Mitigating Contract Disputes in Construction Projects
John Lohan • Jun 20, 2023
The potential for misunderstanding increases as buildings get more complex. Minimizing disagreements requires thoughtful planning and clear communication.
Designing and constructing an industrial or commercial building is challenging work. It can become even more so when clients, manufacturers, building companies and sub-contractors have different expectations, leading to misunderstandings about deadlines and deliverables. Every construction project will inevitably experience its own unique story of challenges (of varying size).
I recently watched a short, informational video from David de Groot, partner at Calgary’s Burnet, Duckworth & Palmer LLP (BD&P) law firm. In it, he discusses the common mistakes that lead to disputes within the construction industry. He summarizes that most disagreements requiring litigation are due to a lack of proper documentation, allocation of risk or use of subcontractors on projects.
I couldn’t agree more with de Groot’s observations. I wanted to expand on a couple of David’s points and share advice I’ve learned from my own experience leading pre-engineered steel building construction projects since 2004.
Every Project Offers Unique Engineering Challenges. Common Issues are Preventable:
1. Put Everything in Writing
One of the primary reasons for contract disputes is the absence or inadequacy of proper documentation. The backbone of successful projects is detailed contracts that clearly outline responsibilities, scope of work, change order processes and payment terms. These are essential items to have in writing to protect the interests of both parties. It may seem like a lot of paperwork, but by documenting every aspect of the project, from initial discussions to final agreements, potential misunderstandings can be minimized to avert conflict. I ensure all my team members regularly update project records, and we save all correspondence and approvals, including meeting details, so everyone is clear on expectations and deadlines. A little extra attention to detail can save a lot of litigation costs and headaches down the road. And clients appreciate having clarity along the way.
2. Strike a Fair Balance in Accountability
Properly allocating risk is crucial in construction contracts to prevent conflicts. Identifying accountability is crucial. Clients and builders should negotiate and outline responsibilities for unforeseen events, such as material price fluctuations, design changes and even delays due to weather conditions. Clauses that clearly define each party's obligations and establish mechanisms for resolving disputes should be incorporated into every contract. A balanced approach ensures that risks are distributed equitably, reducing the likelihood of disagreements arising from unforeseen circumstances.
3. Avoid Using Sub-Contractors When Possible
The quality of tradespeople at firms varies greatly. We’ve found it’s better to trust the individuals we’ve hired and trained ourselves rather than risking our reputation and the durability of the final structure on lesser-known or unknown abilities. It’s the main reason why Double Black Construction doesn’t use sub-contractors. We hire only the most qualified and experienced tradespeople to minimize the risk of poor workmanship, project delays and resulting disputes. We want clients to be able to trust our track record, financial stability and full compliance with legal requirements and building codes.
4. Regular Communication and Collaboration
Preventing conflict starts with open and frequent communication with clients. Regular project meetings and progress reports help maintain transparency and foster collaboration. We work to identify and resolve potential issues in a timely fashion to keep minor disagreements from escalating into major conflicts. Open lines of communication between our team and clients proactively addresses concerns and enhances trust, promotes goodwill and lessens the likelihood of contract disputes.
5. Have a Plan for Dispute Resolution
Despite best efforts, disputes during construction projects may still arise. To avoid lengthy and costly disagreements within the courtroom, we’ve used alternative dispute resolution methods such as mediation or arbitration. These processes provide a more efficient and collaborative approach to resolving conflicts, enabling parties to retain control over the outcome while preserving business relationships. Including a clause about dispute resolution in contracts (such as chosen method and naming a neutral third party) enhances trust and adds certainty for everyone involved.
Those Who Fail to Plan...
Listening to David de Groot’s advice was a welcome reminder of the potential risks involved with any construction project. By proactively addressing areas of potential conflict, such as by keeping proper documentation, avoiding sub-contractors and keeping communication transparent, clients and their construction teams can significantly reduce the likelihood of conflicts. A little advance planning and due diligence during the build create a more harmonious construction environment. And, by safeguarding clients’ interests, it helps to foster long-term partnerships and repeat business.
When you are planning to build a new commercial or industrial structure and want the construction process to go as smoothly as possible, contact John Lohan
and his team at Double Black Construction. Contact us online, email our team at info@DoubleBlackConstruction.com
or speak with us at (833) 322-2722
and we’ll provide you with a free consultation and quote.
About the author:
John Lohan has over 15 years of experience designing, engineering and installing over 500 metal buildings for architects and clients across North America and the globe. He’s managed all aspects of steel building construction, including material logistics and managing local and foreign construction teams. John also has special expertise in concrete foundation and excavation. He can be contacted at Double Black Construction at (833) 322-2722, by email at john@DoubleBlackConstruction.com
or on LinkedIn.
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