Construction litigation proceedings can be highly stressful, time consuming and financially damaging for the losing party. For example, in one 2019 UK court case, an architect was ordered to pay £500,000 (plus interest) after poor communication over the design of a cinema box.
The good news is that most construction disputes are resolved in a timely way and out of court. Nevertheless, it’s important not to be complacent – there is an industry-wide trend towards more construction claims ending up in court, and longer litigation too.
To avoid construction litigation, there are many strategies that can be employed which reduce the likelihood that you’ll have to call the lawyers.
In this article, you will find out why construction litigation happens, how to avoid these arguments and alternative solution for resolving them.
Why does construction litigation arise?
A combination of environmental and behavioural factors can lead to construction disputes. That said, the most common arguments occur because of one of the two parties (contractor or owner) breaches 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.
Other common causes of construction claims include:
- Contractual problems
- Project members’ behaviour
- Acceleration of the project and time schedule
- Lack of coordination
- Ineffective project management control
- Differing goals of project parties
- Construction delays
- Design errors
- Project complexity
- Quality and workmanship
- Site conditions
- Tender documents
- Changes to the plan during the construction process
While the causes listed above do not, in and of themselves, constitute a breach of contract, they may become one. Therefore, in order to reduce the chances of disputes arising, all parties on a contract should take proactive steps before the project itself begins.
12 simple tips to avoid going through Construction litigation
If you have ever been involved in construction litigation, you will naturally wish to avoid the experience as far as possible. The following 12 steps can help you to reduce the chances of a construction warranty claim being made against you:
- Conduct upfront planning before works begin to ensure that you will finish on time
- Document daily reports for any defects that may arise during execution
- Make sure schedules are realistic and flexible enough to include any defects or anticipated disruptions
- Carefully understand and negotiate all the contract terms and conditions with your clients
- Follow the contract and insist that the other party do so to avoid construction litigation on the two parties’ legal rights
- Keep your communication mails formal and reasonable
- Be aware of the danger zones in construction – e.g. delays, quality, and design issues
- Follow risk management strategy and consult specialists in each technical field
- Ensure critical problems are discussed in meetings, not by email
- Perform any contractual obligations as scheduled
- Remember your duty to mitigate if the other party breaches the contract
- Adopt technology systems that increase effective communication and information transparency between the project parties.
PlanRadar is a cloud-based construction management tool that provides easy documenting, statistics, defect tracking and managemtn, direct communication services and more. It can help manage projects more effectively and reduce the chances of having a construction warranty claim made against you.
Alternative construction litigation resolution methods
Most construction contracts now have an escalating series of formal steps in case of any dispute – so where possible aim to include the following steps in the contract. This can help resolve any issues amicably and effectively.
- A negotiation clause means that if a dispute occurs between the contractor and the project owner, both will attempt to reach a satisfactory solution through negotiation. They seek to minimise project deterioration and prevent moving to a more confrontational stage in the construction dispute.
- A mediation involves the use of a mediator in the dispute situation to help mediate the process and help reach a compromise.
- Expert determination. Expert determination is an alternative to meditation in construction disputes. Instead of including a neutral third party, the claimants solicit a specialist’s opinion – this most often occurs over technical arguments. This type of resolution is not legally enforceable for the project members, but it can help them save more procedural time.
- The adjudication method. This approach to construction disputes 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.
- Once again, 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 favours one side if the parties fail to achieve consensus. Arbitrations can be legally binding, depending on the jurisdiction.
- Construction litigation. 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 this is a legally enforceable method. Litigation can be by far the most thorough way of resolving construction disputes, but it is also slow and very expensive. 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. Working with attorneys and lawyers should be your last solution, because 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.
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!
PlanRadar reduces the risk of construction litigation
Construction disputes commonly stem from a lack of coordination and effective communication, tender documents and sudden changes by any of the project parties.
And this is where technology can help. PlanRadar allows you to document and follow up on project progress instantly, provide transparent and easily accessible plans, and record all project data to the cloud. This means that all parties are ‘on the same page’ and all information and decisions are clearly recorded. That insures you against construction warranty claims and means the chances of facing construction litigation are much lower.
Contact us today to find out more about PlanRadar, and how it can be used to reduce your risk of construction litigation.