As a result of the risks and complexities that are naturally inherent with construction projects as well as the diverging interests of the parties involved, claims could be considered an unavoidable consequence of construction processes.[1] Construction disputes generally concern claims for payment, claims for loss and expense caused by delays or disruption during design and/or construction, or claims for damages due to defects in the completed works, sometimes all of these.[2]
1. Claims for payment
Construction projects are susceptible to a number of factors that can result in extra costs and delays. For instance, it is not uncommon for clients to refuse to give fair compensation to contractors even though there are legitimate causes, thus offering the perfect recipe for a dispute.[3]
2. Delay claims (time) and disruption and prolongation claims (money)
If the contractor fails to complete within the time for completion (after taking account of any entitlement to extensions of time) then he must pay delay damages to the employer.[4] It is important to distinguish between the time and the money consequence of delay and disruption claims
A. Delay claims
The contractor’s obligation to complete the works by the completion date is, like all such obligations, backed up by legal sanctions. A delay claim is ordinarily a claim for more time to complete, brought under the express terms of the contract. As to how such damages are to be measured, it is of course perfectly possible for the contract to say nothing, and to leave the assessment of the employer’s loss (including any loss of profit) to an arbitrator or a court. However, it is standard practice in building and civil engineering contracts to state in advance what the damages shall be for delay, and this is usually done by specifying a fixed sum of money to be due for every day, week or month by which the contractor fails to meet the prescribed completion date.[5]
B. Disruption and prolongation claims
If a consultant or contractor is disrupted in carrying out its works, this may give rise to a claim either in damages, if a breach of contract can be shown, or for a contractual payment, if the reasons for the disruption are matters that give rise to such an entitlement. Where the disruption delays the completion of the work in question, such a claim is often referred to as a prolongation claim.
These provisions often bear some resemblance to those under which an extension of time may be claimed, but there are at least two important distinctions between the two issues. First, an extension of time will only be granted where the contract administrator believes that completion of the works is likely to be delayed, whereas compensation for disruption does not depend upon any such delay. Second, as we have already noted, clauses which deal with extensions of time for completion frequently apply to various ‘neutral’ events such as adverse weather, as well as to those causes of delay which are the employer’s responsibility. By contrast, the vast majority of contractual provisions compelling an employer to pay financial compensation to the contractor relate only to disruption that is caused by the employer.[6]
3. Defects in the services or the works
Where an apparently completed building is found to contain defects of design or construction, the client for whom it was originally constructed may wish to take legal action against the person or organization responsible. Defects can be grouped into the following four categories: (1) design deficiencies, (2) material deficiencies, (3) specification problems, and (4) workmanship deficiencies.[7] Such an action will normally be based on a breach of contract: the building contract if the defect is one of construction, a consultant’s terms of appointment if there has been a design error. The defective claim is usually for the cost or estimated cost of rectification of the damages or completion of the work.[8]
[1] El-adaway, I. H., & Kandil, A. A. (2010). Multiagent System for Construction Dispute Resolution (MAS-COR). JOURNAL OF CONSTRUCTION ENGINEERING AND MANAGEMENT, 303-315
[2] Hunter, K. W., & Hoenig, J. (1992). Dispute Resolution and Avoidance Techniques in The Construction Industry. Arbitration Journal, 16-18.
[3] Cheung, S.-O., Suen, H., & Lam, T.-I. (2002). Fundamentals of Alternative Dispute Resolution Processes in Construction. Journal of Construction Engineering and Management, 409-417
[4] Godwin, W. (2012 ). International Construction Contracts: A Handbook. John Wiley & Sons.
[5] Haidar, A. (2011). Global Claims in Construction. Springer.
[6] Murdoch, J., & Hughes, W. (2007). Construction Contracts: Law and Management. New York: Taylor & Francis.
[7] Glover, J. (2008). Liability for Defects in Construction Contracts – Who pays and how much. Construction Law Update Seminar. Retrieved from http://www.fenwickelliott.com/files/Liability%20for%20Defects%20in%20Construction%20Contracts.pdf.
[8] Davenport, P. (2006). Construction Claims. Federation Press.
Dr. Shahriar Eslamitabar
