Construction disputes are often full of technical and legal terminology that many people do not encounter until they are already dealing with a disagreement.

Whether you are a contractor, employer, developer or project manager, understanding common construction dispute terminology can help you communicate more effectively, better understand your position, make informed decisions and avoid misunderstandings that could cause a dispute to escalate.

In this guide, we explore some of the most common terms you are likely to encounter during a construction dispute and explain what they mean in practice.

Why understanding construction dispute terminology matters

Construction contracts contain specialist language that can have very specific legal or contractual meanings. A term that may seem straightforward can have important implications for what each party is entitled to do, claim or recover.

Misunderstanding a term can lead to disputes over responsibility, incorrect assumptions about contractual rights, delays and unnecessary costs.

You do not need to be a legal expert, but understanding the basics can make discussions with contractors, consultants and dispute professionals much easier. It can also help you recognise when an issue needs further investigation before it develops into a more significant commercial or contractual dispute.

Common contract terms you should know

Many construction disputes begin with disagreements about what the contract actually says. Understanding the terminology used to describe contractual obligations and changes to the works can help make these disagreements easier to identify and resolve.

Terminology can vary between contracts and forms of procurement, so the meaning and implications of a particular term should always be considered in the context of the contract being used.

Breach of contract

A breach of contract occurs when one party fails to fulfil an obligation set out in the contract. In construction, this could include failing to make a payment, failing to complete work as agreed, carrying out defective work or failing to meet the agreed programme.

However, not every disagreement automatically amounts to a breach of contract. Whether a breach has occurred will depend on the specific terms of the contract and the circumstances surrounding the issue.

Scope of work

The scope of work sets out what work has been agreed as part of the project, including the contractor’s responsibilities and the work, deliverables and requirements they are expected to provide.

An unclear or incomplete scope can create uncertainty over what the contractor is responsible for delivering. This can lead to disagreements about additional work, responsibility for certain elements of the project and whether particular costs should be included within the original contract price.

A clearly defined scope of work can therefore play an important role in preventing disputes before they arise.

Variations

A variation is a change to the original scope of works agreed under the contract. Variations are common on construction projects, as designs, requirements and site conditions can change during the works.

Disputes can arise when changes are not properly documented, or the parties have different understandings of what was instructed and what it should cost.

For example, a contractor may consider that an instruction represents additional work and entitles them to additional payment, while the client believes that the work was already included within the original scope.

Clear records of changes, instructions and their financial implications can help reduce the risk of disputes.

Common payment and commercial terms

Payment is one of the most common areas of disagreement in construction, making it essential to understand the terminology used in payment provisions.

Payment Notice

A Payment Notice is a formal notice confirming the amount considered due for payment and explaining how that amount has been calculated.

Payment Notices form an important part of the payment process under many construction contracts and are also governed by the payment provisions of the Housing Grants, Construction and Regeneration Act 1996, commonly known as the Construction Act.

The timing and content of a Payment Notice can be important. A notice generally needs to clearly state the sum considered due and provide sufficient information to explain how that figure has been reached.

Getting the payment process wrong can have significant consequences if a dispute later arises over how much should have been paid.

Pay Less Notice

A Pay Less Notice is used when the paying party intends to pay less than the amount stated in a Payment Notice or application for payment.

The notice should set out the amount the paying party intends to pay and explain how that figure has been calculated. The relevant contract will determine the applicable requirements and deadlines.

Failing to issue a valid Pay Less Notice within the required timeframe can have significant financial consequences and may limit the paying party’s ability to challenge the amount that is due.

Retention

Retention is an amount withheld from payments due under a construction contract, usually calculated as a percentage of the contract value.

The purpose of retention is to provide the client with some financial protection in case defects or other outstanding issues need to be addressed after the works have been completed. The retained amount may be released at different stages depending on the terms of the contract.

Retention can become a source of dispute where there is disagreement over whether the conditions for release have been met, whether defects have been rectified or whether the amount being withheld has been calculated correctly.

Common time and delay terms

Delays are another frequent cause of construction disputes, particularly where contracts contain strict completion dates and financial consequences for late delivery.

Extension of Time (EOT)

An Extension of Time (EOT) is an extension to the contractual period allowed for completing the works.

An EOT may be available where a delay is caused by an event for which the contract provides an entitlement to additional time. Obtaining an EOT can be important because it may prevent a contractor from being held responsible for delay caused by an event outside their control.

Disagreements can arise where the cause and effect of a delay have not been properly assessed, or where the parties disagree about whether an EOT is justified and how much additional time should be granted.

Relevant Event

A Relevant Event is a term commonly associated with JCT contracts. It refers to certain events that may entitle a contractor to an EOT, such as exceptionally adverse weather, variations or late instructions from the client.

Not every delay automatically gives a contractor an entitlement to additional time. The event must fall within the contractual provisions, and the relevant notification and assessment requirements must be followed.

Liquidated and Ascertained Damages (LADs)

Liquidated and Ascertained Damages (LADs) are pre-agreed sums that may become payable if a project is not completed by the contractual completion date and the contractor does not have an entitlement to an EOT.

They provide a degree of certainty about the financial consequences of delay rather than requiring the client to establish the actual loss suffered in every case.

Whether LADs can be applied will depend on the contract and the circumstances of the delay, which is why assessing any entitlement to an EOT is often closely connected to whether liquidated damages can be applied.

Common dispute resolution terms

If a disagreement cannot be resolved informally, there are several recognised methods of resolving construction disputes. The most appropriate approach will depend on factors such as the nature and complexity of the dispute, the relationship between the parties, the outcome being sought and how quickly a resolution is required.

As we explain in our guide to construction dispute resolution methods, different methods can be suited to different circumstances.

Adjudication

Adjudication is a relatively quick form of construction dispute resolution that provides a decision from an independent adjudicator. It is widely used in the construction industry and, where the statutory or contractual right applies, can provide a way of resolving disputes without waiting for a lengthy court process.

Adjudication is often described as providing a 'pay now, argue later' approach because an adjudicator’s decision is generally binding on an interim basis, unless and until it is finally determined through litigation or arbitration.

For more information, read our guide to adjudication, mediation and arbitration in construction disputes.

Mediation

Mediation is a voluntary process where an independent third party helps the parties negotiate towards a mutually acceptable resolution.

Unlike an adjudicator or arbitrator, a mediator does not normally impose a decision. Instead, they help the parties explore possible solutions.

Mediation can be particularly useful where the parties want to maintain their working relationship or resolve a disagreement without formal proceedings.

Arbitration

Arbitration is a private form of dispute resolution in which an independent arbitrator considers the dispute and makes a decision. It can provide a more formal alternative to litigation while allowing the parties to resolve the dispute outside the courts.

Arbitration can be appropriate for more complex disputes where a formal and binding determination is required.

Read more in our beginner’s guide to arbitration.

Litigation

Litigation involves resolving a dispute through the courts. It may be considered where other forms of dispute resolution have not produced a resolution or where court proceedings are considered the most appropriate route.

Construction litigation can involve significant amounts of technical and commercial evidence, and expert witnesses may be required to provide independent opinions on matters within their specialist knowledge.

Because court proceedings can be time-consuming and costly, it is often worth considering whether an alternative dispute resolution method could provide a more proportionate route to resolution.

Discover our guide on ADR vs. litigation: which way for construction disputes?

Expert Witness

An expert witness is an independent professional who provides specialist opinion on technical, commercial or other matters relevant to a dispute.

In construction disputes, an expert may be asked to assist with issues such as valuation, defects, delays or the financial consequences of a claim. Their evidence can help an adjudicator, arbitrator or court understand complex construction issues that fall outside their own technical knowledge.

Want help choosing the right expert witness for your dispute? In our blog, How to choose the right expert witness for your construction dispute, we explain how to do just that.

How Novus Resolve can help

Understanding the terminology used in a construction dispute is a useful starting point, but knowing what action to take is often more complicated.

At Novus Resolve, we provide practical, commercially focused support across contract reviews, commercial advice, claims assessment, dispute resolution, expert witness services and dispute avoidance.

Our expert team works with clients to understand the circumstances of a dispute, assess the available options and identify the most efficient and appropriate route towards resolution while protecting your commercial interests.

Construction dispute terminology made simpler

Construction disputes don’t have to be made more difficult by unfamiliar terminology.

Whether you are dealing with a variation, an EOT, a Payment Notice, or a dispute resolution process such as adjudication, understanding the language being used can help you communicate more effectively, reduce misunderstandings and make better-informed decisions.

However, understanding the terminology is only part of the picture. Applying a term correctly to a live project or dispute often requires a detailed review of the contract, evidence and circumstances involved.

If you are dealing with a construction dispute or need advice on interpreting contractual terminology, contact us today to discuss your dispute and explore the most appropriate way forward.