What Are Construction Disputes and How Are They Resolved?

All parties involved in a construction project want it to run as smoothly as possible, without exceeding the predetermined budget and deadlines. Unfortunately, things don’t always go as planned. Required changes to the design, unforeseen events, and unexpected delays are just some of the many issues that may cause the work to take longer than expected.

This often results in increased costs for the project, which may in turn lead to disagreements between the involved parties. Sometimes, these construction disputes can be resolved through discussion. Other times, they lead to a claim that may go to court.

In this article, professional construction consultants from VERTEX will answer some common questions about construction disputes and explain how these disputes can be resolved without taking the case to court. Keep reading to learn more.

What are the most common types of construction claims?

Construction claims can be made by either party to the contract, for compensation for damages that result from failure by the other party to fulfill their part of the obligations as defined in the contract.

The most common types of construction claims include:

• • Contractor against Developer/Owner claims may occur as a result of unexpected delays or changes to the scope of the work. 
  • Developer/Owner against contractor claims occur when the employer feels that the contractor has missed deadlines, provided defective work, or failed to follow previously agreed-on project plans. 
  • Developer/Owner against consultant claims may occur due to a failure to properly supervise the work or for deficiencies in the design.
  • Consultant against owner claims may be filed for non-payment of fees.
  • Contractor against subcontractor claims may happen when the subcontractor fails to meet deadlines, follow specifications, or meet expected quality standards.

How are construction disputes resolved?

Historically, construction disputes were resolved through litigation in civil courts. It’s a process where the attorney representing the plaintiff files a complaint with the court and formally delivers it to the defendant. The defending party then has a time period to submit an answer and could also file counter-claims against the plaintiff. The plaintiff side can respond in a variety of ways, but after this back & forth process is completed, the case will have defined issues for resolution. Then the lawsuit goes into discovery, further motions, and eventually reaching settlement or trial.

Civil litigation tends to be an arduous process that involves witness statements, lengthy depositions, full document disclosure, expert reports, and so on. 

To make matters worse, a case may take more than two years to get in front of a bench judge or jury at trial. All of this can cause significant delays and may even result in the project falling through, which leads to further financial losses for the parties involved.

In order to avoid formal litigation, an increasing number of disputing parties choose to use alternative dispute resolution (ADR) methods such as mediation, arbitration, and adjudication. 

Here’s a brief explanation of these methods:

Adjudication

This method quickly resolves issues by providing a temporarily binding decision which has to be complied with until varied or overturned by a court or an arbitration. The advantage of adjudication is that it minimizes the delays in the work and reduces the possibility of additional losses that may be caused by these delays.

Mediation

In mediation, the parties enlist the help of an independent third party who helps them determine the issues at the heart of the dispute and identifies a solution that satisfies both parties. The mediator has no say in the outcome: the final decision ultimately lies with the involved parties.

This is often the route first pursued by construction attorneys if their client’s goal is to reach a settlement early. If the mediation doesn’t reach a resolution, the claim goes into arbitration or litigation.

Arbitration

During arbitration, the parties appoint their own private tribunal. The outcome of this process is final and binding on the parties in the same way as a court ruling would be. The advantages of arbitration over regular legislation include reduced expenses, confidentiality, and increased speed.