Construction disputes. Can we fix them? Yes, we can!
Construction disputes can arise with any construction or engineering project and be brought by the contractor or the employer, so it is essential to understand your rights, responsibilities and options when that happens.
There are many different types of construction disputes, which can include:
- Claims for defects and/or negligence in the works done – Defects can range from minor issues highlighted in a snagging list to more significant (and possibly undetected) problems. The presence of a defect can be a breach of contract by the contractor, in which case they might be required under a standard form contract to fix the problem at their own cost.
- Claims for extension of time – A completion date for the work is usually agreed upon in the contract. If there is no completion date agreed, then the contractor must complete the works within a reasonable time. However, a standard form contract usually allows a contractor to claim for more time to complete the project, although they can be liable to their employer if they caused the delay.
- Claims for liquidated damages – If a contractor completes the work late, then the presence of a liquidated damages clause in a standard form contract compensates the employer at a pre-determined rate of damages. However, for the liquidated damages clause to be binding on the contractor, the rate of damages must be a genuine pre-estimate of the employer’s loss (and not an artificially large amount intended to penalise the contractor).
- Claims for loss and expense – If a contractor incurs more cost in doing the works because of the employer’s delay or inefficiency, then a standard form contract usually allows a contractor to claim for the delayed or disrupted work. A contractor can make this claim simultaneously as claiming an extension of time.
- Claims for cost of variations – It is commonplace for a standard form contract to include a clause allowing for the variation of previously agreed works. A variations clause can be mutually advantageous for both contractor and employer alike. However, if the scope of the works is varied, then a contractor can be entitled to claim for the costs of that variation.
Many construction contracts include a clause requiring the parties to engage in an alternative dispute resolution called adjudication (and where there is no adjudication clause, then the adjudication procedure set out in the Scheme for Construction Contracts will apply instead).
The adjudication clause will typically name the adjudicator (a neutral third party who will decide the adjudication) or the nominating body that will select the adjudicator for the parties (for example, the Royal Institute of Chartered Surveyors).
The adjudication clause in a construction contract will also set out the powers that the adjudicator would have, including whether their decision is final (in which case it cannot be appealed or overturned using conventional Court litigation) and whether they have the power to order the losing party to pay the winning party’s costs.
As the clauses in a construction contract – including rectification, liquidated damages, or adjudication clauses – will affect your rights and responsibilities in a wide range of ways, it is essential to obtain legal advice before entering the contract to ensure that, in case there is a problem later on, your business is in the strongest position possible.
For more information and advice on construction disputes, contact the Dispute Resolution team at Lennons – call 01494 773377 or email hello@lennonssolicitors.co.uk.