How construction businesses can protect themselves from disputes

Anderson Strathern regularly supports both contractors and employers on construction projects across the UK.

In practice, most construction disputes that we see follow a familiar pattern. A project starts with momentum, pressures build (time, cashflow, design change), and then one or two unresolved issues harden into formal positions. When that happens, the cost is rarely limited to legal fees, it can also cost management time, eroded margins and damaged commercial relationships.

The usual flashpoints are well known: unclear scope, arguments about valuation, late or withheld payment, and delay – often with competing narratives about who caused what and when.

This article explores eight practical steps contractors, subcontractors and developers can take to reduce the risk of disputes, or where disagreements are unavoidable, to keep them contained and commercially manageable.

1. Start with a clear, robust contract

Dispute avoidance starts with clear contractual terms. It is important not to sign up to onerous standard terms and to ensure that the allocation of risk is clear, the scope is well defined and key mechanisms governing payment, variations and delay are workable.

At a minimum, make sure the contract nails down:

• A clear, unambiguous scope of works (including assumptions and exclusions);
• Payment terms that are specific on timing, supporting information and compliant with the terms of the Construction Act;
• A workable, written process for variations and change control; and
• Realistic programme obligations, including how delay and extensions of time will be handled.

In Scotland, SBCC and NEC are the most common standard forms for many projects, but it is important that these forms are properly completed and administered. Problems can arise where a standard form is issued with gaps, or where bespoke amendments are accepted without anyone checking how they interact with the rest of the contract. A short legal sense-check before signature is usually far cheaper than arguing the point later.

2. Understand and comply with notice requirements

Most contracts also come with strict notice provisions – particularly for extensions of time, loss and expense, and (under NEC) compensation events.

If a notice is:

• Late;
• Sent in the wrong format (or missing required detail); or
• Addressed to the wrong person or issued to the wrong address

you may lose entitlement altogether or find yourself in a formal dispute about something that could have been dealt with as routine contract administration.

Set up an internal diary for key dates, agree who is responsible for issuing which notices, and use standard templates which match the contract. Even where the underlying entitlement feels obvious, failure to follow the contract machinery can be fatal to a claim.

3. Maintain comprehensive records

If a disagreement does arise, contemporaneous records can help matters from escalating into a formal dispute. Aim to keep a live project file that would allow an outsider to understand what happened and why.

That typically includes:

• Site diaries and daily progress reporting;
• Labour, plant and material allocation records;
• Dated photographs showing progress, access issues or disruption;
• Core correspondence (emails/letters) and accurate meeting minutes; and
• Updated programmes and progress narratives.

Good records do more than support a claim. They often stop a dispute from escalating in the first place, because the facts are clear and can be tested early.

4. Manage variations carefully

Variations are a frequent source of dispute, particularly where work proceeds on a verbal instruction which is not later confirmed in writing or on an email which isn’t clear on price or scope.

To reduce the risk:

• Where possible, do not start varied work without a written instruction;
• Record the variation promptly and value it in line with the contract mechanism; and
• Keep an audit trail linking the instruction, the work done, and the valuation/supporting records.

If instructions are given informally on site, confirm them in writing straight away and make sure they are channelled through the contract process as soon as practicable.

5. Monitor payment closely

Payment remains one of the fastest ways for a project to derail. A few routine checks make a difference:

• Submit payment applications on time, in the required format, with the right back-up;
• Check payment notices and pay less notices carefully for validity and timing; and
• Chase short payment early and keep the paper trail (before the gap becomes a dispute).

For pure payment issues, statutory adjudication can be a fast way to unlock cashflow. That said, outcomes often turn on whether the contract and the have been followed to the letter so getting the basics right at the application/notice stage matters.

6. Programme management and delay

Delay itself is common. Disputes usually come from uncertainty about cause, responsibility and evidence (or lack thereof).

We recommend:

• Keeping the programme live and updated (not filed away after award);
• Reporting delay events in accordance with the contract with supporting evidence; and
• Assessing time and cost impact contemporaneously where possible.

A properly maintained programme paired with good site records often becomes the key evidence when entitlement to an extension of time or additional cost is being assessed. Legal or expert advice can assist when uncertainty arises.

7. Engage early to resolve issues

Disputes rarely arrive out of nowhere. More often, they escalate from smaller points of disagreement that were left unresolved and/or which are compounded when the next disagreement arises.

To keep issues from escalating:

• Raise problems early and keep communication clear and professional;
• Use the contract’s escalation and dispute resolution steps where necessary; and
• Where appropriate, explore formal legal communications, without prejudice discussions or mediation as a commercial reset.

Early engagement can be the difference between a fixable project issue and a formal claim.

8. Get legal and commercial input early

It is common for parties to seek advice only once a dispute has crystallised. However, seeking legal advice earlier can help:

• Spot risk in contract amendments before you sign;
• Ensure contractual notice and evidence requirements are complied with; and
• Frame correspondence so it protects entitlement without inflaming the relationship.

Done well, that early input is usually far more cost-effective than trying to unwind a problem after positions have set.

We’re here to help

Disputes cannot be eliminated entirely, but they can often be avoided, or at least narrowed, through disciplined contract administration and timely decision-making.

Teams that keep the contract, the programme and the records aligned are in a much stronger position: they are less likely to fall into dispute, and if a dispute does arise, they can head it off before it becomes protracted, expensive and threatens to delay progress.

Our expert construction disputes team is regularly engaged to assist with avoiding and navigating contractual disputes on ongoing and completed projects. If you have any queries with which we could assist, contact Ryan McCuaig or a member of our Construction Disputes team.