The Top Causes of Construction Disputes and How to Avoid Them

When it comes to construction, extension of time and cost claims, incomplete, poorly drafted and unsubstantiated claims often ranks as the number one cause of construction disputes. The rising number of such disputes suggests a pressing need for clarity and improved drafting. Let’s dive into the primary reasons these disputes occur and how to prevent them.

1. The Importance of a Durable Case

According to the annual Arcadis report on global disputes in engineering construction, unsupported claims consistently rank among the top three causes of disputes, but why is this? Often, after making a claim and failing to negotiate an agreement, the claimant embarks on litigation or arbitration, confident in their case. However, they’re often unaware of the underlying weaknesses.

Once the dispute resolution process starts, lawyers supported by consultants and experts take over to build a case that often bears little resemblance to the original claim or the actual project circumstances. This is because the claim already made is not sustainable and has to be replaced by something that might have some chance of success. Though both parties might venture into this territory with hope, they’re often left with uncertainty and high costs. Keep in mind, resolving disputes can be costly. What’s the best approach? In every claim, the onus is on the claimant to provide evidence, yet numerous claims either fall short in this area or are unaware of what is required. Without the necessary proof, a claim stands little chance of progression.

Firstly, you need to ensure that the claims you submit meet your burden of proof obligations, satisfying the seven key factors. But what exactly are these seven crucial elements, and why are they so pivotal?

2. The Need to Establish Causal Links

A glaring problem with most claims is the failure to establish causal links between causes and their effects on time and cost. Frequently, the claimed time and costs are exaggerated beyond justification, leading the recipient to view them with scepticism and subsequently dismiss the claim.

However, rejecting an unsubstantiated claim doesn’t necessarily invalidate the claimant’s case. It might merely indicate that the presented claim isn’t accurate and there is a risk that if a dispute resolution process begins, a more valid claim could surface, catching the recipient off guard and becoming extremely expensive for both parties.

Thus, understanding the actual nature of the claim, guided by the 7 key factors, is paramount.

3. Navigating Contractual Obligations

One significant issue concerns contractual obligations, specifically the lack of understanding and compliance. Effective claims management requires the active participation of both parties.

At Kingsfield Academy, we regularly advise and support claimants or recipients in claim management, and we are so confident in our approach that we developed the “Engineering Construction Claims Tool.” This tool allows those involved in claims to consider the elements that make up the burden of proof, cause, responsibility, liability, impact, contractual entitlement, compliance, and evidence. With consistent application of these factors, we have found that claims made fully in compliance with the tool, invariably lead to amicable, negotiated settlement.

It’s essential to understand that determining cause, responsibility, and liability, along with gauging the impact on time and cost, involves a meticulous study of project records. Moreover, a thorough knowledge of the contract is crucial to ensure compliance. Ultimately, every party involved should be well-versed in their contractual responsibilities, rights, and remedies.

In Conclusion

Arbitration awards and court judgments may favour one party, but it’s rare for there to be a clear winner, especially considering the costs involved in the resolution process. To avoid these pitfalls, understanding your contract, establishing clear causal links and building a durable case is essential. Take action to avoid disputes on your next construction project.  To learn more about the Engineering Construction Claims Tool, click here