Construction disputes are far from unusual. In fact, around a third of construction professionals surveyed by NBS reported being involved in a contract dispute in the previous 12 months.

Another thing to note about construction disputes is that they don’t appear from nowhere. A disagreement might begin with something relatively small, such as a payment that has not been made, a variation that has not been agreed, or concerns about workmanship.

However, if the issue is not addressed, it can quickly become more serious. What starts as a disagreement over one aspect of a project can develop into a formal dispute affecting the project’s cost, programme, cashflow and working relationships.

So, what should you do when a construction project starts heading in that direction?

In this article, we look at the practical steps parties can take to understand the issue, assess their position and determine the most appropriate way forward.

Start with the contract

When a disagreement arises, the contract should be the first point of reference.

The contract should establish the framework for the relationship between the parties and will often set out responsibilities, payment procedures, requirements for variations, completion dates, notice requirements, procedures for dealing with delays and provisions for resolving disputes.

Before deciding what to do next, it is important to establish what the contract actually says.

For example, if there is a disagreement about additional work, the contract may contain specific requirements around how variations should be instructed, valued and recorded. If the issue concerns payment, there may be specific notice and payment provisions to follow.

This is important because failing to follow the contractual procedure can sometimes make an already difficult situation more complicated.

It is also worth remembering that statutory requirements can apply alongside the contract. For example, the Housing Grants, Construction and Regeneration Act 1996 provides a right to refer qualifying construction contract disputes to adjudication, subject to the legislation’s requirements and any applicable exclusions.

The starting point should therefore be understanding the contractual and statutory framework before deciding what happens next.

Gather your evidence together

Once an issue has arisen, good records can make a significant difference to how easily the situation can be understood and, ultimately, resolved.

The relevant evidence will depend on the nature of the dispute. It could include the contract and any amendments, drawings and specifications, payment applications and notices, variation instructions, emails and correspondence, meeting minutes, site records, photographs, programme information, invoices and quotations.

The important thing is not simply having a large amount of paperwork. It is about establishing what happened and demonstrating the position with evidence.

For example, if the disagreement concerns a variation, you may need to establish what was originally agreed, what changed, who instructed the change and what financial impact that change had.

If it is a delay dispute, you may need records showing what happened, when it happened and how it affected the programme.

A clear evidence trail can help separate what is actually known from what each party believes happened. It can also make it easier for a commercial adviser, adjudicator, mediator or other professional to assess the position if further intervention becomes necessary.

Try to resolve the issue early

Despite what many people think, not every disagreement needs to become a formal dispute.

Where appropriate, the parties should first try to establish what the actual issue is and whether there is a practical way of resolving it.

That means asking some straightforward questions:

• What exactly are the parties disagreeing about?

• What does the contract say?

• What does each party believe it is entitled to?

• What evidence supports each position?

• Is there a practical solution that both parties can accept?

Clear and professional communication can often help prevent a relatively contained disagreement from becoming more complicated.

It is also sensible to keep important discussions in writing. Even if an issue is initially discussed on site or over the phone, confirming the key points afterwards can help create a clear record of what was discussed and agreed.

This does not mean every email needs to become formal or adversarial. The aim is to create clarity while there is still an opportunity to resolve the issue commercially.

Early communication can also give both parties more flexibility. Once high costs have accumulated, deadlines have been missed, or positions have become entrenched, reaching a practical agreement can become considerably more difficult.

Know when the issue is becoming a formal dispute

There is a difference between an emerging disagreement and a dispute that requires more structured intervention.

It may be time to take a more formal approach when:

• Neither party is willing to change their position

• Correspondence is becoming increasingly formal

• Significant sums are being disputed

• Contractual notices or claims are being issued

• Deadlines are approaching

• Work is being delayed or disrupted

• One party stops engaging

• The same issue continues without resolution.

There is no single point at which every disagreement automatically becomes a formal dispute. The circumstances and the terms of the contract will matter.

However, the above warning signs should not be ignored.

The longer an issue goes unaddressed, the more difficult and potentially expensive it can become. Evidence may become harder to establish, further costs may accumulate and the disagreement can begin to affect other parts of the project.

Recognising that an issue is escalating gives the parties an opportunity to take appropriate action before the situation becomes even more difficult to manage.

Get professional advice before the dispute escalates

Seeking professional advice does not necessarily mean starting legal proceedings. In many cases, the value of early professional input is simply having someone independent assess the commercial and contractual position before decisions are made.

A construction dispute professional can help establish:

• What the contract says

• What the evidence shows

• Whether a claim has merit

• What the financial implications may be

• What each party may be entitled to

• What options are available

• What the most proportionate route to resolution might be.

This commercial perspective can be particularly important because construction disputes are rarely just legal questions.

There may be issues around valuation, variations, delay, loss and expense, payment, defects or contractual entitlement. Understanding the financial and practical implications of these issues is often essential to deciding how the dispute should be approached.

For example, it may be necessary to assess whether additional work has been properly valued, whether a delay has caused a compensable loss or whether the sums being claimed are supported by the available records.

Getting this assessment early can help parties understand the strength of their position and make better-informed decisions about what to do next.

Choose the right route to resolution

If the issue cannot be resolved through direct discussions, there are a number of potential routes available.

Negotiation involves the parties attempting to reach an agreement directly. It can be appropriate where there is still scope for a commercial compromise and the parties are willing to engage.

Mediation involves an independent third party helping the parties explore whether a mutually acceptable settlement can be reached. The mediator does not normally impose a decision on the parties.

Adjudication is a relatively quick dispute resolution process commonly used in the construction industry. Under the Housing Grants, Construction and Regeneration Act 1996, qualifying construction contracts generally give parties a right to refer a dispute to adjudication, subject to the statutory requirements. The adjudicator’s decision is generally binding unless and until the dispute is finally determined by legal proceedings, arbitration where applicable or agreement between the parties.

Arbitration is a private dispute resolution process in which an arbitrator makes a binding decision in accordance with the applicable rules which may only be challenged on very limited grounds.

Litigation involves formal court proceedings and may be appropriate where other routes have not resolved the dispute or where court proceedings are otherwise the appropriate option.

The bottom line is that no single resolution method is right for every construction dispute. The better question is not, “Which method is best?” but “Which method is most appropriate for this particular dispute?”

That decision should take into account the contract, the nature and value of the dispute, the available evidence, the urgency of the issue, and the commercial objectives of the parties.

To find out more about dispute resolution methods, check out our blog.

Don't let the dispute stop the project

A dispute does not necessarily mean that the entire project has to grind to a halt.

Depending on the nature of the disagreement, the parties may still need to consider what work can continue, what decisions need to be made, whether payments remain due, whether contractual deadlines are approaching and whether any notices need to be issued.

There may also be wider commercial and programme risks developing while the dispute remains unresolved.

For example, a disagreement about the valuation of a variation should not automatically mean that unrelated works stop. Equally, a dispute about delay needs to be managed alongside the ongoing programme rather than allowing further delays to develop without being addressed.

This is where a commercial approach can be particularly valuable.

The aim is not simply to resolve the original disagreement. It is also to prevent that disagreement from creating a second set of problems through further delay, additional costs, cashflow pressures or contractual issues.

Keeping the wider project under review while the dispute is being dealt with can help limit the overall impact.

When a dispute arises, act early

A construction dispute does not necessarily mean that the project has failed or that court proceedings are inevitable. What matters is how the issue is handled once it becomes apparent.

The practical process is relatively straightforward:

Understand the contract → gather the evidence → communicate clearly → seek advice where appropriate → choose the right resolution route → keep the wider project moving.

The earlier a potential dispute is properly understood, the more opportunities there may be to resolve it before positions become entrenched and costs increase.

That does not mean every disagreement can or should be settled informally. Some disputes will require a formal process. The important thing is making that decision based on the circumstances rather than allowing an unresolved issue to escalate by default.

At Novus Resolve, we provide commercially focused support to clients dealing with construction disputes and the issues that can lead to them.

Our support can include contract reviews, commercial advice, claims assessment, valuation and quantum analysis, delay assessment, negotiation, mediation, adjudication, arbitration support and expert witness services.

The aim is to help clients understand their contractual and commercial position, assess their options and determine the most appropriate way forward.

If a disagreement on your construction project is becoming more difficult to resolve, getting the right advice early can help you understand where you stand and what to do next.

Contact us today to discuss your construction dispute and find out how we can help.