission to the works, such as changes to:

• The quantity of work that will be produced
• The design differing from the original plans
• The schedule that a project will run to
• The materials being used or the conditions the builders are working under

A variation can usually only be made in writing and by a specific person within the project. While in some projects, variations will be inevitable as they are dictated by external forces such as legislation or technological advances, they can lead to a dispute if one party does not agree to either the detail of the variation requested, whether it was adequately instructed, or the anticipated change to the budget.

Extension of Time

One of the key clauses within a contract is to specify the start date and anticipated completion date. If there is a delay that is not the contractor's fault, such as prevention by the employer, adverse weather conditions or a strike, an Extension of Time (EoT) can be applied for.

There is a proper procedure to follow to make a valid EoT request, which must usually be done in writing, including but not limited to the following details:

• Why the request is being made
• The reasons that have led to the possibility of there being a delay
• The impact this will have on the project and the individual activities from the schedule of works
• Any actions that have been taken to avoid or minimise the delay
• Referencing the relevant term within the contract that allows the request

A dispute can arise from an EoT claim if there is disagreement over the terms of the claim, where no claim has been made, or not made within the required time limits.

Where the delay is caused by the contractor, this is a breach of the contract, which entitles you to recover damages. It is often important that these are specified in the contract ahead of time, as this greatly increases your chances and the amount of recovery.

Loss and Expense claim

A Loss and Expense claim allows the contractor to claim financially for any '‘direct" loss caused by the other parties. For example, a failure to provide the contractor with the necessary access to the site and equipment or a delay in sending instructions. 

A dispute can occur following a Loss and Expense claim for various reasons. Ordinarily, it will be determined by the wording and clauses within your contract, including defining what would constitute a '‘direct" or '‘consequential" loss.

Keeping records to demonstrate the loss will be vital to making a claim or settling a dispute in this area.

Termination of contract

Terminating the contract is not something that should be done lightly, bearing in mind the financial and commercial consequences for all parties involved.

If termination is sought, it is vital to receive legal advice to ensure that you do not find yourself in further complications, whether you are the party terminating or the party facing contract termination.

Generally speaking, when terminating a contract, the first step is to ascertain whether you are entitled to terminate, which will be detailed in your contract. If you are, you will need to follow the guidance set out in the contract. You will need to understand the potential risks involved, such as causing a repudiatory breach, which is where legal advice will prove invaluable.

What is Part II of The Housing Grants Construction and Regeneration Act 1996 (as amended), and why is it important?

Part II of the Housing Grants Construction and Regeneration Act 1996, as amended by the Local Democracy, Economic Development and Construction Act 2009 "the Act", sets out important rights and obligations for all those involved in '‘construction operation" and so forms the basis of several fundamental aspects of construction law.

Not all contracts fall within the scope of the Act. However, those that do are affected by two broad general set of rights and obligations in respect of:

Adjudication

This essentially gives a party in the construction contract the right to refer any dispute or difference arising out of or connected with the contract to a third party, the Adjudicator. The Adjudicator will then receive submissions from both sides of the dispute and make their decision. This is supposed to be within 28 days of the matter being referred to them but can be extended to up to 42 days by the referring party or longer if both parties agree. The result of the Adjudicator is usually binding.

This process can be incredibly advantageous as it is often quicker and cheaper than other forms of construction dispute resolution. However, please note that it is a cost-neutral regime, so you will be liable for your own legal costs.

Interim Payment

As defined by the Act, the parties to a construction contract are entitled to payment by instalment, stage or periodic payments. This is satisfied where the contract provides an adequate mechanism for determining what payments become due and when, not necessarily what the contractor says should be paid. The contract should also give a final date for payment of any sums that are due.

It is unlawful to make such payments conditional on the performance of obligations under another contract or a person's decision on whether they have been performed. Connected with this important right is the right to various notices, namely Payment Notices and Pay Less Notices.

If the contract does not provide for these important obligations, and the Act applies, then they are implied in the terms of the Scheme for Construction Contracts (England & Wales) Regulations 1998 as amended by Scheme for Construction Contracts (England) Regulations 2011.

Speak to our construction dispute lawyers today

Andrew Cullyer advises on Construction Law, managing contentious and non-contentious issues across various sectors, industries and job roles, and advising on disputes that arise at any stage of the procurement process.

With experience across a diverse range of sectors, including the building of factories, hospitality, retail and office buildings, Andrew has the commercial awareness, skills and expertise to analyse the underlying details of your dispute and understand the most viable route to resolution.

To discuss your construction contract, to have your contract reviewed or if you are in dispute with another party within your contract, you can contact Andrew for his expert advice on 023 8071 7482 or email andrewcullyer@warnergoodman.co.uk.

We also have an experienced and dedicated team dealing with commercial and property disputes. For general Litigation or Dispute Resolution enquiries, contact the team on 023 8071 7412.