The Top Three Causes of Disputes on a Construction Project
Earlier this week, I was talking with fellow attorney who does not practice construction law. At one point in our conversation, he threw out a goocher of a question: "I know this is a hard question, but what do you think causes most of the disputes on a construction project? I am sure there could be plenty of reasons for lawsuits, but are there some more to blame than others?"
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Wow! That is a hard one ... particularly because there could be so many different reasons for disputes on a construction project. Here were my top three reaspons for disputes:
- Problems with the contract. The written (or unwritten) contract is what guides the parties' expectations as to payment and performance. The contract must clearly identify the rights and obligations of each player in the process, from developer, to designer, to contractor, to subcontractor and supplier. More problems occur because an incomplete, vague or ambiguous "Scope of Work" in the agreement. A well-written contract that properly analyzes and allocates the risk on the project will often save heartache at the time of completion.
- Problems with the people. It is no secret that successful companies are driven by successful people. The opposite is true as well: failing companies suffer from poor management and leadership. When "people" are responsible for building "things," you have to realize that those "people" can cause problems during the construction process, whether you are talking about a loan officer, a design team, a project manager or supply deliveryman.
- Problems with the unknown. This is what I would call the "catch-all" category, as disputes often arise from events beyond one or more of the parties' control. This woud include anything from unusually severe weather, to labor strikes, to differeing site conditions. These "causes" often involve requests by the contractor for more time and/or money.
If you had to answer my colleague's question, what would you say?
Nice list & very accurate, especially the contract part.
I think under number 2, the homeowner wanting that something extra and feeling we owe them - always trying to stretch the contract terms --- it's not always the contractor.
Sean: Thanks for leaving a note. I agree with your comments, as that goes to the heart of expectations. Each has an expectation over what the finish product will be and how much it will cost. -Matt
So true, though I'd throw something in there about unrealistic expectations. Many disputes could be avoided if the parties really knew what they were getting up front.