Disruption and delays in construction contracts
It is unlikely that any construction project will complete without any issues. Given the nature of the work and the many different construction professionals, contractors, and external factors it is commonplace to see that some form of disruption and/or delay which could result in a construction dispute.
If a party to a contract is worried about the contractual consequences of being delayed in carrying out the works on a project it will be important to establish the cause and effect of the delay. Delays can affect employers, main contractors and sub-contractors in different ways.
Main contractors and sub-contractors will often want to try and apply for an extension of time and loss and expense in the event they feel that they are in delay through no fault of their own. This can be important to limit the possibility of the employer levying liquidated damages (LADs) for late completion of the works and failure to meet the contractual completion date for the works or particular phase of works on the project.
Conversely, employers will want to consider the circumstances where they can limit any claims from main contractors for time and money and to establish their rights to levy liquidated damages against them.
In addition, sub-contractors will need to understand their position in the event of any delays and disruption which has occurred on a project through no fault of their own and whether there are any circumstances in which they can limit the risks of a main contractor trying to pass on their losses levied by the employer under the terms of the main contract.
The right to an extension of time is a contractual right and therefore will normally fall within the terms and conditions of the commercial contracts which were agreed between the parties at the outset. There are normally strict notice requirements which need to be complied with in order to apply for an extension of time. A failure to conform to the contractual requirements could result in an employer refusing to consider any application.
Quite often it will be necessary to carry out a delay analysis to establish where the critical delays were on the construction project and whether the cause was due to a relevant event or relevant matter which could result in an extension of time and/or claim for more money on a particular project.
In such circumstances it may be necessary for a party who is involved in a construction dispute to instruct an appropriate delay analysis expert to assist in assessing the original or any updated versions of the construction project programme as against the as built programme of the project. This is to assist with determining the actual delays which has effected the critical path of the project which have caused the delay to the contractual completion date.
Should you be an employer, main contractor or sub-contractor on a particular project and worried that the project is being delayed it is important that you obtain early independent legal advice to assess your position with the terms of the particular contract to avoid and reduce the risks of your company losing money or having a reduced cash flow reducing the commercial value of the project and the works you have contracted to carry out.
Payment disputes in construction contracts
Construction projects involve various parties investing a lot of time and money. When there is a dispute over the payments due and owing on a construction project this can have significant consequences on the cash flow of a business. Cash is the life blood of a business and so if payments are not made on time or fall short of what is due and owing it can have a dramatic effect on the relationship of the parties and the progression of works on a construction project.
Most standard form construction contracts have terms and conditions which relate to how payments are made often referred to a payment schedule. This provides a mechanism of determining the sums due and the timing of such payments. There is also normally a mechanism referred to within the contract which the parties need to comply with to apply for payment and provide any notices in the event that any sums requested are disputed.
In the absence of any payment mechanism within a construction contract the relevant provisions of the Scheme for Construction Contracts (England and Wales) Regulations 1998 (as amended by the Scheme for Construction Contracts (England and Waled) Regulations (Amendment) (England) Regulations 2011 (the “Scheme”) are deemed to apply.
In the event a party fails to comply with the relevant terms of a construction contract and/or the Scheme there are draconian consequences which can apply. This could mean a paying party may be required to pay any application for payment presented to them despite disputing the amount applied for. Quite often parties who are involved in payment disputes refer the matter to a “smash and grab” adjudication in the event the dispute cannot be resolved amicably.
If your business is having issues relating to the payment mechanism on a particular project it is important that you take early independent legal advice to minimise any risks of falling foul of the particular payment mechanism which applies to your particular construction contract.
Defects arising in the design and/or workmanship of a construction project
There are various issues which can affect a construction project when design and/or workmanship defects arise.
Many problems that do arise are often resolved by reference to the terms of the construction contract once liability for the cause and effect has been established.
If a construction project encounters defects caused by design or workmanship issues before the completion date, inevitably delays occur which could have an effect on the cost of the project, subject to whether the contract terms allow for any extensions of time and/or entitlement to further money.
Quite often defects which relate to design and/or workmanship only come to light long after practical completion and any agreed defects liability periods. In such circumstances those effected will need to consider their position having regard to any contract, collateral warranties in place and any common law or statutory provisions (E.g The Defective Premises Act 1972 and The Civil Liability (Contributions Act) 1978.
Whatever the circumstances and whether you are an employer/developer, main contractor, sub-contractor or end user it will be important to seek early independent legal advice as soon as issues manifest. Delaying taking independent legal advice could adversely affect a party’s position.
Terminating a construction contract
If both parties’ relationship under a construction contract breaks down it will be important to consider how the contract can come to an end, especially when a project is only part completed. It may well be that the parties are in dispute over delays, payment issues or defective works or materials. Whatever the issue it is important that the parties consider any contractual obligations before taking any steps to determine the contract. For example, if an employer refuses to pay a contractor, the contractor may wish to down tools and refuse to carry out any further work.
Within most standard construction contracts there are termination clauses included which sets out the necessary steps each party must do upon a specific event occurring which allows them to determine the contract. If the steps taken by a party do not conform with the provisions of the contract, then this could adversely affect the party who relies on them validly terminating the contract. Getting termination wrong could mean that the party who is relying on the incorrect termination is in repudiatory breach of contract which may open a claim from the other party for damages.
If you are a party to a construction contract and are considering ending your relationship with the other party to the contract, it is important that you take early independent legal advice so as to ensure your position is best protected.
Final account disputes
Depending on the type of construction contract the parties have entered into will normally define the mechanism in which the contractor can submit its final account. If a construction contract does include a mechanism for a final account to be submitted, it can provide a lifeline for a contractor to claim all sums which they did not include for any variations or additional costs throughout the course of the works.
Disputes often arise between the parties to a construction contract which relate to the amount of final payment due and owing on a project. Claims relating to loss and expense, variations and changes from employer’s instructions and whether liquidated damages should be levied are all just a few examples of the disputes that can arise.
Good administration of a construction contract with adequate records being retained will limit the potential for disputes to occur. However, it will be unusual for any construction contract to not have some claim relating to extra time and/or costs.
It is important to note that not all construction contracts will contain a mechanism for the submission of a final account. Accordingly, if you are concerned about the sums that have been incurred on a construction project, whether you are an employer or a main contractor or sub-contractor it is vital that you obtain early independent legal advice so as to ensure that your position is best protected.
Contact our construction dispute solicitors
Our team have a proven track record of negotiating successful outcomes and finding agreed resolutions for our clients involved in construction disputes. Our approach means we ensure that we find out the full history and background for each dispute and investigate every possibility so that we can give you the best possible advice in the given circumstances.
Please contact our dispute resolution lawyers on 0161 696 6178 or complete our online enquiry form and we will contact you directly.