13th October 2022
If your business is expanding, then you may find yourself contemplating building an extension or even new premises. Whatever the scale of the project, any construction work will be a major distraction from your usual business activities and you will not want further disruption caused by a potential dispute with your contractor.
While there are numerous causes of disputes arising from construction projects, it is important to get contractual arrangements right from the outset. Tim Newsome in our dispute resolution team outlines four key issues to address with your building contractor(s) to avoid a dispute about a construction project.
While a contract may be agreed orally or in writing, relying on an oral agreement followed by a handshake can be a recipe for disaster with construction projects. Two people will rarely remember the precise wording of an oral agreement in the same way and this disparity can be a fertile ground for disputes. A written contract removes any doubt as to what has been agreed.
If your contractor presents you with a contract, do not just sign it without investing in an expert opinion from a solicitor with experience of construction contracts. Your solicitor will help ensure that you are comfortable with the scope of works, responsibilities, timescales, costs and payment mechanisms. Misunderstandings and disputes can arise if you do not fully understand the terms that you are signing up to and your solicitor will explain your obligations and any risks that you might need to address or renegotiate.
As soon as the contract has been signed by both parties and dated, it is deemed to be entered into and is then legally binding. By this stage, it is too late to obtain professional legal advice if you find that you are unhappy with the terms and conditions.
Many people may be involved in a construction project, aside from the client and the construction company. The team may include architects, surveyors, planning environmental or heritage consultants, sub-contractors, and suppliers of materials and equipment.
What is detailed in the construction contract is often not shared with all site supervisors and other essential employees. Consequently, the potential for confusion and misunderstanding is great and disputes often arise when there is a breakdown in communication along the chain.
A useful way to reduce the risk of this occurring is to request that a project handbook is prepared before the programme of work commences. This will put key points of the contract into simple terms which can be disseminated to the key individuals involved.
On more complicated construction projects, a handbook has the added benefit of identifying the principal point of contact for each contractor, professional appointee and sub-contractor which can save significant delays through lost time.
Once works are under way, the majority of construction projects will require a change from the original specification. Known as a variation, this may be an alteration to the design, the quantities involved in the work, the quality of the materials used in the works or the sequence of works.
To manage variations effectively, the construction contract should have a defined process which must be followed. A correctly managed variation rarely gives rise to a dispute, however often the method by which a variation is agreed can trigger a dispute. Once again, a handshake in the construction site office will not provide you with legal certainty.
An agreement to any variation should be recorded as soon as possible and circulated so that any errors do not cause a dispute further down the line.
Taking these four steps will help to reduce the risk of a dispute occurring during a construction project, but with so many people involved and so much potential for misunderstanding then it is not possible to eliminate all risk.
If you should find yourself in a dispute with your contractor or any of the professional advisors to your construction project, then please contact our dispute resolution team. We appreciate the need to keep work from grinding to a halt and we are experienced in resolving disputes commercially and pragmatically.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.