Disputes in Construction and Engineering – What you need to know

8 Minutes

Disputes arising from construction and engineering projects are, unfortunately, very common

And as forewarned is forearmed, we thought it would be useful to give you some background about typical disputes that arise and the methods of dispute resolution that are most commonly adopted. We’ve also produced a handy factsheet of dos and don’ts that gives you some best practice guidance if a dispute is unavoidable.

View Fact Sheet

Typical disputes

It is very difficult to predict exactly how a building project will pan out and disputes over delays to the schedule and time extensions are unavoidable. Losses and expenses that arise from these delays inevitably follow.

Variations to the schedule of work can occur, either because an employer has changed their mind, or because something unexpected has been found during construction. These alterations can lead to breaches of contract and consequently disputes.

Some disputes, like poor workmanship, often emerge at the end of a project and your contract should include provision to address these issues.

Liquidated damages are designated at contract stage to determine compensation amounts for specific breaches, such as delays. These amounts are meant to be based on costs and be fair compensation, rather than unduly penalize the party who has breached the contract. It is important for both parties to agree to reasonable damages at the outset, as disputes around the application and enforcement of clauses relating to liquidated damages are common.

The final account is another highly disputed area. Contractors can use this as a last opportunity to charge and a lack of clarity around valuations, or disagreement of why or how the valuation has been calculated, can trigger dispute. Be mindful of this when the contract is being agreed and ensure that due attention is paid to how final accounts are certified. Insisting on interim accounts will minimize the opportunity to load costs onto the final settlement.

Dispute resolution options

Pre-Action Protocol

Because of their frequency, there are stringent procedures in place to standardise how disputes in this area are dealt with. Laid down by the Technology and Construction Court, the pre-action protocol is designed to ensure that, before court proceedings commence, both parties have provided sufficient information and have had time to consider the outline of the other’s case. This protocol must be followed before court action begins. Some of the stipulations can be fairly laborious, so it is worth consulting a lawyer for help.

Mediation

The next stage of a dispute is mediation, which is a consensual process whereby an appointed, third-party mediator facilitates in negotiating a resolution to the dispute. It can be initiated at any time and works best when both parties are committed to resolving the dispute and are prepared to compromise. If this cannot be achieved, then mediation fails. The process is non-binding and a mediator has no power to enforce settlement.

Though it is preferable to enter mediation willingly, be careful not to disclose information that may weaken your case, should the dispute progress.

Adjudication

Construction law can differ from general contract or commercial law and the provisions laid out in the Housing Grants, Construction and Regeneration Act 1996, uniquely allow construction claims to be settled by adjudication. This process specifically helps those who cannot cover the costs of a High Court hearing and is a useful tool for securing a quick satisfactory resolution, taking just 28 days.

The Technology and Construction Court

The Technology and Construction Court handles disputes related to buildings, engineering, and surveying of value, over £250,000. Inherently expensive, and time consuming, this is not a suitable dispute resolution alternative for many. You can find more about the court and what types of cases it hears on the government website.

Arbitration

Arbitration is the preferred method for resolving disputes on international construction projects offering a neutral forum, not tied to a particular country’s national laws or legal system. Though it can be time consuming and expensive, the process affords the parties a great deal of flexibility, allowing them at contract stage to specify the arbitrators, their powers, the location, and the jurisdiction should a dispute arise. It is worth noting that The International Federation of Consulting Engineers (FIDIC) publishes a variety of construction form contracts for use in international projects.

How can 'The Legal Director' help?

Many disputes can be bypassed or resolved more easily with a well-drafted contract. We have senior lawyers with vast experience in the engineering and construction industry, who can support you on a part-time or flexible basis and ensure that you are entering into agreements, well prepared and fully aware of the potential risks. Our lawyers will amend standard contracts to include precise mechanisms for determining claims and certifying final accounts to provide much-needed clarity if a disagreement arises.

And if you are in dispute with another party over a construction or engineering project, our lawyers can manage the process fully, collating the necessary documentation, securing witness statements, and liaising with your broker. As a starting point, they will closely examine your existing contract, looking at the formalities and checking the days by which notices need to be served. They will review your letter of intent and all the associated documents – the designs and schedules. They will also ascertain who the key players are, whether sub-contractors are involved for example, to understand fully the nature of the dispute and who it impacts. Because a TLD lawyer works within your business, they learn what is important to you and how you operate. They understand the inter-relation of the parties and are familiar with your supply chains which puts you in the best possible position in a dispute.

Fully versed with the appropriate dispute resolution options for construction and engineering disputes and the requirements of the pre-action protocol, our lawyers can give you all the necessary support in, what can be, a stressful and difficult time.

If you are entering into an agreement or are currently in dispute, please get in touch for an informal chat.

The Legal Director

email: Kirstie.Penk@thelegaldirector.co.uk
call: 020 3053 8613
website: www.thelegaldirector.co.uk