Construction contracts, claims, and disputes are all integral parts of the construction process. These elements come into play from the initial planning stages of a project all the way through to its completion.
Construction Disputes
A construction contract is a legally binding agreement between a contractor and a client or owner. It lays out the terms and conditions of the project, including the scope of work, the schedule, and the payment terms. The contract also outlines the responsibilities of each party, such as the contractor’s obligation to complete the work on time and within budget, and the owner’s responsibility to provide funding and necessary approvals.
A good construction contract will also contain sections on how construction claims and disputes will be handled.
Construction Claims
Claims are a common aspect of construction projects. They can be made by either the contractor or the owner and can be related to a variety of issues, such as delays, extra work, or change orders. Claims can be made for additional compensation or for an extension of the project’s completion date. The process for submitting and resolving claims is typically outlined in the construction contract.
The process for recording, tracking, and submitting claims in a construction contract is often strict. In other words, it is important to follow the wording of the contract closely in order to preserve your right to advance a claim (for a contractor), or to deny a claim (for an owner).
Often the process requires that the party wishing to make a claim provide notice to the other party of the claim within a certain amount of time. Notice provisions are discussed in more detail below.
In the case of delay claims, contracts sometimes allow for claims for additional time for the contractor to complete the work as a result of the delay, and other times the contract will allow both additional time and additional compensation for the delay.
Contracts are often specific on what constitutes a compensable delay. Typical compensable delays are related to changes or additional work directed by the owner or the owner’s agents. An example of a delay which would not be compensable is if the contractor’s supplier does not deliver materials on time – the contractor is usually held responsible for his suppliers and subtrades’ schedules.
In the case of claims for additional work, or so called “change orders”, the contract often specifies how those changes are to be compensated. Some contracts such as the CCDC set of contracts specify the precise types of costs which will be considered to be compensated in the case of a change order, such as additional labour, materials, rental costs, and so on. Profit and overhead are usually also called for as additional compensation for change orders, and often in the amount of around 10%, though this figure can be negotiated between the parties.
Construction Disputes
Disputes can arise when the parties involved in a construction project are unable to resolve a claim or other issue. Most commonly, disputes arise where there is either a delay to the project, and the parties cannot agree on the appropriate measure of compensation to the contractor, and where there is a change to the work and the contractor is demanding compensation. Disputes can be resolved through a variety of methods, such as mediation, arbitration, or litigation. Mediation is a process where an impartial third party helps the parties come to a resolution. Arbitration is a process where an arbitrator hears the case and makes a binding decision. Litigation is the process of resolving disputes in a court of law.
Construction claims and disputes can be costly and time-consuming for all parties involved. To minimize the risk of claims and disputes, it is important for all parties to have a clear understanding of the project’s scope and schedule, and to communicate effectively throughout the project. It is also important for the contract to be well-written and to include detailed provisions for the resolution of claims and disputes.
Dispute Resolution Clause
One important aspect of construction contracts is the inclusion of a dispute resolution clause which will outline the process to be used in case of any disputes. These clauses can be either binding or non-binding and can include methods such as arbitration, mediation, or litigation. These clauses can be specifically drafted to fit the needs of the specific project and the parties involved.
Notice Provision
Another important aspect of construction contracts is the inclusion of a notice provision. This provision outlines the process for submitting claims and disputes and the time frame in which they must be submitted. This provision also outlines the process for notifying the other party of a potential claim or dispute. This is crucial as it helps to ensure that any issues are addressed in a timely manner, before they become bigger problems.
In conclusion, construction contracts, claims, and disputes are an important aspect of the construction process. To minimize the risk of claims and disputes, it is important for all parties to have a clear understanding of the project’s scope and schedule, and to communicate effectively throughout the project. It is also important for the contract to be well-written and to include detailed provisions for the resolution of claims and disputes. By understanding the process and being proactive, the parties can work together to avoid or resolve disputes and complete the project successfully. If you require assistance with construction claims, disputes, or contracts, please contact us today.
