How to avoid a construction dispute

It is not unusual for disputes to arise in markets as competitively and financially demanding as construction and engineering. On even the best managed projects, commercial relationships can break down. Our Dispute Resolution Team are experienced in helping clients through these situations to resolve the issues quickly and effectively.

Disputes cause delays

Even if resolved, construction disputes can damage the reputation of all parties involved and cause significant delays to a project as well as loss of earnings.

Wherever possible, the process of legal action should be avoided. Michelle Hayter, a Partner in our Dispute Resolution Team, has set out the following steps you can take to try to avoid a potential dispute.

A fitting contract

This seems obvious, but companies will often put contracts in place that are not tailored to the project and its needs. Seeking advice to create a clear, uncomplicated contract that accurately sets out what will be required from both parties is essential. If the other party passes you a contract with ambiguous terms, then you should seek to communicate and resolve these areas with all parties involved at the earliest stage possible.

Our Company and Commercial team are on hand to look over contracts to assist with any areas of concern to draw your attention to. This is a way to prevent a dispute from ever arising, or if there is an issue that the two parties see completely differently, it is better to realise this before you are part way through a costly project. Early stage procurement and contractual advice from professionals will reduce any potential risks dramatically.

It should also be noted that if you commence work without highlighting any issues, it is likely to be assumed that you have accepted the terms of the contract.

Keep records

Throughout the project, it is vitally important to remain diligent and keep records of the following recommended areas:

• Worksheets and schedules
• Deliveries
• When new information regarding the contract is received
• Requests to perform particular aspects of the work in a certain way
• Any changes to the schedule
• Any meetings to discuss issues between parties, problems regarding the work or the contract
• Most importantly, record anything that may be delaying your project as and when these issues arise – what is damaging efficiency?

Clarity in correspondence

Ensure that the lines of communication between parties are left open at all stages.

Ensure that your programme, as well as any instructions specific to the contract, are appropriately outlined and monitored on a daily basis.

If additional works need to be carried out, agree to costs before you undertake the work as early as possible. If this is not possible, then you should set out to regularly review, agree and sign off on additional costs.

Michelle comments “Blindly going ahead with work that has not been fully discussed from a financial perspective is obviously likely to cause trouble further down the line. Don’t let communication slip and always try to ensure that everyone involved has clarity as the project evolves. Also, don’t ignore the signs if you begin to suspect that the project may not meet requirements and completion as per the terms of the contract. Instead, try and formally agree to a variation or extension of time and ensure that any agreements of this nature are recorded in writing.”

Payments

Payment issues are an extremely common cause for building disputes. They can be incredibly frustrating for all parties, especially if proper records are not kept or schedules are not adhered to.

It is important to remember that if you are requesting payment, or are seeking to issue a payment or pay less notice, it is crucial that you follow the guidelines as set out in your contract timetable.

Michelle explains that failure to do this could result in being paid late or having to pay the full amount applied for. He says “Be aware that if payments are not properly processed, recovery action can be taken by the other party against you. Sticking to payment terms will give you the means to get to the bottom of a potential dispute before it escalates into legal action.”

This could save your business a lot of time and energy, as you won’t have to divert as many resources to solve issues – all of the facts should be available to hand.

Notices

If you believe that there has been a breach of contract by the other party, it is generally best to notify them of the problem as soon as possible and your contract may oblige you to do so. This helps everyone involved to reach a solution to the problem and mitigate consequences sooner rather than later.

Delay or loss and expense claims should identify as much information regarding the delay as possible. This should include dates, determine the specifics of the breach and state if there will be an effect on completion dates.

Always make sure that if you receive a notice, you act on it quickly and check it for accuracy.

If in doubt, take legal advice straight away.

Avoiding disputes

While this is by no means a fully exhaustive list of solutions to avoid disputes, these tips should give you an idea of factors to bear in mind before issues escalate.

Michelle concludes “Disputes can quickly become toxic, destroying relationships between businesses that were once healthy. Not only this, but the stakes can be high depending on the outcome of the dispute if, for example, you have to make a payment that could potentially cripple your company. With adequate planning, records and communication, you can take steps to reduce risk for your business and its reputation.”

Our Dispute Resolution Team are happy to discuss any issues that this raises for you and we offer a free initial meeting or chat on the phone.

If you have any questions, you only have to ask us at Frettens. Please call 01202 499255 or 01425 610100 and Michelle or a member of the team will be happy to chat about your situation and your particular requirements.