We all know that getting embroiled in construction disputes can be costly. Disputes can be a drain not only financially due to the need to pay professionals, for example, lawyers and experts but also in respect of less obvious costs such internal staff being diverted from the day to day running of the business.
The stakes can also be high depending on the outcome of a dispute. For example, losing at trial may mean a potentially crippling payment having been made to the other party to the dispute.
Getting entangled in disputes can also often have a funny way of killing off otherwise perfectly good business relationships. Companies that get a reputation for ‘going legal’ can sometimes have an uphill struggle to win work, as other companies become wary of contracting with them.
Given this, our motto is that prevention is definitely better than cure.
Top tips to avoiding disputes:
- Pre-contract: Allocate risk efficiently
- Make sure that risk is allocated efficiently to ensure that each party carries the risk that it is best placed to manage and can insure against. This will help to encourage parties to work together should problems arise.
- Post-contract: Follow the contract
- It might sound really obvious but, once the contract has been signed, don’t shove it in a draw to gather dust. We know (all too well) the language used in standard form contracts can make difficult reading. This probably explains just how many disputes crop up by parties not knowing what the contract requires of them and getting caught short when the other party to the contract points out failings that stem from that lack of knowledge.
- Don’t be the one that gets caught out. Instead, review the contract and produce a table which clearly sets out any contractual deadlines and key information. Circulate this to your team so that they are all up to speed.
- An easy win: ensure any contract notices are valid. Most standard form contracts have notice requirements. These need to be followed to the letter.
- Define contract obligations clearly and reach a shared understanding on obligations with all key project participants to reduce the potential for any misunderstandings which can lead to disputes.
- Verify all of the contract documentation provided and compare it to what you tendered on and have a robust and workable system for monitoring site activity.
- Routinely keep the other parties informed if there is any risk that a deadline will not be met. By providing as much notice as possible, all parties can work together to limit any adverse impact to the project.
- Dealing with changes to the build programme
- Having a good working knowledge of the contractual mechanisms dealing with changes to time and budget is important. It means you will be well placed to take the appropriate steps as soon as you identify any such changes.
- Avoid carrying out additional works and incurring extra costs until variations are agreed in writing.
- Don’t leave all the ‘mopping up’ to the end of the project. Deal with changes as they arise whilst the key facts are fresh.
- Keep good records
- It is fair to say that when disputes crop up, it is often the party who has the most detailed and accurate records (i.e. the best evidence) that wins. This is why it is crucial to keep accurate records.
- Ensure that progress on site is well documented. Check site minutes carefully at the time they are issued and correct anything that isn’t right straight away. Often site minutes are used as the best evidence of what was happening at the time, so don’t allow any inaccuracies to go uncorrected.
- If there are any key agreements reached in discussions, follow these up with written confirmation as to what has been agreed.
- If there is any delay, keep decent records detailing the impact of the delay on the build programme and resources. This will help in dealing with any extension of time and/or loss and expense issues.
- On the completion of each project, collate all key documents from staff for safe keeping. Keep up to date details of staff in case the project team disbands after the project.
- Stick to payment terms
- Payment issues are a really common cause of disputes. Make sure you know what’s what by checking the payment terms in your contract.
- Whether you are making an application for payment, or issuing a payment or pay less notice, stick to the contract timetable, otherwise you risk being paid late or having to pay out the full amount applied for.
Taking these simple steps in relation to every contract means that, if a dispute kicks off, you will be sufficiently up to speed with all the facts at your finger tips enabling you to look to resolve the dispute before it escalates. Should the dispute escalate to formal proceedings (whether adjudication, arbitration or court), having decent records will mean you should have the advantage over your opponent.