Construction projects involve legally-binding documents, substantial amounts of money, and multiple stakeholders with unique responsibilities and interests – so it should come as no surprise that disagreements and disputes may arise during construction projects.
Avoiding disputes whenever possible is ideal, but when they do arise, utilizing appropriate dispute resolution methods can save both time and money while maintaining healthy relationships – thus justifying why every construction contract should include alternative dispute resolution clauses.
Contract Disputes
Construction projects involve large sums of money, legally-binding documents and stakeholders with various agendas; therefore, it should come as no surprise that disagreements and misinterpretations arise often.
When problems arise, it is crucial to address them immediately and seek resolution quickly in order to prevent disputes from building up and ultimately leading to delays in project completion.
The construction disputes can be settled in various ways, from litigation and arbitration to mediation and alternative dispute resolution (ADR) methods. Legal action, in particular, may be costly and time consuming – therefore it would be prudent to utilize ADR methods as a first step before resorting to legal action.
ADR (alternative dispute resolution) is a process where a neutral third party examines both sides of a claim in order to reach an agreement, or identify and prevent miscommunication. To avoid costly disputes, clients should ensure their contracts contain ADR clauses as well as implement internal management systems which monitor potential claims or disputes.
Time Disputes
Construction projects require significant time and money investments, with each step often lasting months or even years. Without clear terms and conditions in place, disputes could arise that delay projects for weeks or even months at a time.
Controversies often result from unclear or vague contract language and differing interpretations of clauses. Change order processes with clear guidelines describing approval procedures and providing detailed documentation of additional costs are vital tools in managing disputes of this nature. If a dispute can’t be settled through negotiation, mediation or arbitration might be the solution. These methods involve having a neutral third-party examine the evidence before rendering a binding decision that must be accepted by both sides; mediation and arbitration tend to be less formal than litigation but can still provide effective resolution of issues. Mechanic’s liens and payment bonds may also help in these types of situations.
Design Disputes
Design disputes on construction projects are becoming more frequent. With modern infrastructure projects becoming increasingly complex, design coordination issues have become more prominent. Contractors are finding it increasingly challenging to communicate design information effectively while meeting third-party requirements on tight schedules; this has resulted in design issues and delays to their project.
Design errors can be costly and dangerous for the inhabitants of a building, leading contractors to pursue litigation against architects, engineers and other design professionals in order to correct design flaws which cause cost overruns or delays on projects.
Mediation offers an expedient and less costly means of construction dispute resolution than arbitration or litigation, while maintaining relationships that could benefit future projects and business opportunities. Mediation may even be less expensive than arbitration – making it an excellent solution for resolving construction disputes that would otherwise halt project progress.
Payment Disputes
Construction projects seldom go off without running into some kind of disagreement or dispute, which can often put projects on a backburner and cost both parties time and money. Most disputes stem from either inadequate communication between parties involved, or confusion surrounding contract language – so when one occurs it should be treated seriously by both sides involved.
Payment disputes are also not uncommon, with anyone providing labor or materials to a project having the right to be paid accordingly. If their debt goes unpaid, mechanic’s liens or payment bonds may be filed to ensure its coverage.
Litigation may be one way of resolving disputes in construction projects, but it should always be the last resort. Litigation requires both sides to secure lawyers and pay legal fees – which can be an expensive proposition for all involved. Furthermore, litigation takes an extended amount of time. Compared with litigation, other methods like arbitration can often be faster and cheaper – including as an option in contract agreements as required steps before going before court.
