The Most Common Reasons for Disputes – and How You Can Avoid Them

By AIA Contract Documents

February 22, 2022

Construction is a multi-faceted endeavor often involving multiple parties, so it’s no surprise that issues and disputes arise—particularly as projects become larger, more costly and more complex. The scope and scale of monies made available through the federal infrastructure bill certainly provides some foresight into the quantity of work ahead while labor and supply chain challenges open the door for potential issues.

As the construction industry readies for what looks to be a strong construction year, it’s a good time to consider the most common causes for disputes, and best practices for avoiding them.

Here are three concerns to consider:

1.     Non-Compliance with Contract Obligations: According to the Arcadis 2021 Global Construction Disputes Report, the failure to understand or comply with contractual obligations was the top cause of construction disputes in 2020—up from #3 in 2019.

In the desire to move projects forward, owners and contractors can often overlook contract requirements. Take the time to review payment terms and obligations, understand lien rights, recheck your notice requirements, examine your dispute resolution administrative processes and communication protocols, and understand key clauses such as force majeure.

2.     Project Financing: In these times of uncertainty related to the pandemic as well as economic conditions, owners will likely need to take extra steps to ensure project financing is in place.

For contractors, know your payment stipulations and application submittal processes. Too often, owners and contractors interpret the submittal requirements in different ways. Review and confirm the necessary timelines for all payment related documents. Know what details for those applications must be included in the submittals so that everyone is on the same page.

3.     Claims Errors: Claims are one of the most common causes of formal disputes in the construction space. Claims are essentially a request for compensation for damages caused by another party’s failure to fulfill an obligation that is specified in a contract. Whether triggered by issues such as delay or time, claims require accurate details. Error prone or poorly drafted claim filings are one of the most common reasons that claims are denied.

Enact sound project management practices to accurately track and document work completed, associated time and costs. These details may mean the difference between your claim being approved or denied.

AIA Contract Documents has provided this article for general informational purposes only. The information provided is not legal opinion or legal advice and does not create an attorney-client relationship of any kind. This article is also not intended to provide guidance as to how project parties should interpret their specific contracts or resolve contract disputes, as those decisions will need to be made in consultation with legal counsel, insurance counsel, and other professionals, and based upon a multitude of factors.