How to avoid construction litigation and disputes gradually

people discussing the construction contract

The contractor may warrant its licensure or status as an entity and that the individual signing the contract is authorized to do so Construction industry entanglement leads to daily claims and disputes but most of them are resolved in a timely way. But when a dispute remains unresolved the consequences could be destructive for the project. The next step in these arguments is to turn into a legal battle when the two parties go for litigation. Many strategies can be employed now to avoid reaching this end and to practice how to resolve them with a minimal loss to the project. In this article, you will find out how to avoid these arguments, the alternative solution for resolving them and the impact of construction warranty on the construction litigation too.

13 simple tips to avoid going through Construction litigation

The construction dispute starts with the construction contract. To reduce the chance of arguments arising, you have to ensure that the project team spends time negotiating the contract and fully understanding it. The failure to understand the contract is the main source of arguments and litigation in the construction field. You don´t want to clear contract related questions with your clients sitting next to lawyers or attorneys. Next, we will show you some simple steps to avoid construction litigation and arguments. PlanRadar Software for Construction offers a real new practice for your firm to avoid construction litigation.

  1. Upfront planning before work can guarantee you to that you will finish on time
  2. Document daily reports for any defects that may arise during execution
  3. Make sure schedules are realistic and flexible enough to include any defects or anticipated disruptions
  4. Carefully understand and negotiate all the contract terms and conditions with your clients
  5. Follow the contract and insist that the other party do so to avoid litigation on the two parties’ legal rights
  6. Do not postpone any new problems, deal with them as they arise
  7. Keep your communication mails formal and reasonable, always
  8. Be aware of the danger zone in construction e.g. delays, quality, and design issues
  9. Follow risk management strategy and consult specialist in each technical field
  10. Ensure critical problems are discussed in meetings, not by email
  11. Perform any contractual obligations as scheduled
  12. Remember your duty to mitigate if the other party breaches the contract
  13. Adopt technology systems that increase the effective communication and information transparency between the project parties. A counsel with experience and practice might help your firm making the right decisions.

 

PlanRadar provides easy documenting, following stats, tracking and managing defects, direct communicating, services and more, to save you time and money and the most important it helps you to avoid the construction litigation and arguments.

Alternative construction litigation resolving methods

Most of the construction contracts now have an increasing series of formal steps in case of any dispute. It starts with negotiations, which are the most commonly used method in the United States market, based on the global construction disputes report 2017, then non-binding expert opinion. Afterward, comes the mediation which means negotiating with a mediator. Finally, there’s the arbitration followed by the litigation as a last step. Negotiating is so far, the best way to resolve a construction dispute. It minimizes the cost and time loss and controls the outcome of all the project parties. Every alternative method for construction litigation will be explained briefly based on the article “Construction executive” by Vic lance next.

Chart about the most common methods of dispute resolution
  1. Negotiation. A negotiation clause means if a dispute occurs between the contractor and the project owner, both will attempt to reach a satisfactory solution for both of them. They seek to minimize the project deterioration and prevent moving to a stricter step in the construction dispute.
  2. Mediation. A mediation suggests including a mediator in the dispute situation to help mediate the process of resolving the dispute.
  3. Expert determination. Expert determination is an alternative to meditation but instead of including a third neutral party they go for a specialist’s opinion, it most often occurs in technical arguments. this type of resolving is not legally enforcing for the project members, but it helps them save more procedural time.
  4. The adjudication method also includes a neutral third party but unlike the previous methods, the adjudicator will give a decision. Adjudication clauses typically also include the possibility of applying to a court to enforce the adjudicator’s decision.
  5. Arbitration also includes a third party but, in this case, the third party is an arbitrator who has relevant experience in the disputed field. The arbitrator considers documents and facts that concern the situation and can make a decision that favors one side if the parties fail to achieve consensus. Arbitrations can be legally binding, depending on the jurisdiction.
  6. Finally, in case the parties do not find any other way to resolve the issues that have come up during the project they go for litigation as it’s a legally enforceable method. Litigation can be by far the most thorough, complex as well as slow and costly way of resolving a dispute. That is why parties will typically attempt many other resolution methods before opting for litigation.

 

When a dispute arises the first thing to do is to carefully read the contract and ask about your legal position. The flexibility of the outcome and searching for a practical less-loss solution is the second thing to put in your mind. Working with attorneys and lawyers should be your last solution. Engaging a counsel regarding the questions of law is the beginning of a cost-intensive lawsuit. Construction warranties also play a basic role in building disputes so it’s important to design its terms and conditions carefully. With a little legal assistance, it is possible to design a construction plan that fits the project. Remember: there is no better insurance for you than qualitative work! You can enhance efficiency on site while ensuring quality with a fitting Software for Construction.

Impact of construction warranty on the construction disputes

The main function of a warranty in the construction industry is to limit the risk of arguments and claims between the project parties. The warranty guarantees that certain circumstances will be true and will happen in time and is therefore a real insurance. The contractor agrees to be responsible for fulfilling these duties and to let the owner always check the workflow of the project. Thus, failure in achieving these goals of the warranties represents a strong reason for construction disputes and litigation and may lead to the contract breach as well. The following are some practical guidelines for owners and contractors from the  Contractors’ Construction Warranties paper by Mark C. Friedlander. These guidelines aim to minimize any subsequent detriment by the existence or non-existence of warranty obligations in the construction contract.

  • Both parties should identify and note any unusual aspects of the project that might affect warranty liability.
  • When the contract contains some warranties of a fixed duration, such as a callback warranty, without a durational aspect, both parties should examine the language of the contract closely to put a common base for the maximum and minimum of these durational warranties.
  • When negotiating warranty provisions in construction contracts, contractors, and owners, should resist the temptation to treat them as independent provisions not related to payment, time and other negotiated provisions.
  • The contractor should be careful not to get caught between inconsistent warranty provisions in subcontracts and the prime contract.
  • Both parties should be aware of the nature of the construction services that the contractor will be providing.
  • Both parties should know the law in the jurisdictions in which projects are located and develop their strategy for contracting and negotiating considering the prevailing jurisdiction’s laws.

 

Trying to limit the risks and arguments in the construction industry is like setting a fire off. You can’t know when it’s going to happen, it just happens suddenly and you have to deal with it fast. You can add a fire system to your project, get alarms and prevent any loss that could happen earlier, now, by using PlanRadar. The construction software lets you follow up your project and manage defects instantly. This way you can save time, money and nerves. Sign up for a free 30 days trial version now!

Most common explicit and implied construction warranty types in the building industry

Most of the construction contracts include numerous categories of warranties. The owner may impliedly warrant the accuracy and completeness of the plans and specifications and may explicitly warrant the availability of funds for the construction. The contractor may warrant its licensure or status as an entity and that the individual signing the contract is authorized to do so. However, those warranties can’t be briefed in just lines. The upcoming is a list of warranties which the contractor can express or imply to the owner.

First, Explicit warranties

  1. Construction Services warranty
  2. Callback (Repair) Warranty
  3. Vendor Warranties (warranty of a product or system directly from the vendor who manufactures and/or distributes it. As roofing system warranties)
  4. Design-Build Warranties

 

Second, Implied Warranties

  1. Good Workmanship
  2. Habitability (only in residential projects to cover wide range of defects)
  3. Vendor Literature

Why do construction litigation and disputes occur?

A combination of environmental and behavioral factors can lead to construction disputes. But the most common arguments occur because of one of the two parties (contractor – owner) breach the contract. Projects are usually long-term processes with high uncertainty, and it is impossible to resolve every detail and foresee every contingency at the outset. As a result, situations often arise that are not clearly addressed by the contract. The world’s construction industry is trying to manage the average loss by construction arguments in cost and time effective manner. However, it still costs the industry a lot. The right Software for Construction can help you to overcome this pitfall.

Bar chart about average dispute values and length

Source: global construction disputes 2017 report

The general reasons for arguments are:

  • Uncertainty
  • Contractual problems
  • Project members behavior
  • Acceleration of the project and time schedule
  • Lack of coordination
  • Ineffective project management control
  • Differing goals for project parties
  • Construction delays
  • Design Errors
  • Engineer and Employer’s Representative personality and culture
  • Project complexity
  • Quality and workmanship
  • Site conditions
  • Tender documents
  • Changes are done by owner during the construction process
  • Value engineering

 

While arguments in and of themselves do not constitute a breach of contract, they may become one, and even lead to a termination of the contract or a claim against the contractor’s surety bonds. In order to reduce the possibility of arguments arising, all parties on a contract have to take proactive steps before the project itself begins. PlanRadar can help you in this step by providing a direct communication platform for all the parties from day one until the end of the project.

PlanRadar the smart solution for managing your work

The previous part showed the common reasons for the construction disputes. These reasons included lack of coordination and effective communication, tender documents and sudden changes by any of the project parties. So, what if you can have a CMMS Software to ease all of the construction process stress. PlanRadar allows you to document and follow up the work instantly even offline, createyour own business model now and take advantage of documenting all the project data to the cloud, following your project through the statisticsand manage every defect that occurs. You no longer need to rely on only your memory.

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