A Builder's Field Guide to Managing Common Construction Disputes

In the construction industry, disputes are not just a possibility; they are a commercial reality. Things like unanticipated site conditions, scopes of work that shift, and delays, can quickly spiral out of control and put both your project timeline — and even more importantly, your margins — at risk. But the outcome of a dispute is often determined long before the lawyers get involved. It's won or lost in your contract administration being spot on and your on-site management being proactive.

This guide isn't just about the theory of the law; it's a practical field guide to handling common disputes through thorough preparation and process so that you're in the strongest position to get paid for the work you do.

The Vortex of Variation: How to Profit from Change

Variations are one of the most common causes of disputes and they often occur because instructions are not clear, or the contractual process was not being followed. Proactive management is key.

• Step 1: Identify the Variation

First, ensure there is a clear understanding of what is work in your contract as opposed to what is truly a variation. If an instruction – directive from the principal or superintendent that changes the type of work you are contracted to do, simply treat it as a variation.

• Step 2 – The Golden Rule: Get it in Writing

Before you start any additional work, ensure that you receive a written direction for the variation. An oral, on-the-job, informal instruction is insufficient to protect you. You need to have a formal, written instruction to build your evidence.

• Step 3: Price with Precision

Price the variation work strictly in accordance with the mechanism in your contract (e.g. agreed rates, cost-plus).

Submit a clear, itemised quote for the variation to the client and get his/her approval before incurring any large costs.

• Step 4: Document Everything

Keep a separate file for each variation. This should include: the written instruction + your quote + written acceptance + relevant invoices + notes on how the variation affected the timeline of your project.

The Time Game: Buiding an Extension of Time (EOT) Claim 

If you have not fully finished a project by the date of practical completion, you can open yourself up to large liquidated damages. If there is a delay beyond your control, then the only defence you have is a well supported EOT claim.

• Step 1: Determine the Delay Event

Quickly determine what is causing the delay. Is it a change issued by the architect, a variation directed by the client, an unforeseen site condition, or another contractor impeding your progress on site?

• Step 2: Immediate Notification

Notice periods for EOT claims under construction contracts are often strictly enforced. You may lose your claim no matter how good the evidence you have if you fail to give written notice to the principal or superintendent in accordance to that timetable.

• Step 3: Prove the Impact

It is not sufficient to claim a delay. You need to be able to show the "link" and how it has affected the causes of delay to the "original" critical path date (specify why & the "how" the delaying event affected it), therefore delaying the overall date for practical completion!

• Step 4: Meticulous Record-Keeping

You need to prove your point. Keep good site records including diaries, photographs of progress (dated) and all correspondence which demonstrates the cause and length of the delay.

The Post-Practical Completion: Disaster from Defects

Your responsibilities do not stop at the achievement of practical completion. It is essential that the difference between defects identified at handover and those that appear later is crucial.

• Defects Liability Period (DLP)

You have the right and the duty to remedy defects notified to you in writing during the DLP. You need to act quickly on any notices of defects to prevent the principal from allowing someone else to repair the work at your expense.

• Hidden Defects (or Latent Defects)

Those defects not visible at completion. Your liability for hidden defects shall be governed by provisions of the DLP and/or the applicable statute of limitations.

Your Best Defence: Top Notch Contract Administration

The key to navigating these disputes successfully is good record-keeping. If a dispute goes to adjudication or court/tribunal, the side with better organised and more complete documentation has a huge advantage.

Practical Takeaways:

• Always Obtain in Writing: Never carry out a variation on the strength of a verbal instruction.

• Be Aware Of The Timings: Strictly follow the notices provisions in the contract for serving variation claims and EOT notices.

• Record – Keep records of all site activity, instruction and communication.

• Prove the Impact: To prove a delay on EOT claims, you need to show how a delay event affected the project's critical path.

• Respond in a timely manner: attend to defect notices promptly in the Defects Liability Period to manage the remediation process and the cost of doing so.

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Frequently Asked Questions (FAQs)

❓"What shall I do if the client gives a verbal instruction for a variation?"

👩‍⚖️Politely tell the client or their representative, that you must have the instruction in writing for you to comply with the contract before you can proceed. After the call/conversation, send a follow-up email summarising the conversation and requesting a formal written instruction.

❓"Can I get compensation for delays due to bad weather?"

👩‍⚖️It all depends on your contract. Many contracts spell out what weather conditions qualify as one of the justifying causes for an EOT, but you'll still need to prove that the weather event actually took place and directly affected work on the critical path.

❓"What is the difference between liquidated and general damages for delay?"

👩‍⚖️Liquidated damages are an agreed amount of money (e.g., $300 per day) that will be paid if work continues beyond a specified completion date, as specified in the contract. If the contract sets no rate for liquidated damages, the Builder may be obligated only to pay the difference between the cost of completion and the bid price, in which case the client, with reasonable diligence, might find general damages, its actual, proven loss from the delay, insufficient.

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😨Facing a dispute? Don’t wait until it is too late. Guard your place and your pay.