Guides & Advice

How to handle construction disputes effectively

Published: 4th March 2021
Area: Construction

The delays and disruption caused by both COVID-19 and Brexit have left construction businesses concerned about the disputes that could arise as a result.

With an increase in disputes expected over 2021, companies need to know how best to manage them, including how to avoid unnecessary escalation.

Read more about what the construction sector could look like in 2021.

Keeping delays and disruption to a minimum

New levels of administration have had to be introduced on all construction sites, including the implementation of social distancing and a switch to digital methods of communication.

These changes were inevitably going to cause delay and disruption, and when Brexit was added into the mix, complications only grew. To mitigate any delay and / or disruption, areas for concern should be identified and monitored, with a solution or alternative option ready, if needed.

Common disputes for construction businesses

There are three common types of disputes that are emerging at present, these include:

  • Delay claims – The need for social distancing, and difficulties sourcing materials, has meant some contractors are struggling to finish projects on time. As such, issues surrounding whether employers are entitled to liquidated damages or whether contractors are entitled to extensions of time and loss and expense associated with the delay, are surfacing regularly.
  • Claims for payment – An increasing number of companies are facing financial difficulties. Contractors and sub-contractors in financial distress are more likely to make potentially inflated applications for payment. If the employer does not want to pay the amount applied for, they must issue a valid payment / pay less notice. If they don’t, they leave themselves open to a smash and grab adjudication.
  • Defects claims – Site inspections have been more limited over the past year meaning defects may be more likely. Plus, legacy claims relating to defects in works that were completed many years ago have also begun to emerge. If a construction company hasn’t kept records of these projects, then it will be difficult to deal with these claims.
Stopping disputes from escalating

Early prevention is always better than a late cure, so it is essential to address any issues as soon as possible. Effective communication is key to this, including keeping those upstream (whether employer or main contractor) updated as to any potential delays or disruptions.

Flexibility is also important, with contract renegotiations often being a productive way forward. However, any changes that are agreed must be documented to avoid satellite disputes occurring later on.

What are the types of dispute resolution?

Sometimes, disputes cannot be resolved through communication alone. When this happens, there are a number of routes that can be followed to reach a settlement. Adjudication is the most common form of dispute resolution in the construction industry, but although it is efficient (usually taking little more than a month from start to end), it does come with time and at least some financial cost implications.

If adjudication isn’t the best option for you, there are two alternative options that can be just as effective:

  • Mediation - Issues are discussed with a professional mediator who acts as a neutral voice assisting the parties in reaching a negotiated resolution via a process known as ‘shuttle diplomacy’ (which just means the mediator ‘shuttles’ from a discussion with one party to a further discussion with the other party in trying to bridge the gap). In order to have a productive / meaningful settlement discussion, mediation must be done at the right time, when the rights and wrongs of both parties are clear with all the key issues having been distilled.
  • Early neutral evaluation – A third-party decision maker is appointed who hears each party’s submissions and then offers their view on the likely outcome of the trial. This usually has no binding effect but can be an effective way to start meaningful negotiations (particularly if one party has a misguided view of the merits of its position acting as a ‘sense check’).
We can help you manage, avoid and resolve contractual issues

All aspects of the construction industry have had to face a host of challenges during the pandemic, with delay and disruption being a common theme. However, the disputes that do arise from this don’t have to unduly strain or breakdown working relationships. Keeping clear channels of communication open, following the correct contractual processes and being open to flexibility can help the industry to thrive once more.

If you would like advice on how to handle and resolve a construction dispute then our specialist construction law team can help – contact Kate Onions for guidance and support.

Our construction team is ranked as a Leading Firm in the Legal 500 2021 edition.

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