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FAQs on Construction Disputes

Adjudication

Alternative Dispute Resolution

Quite simply, no you do not need a solicitor to resolve your disputes. A solicitor will only be required in litigation and even then, a solicitor will need to engage an expert in the field in order to provide advice, reports and evidence on the disputed matters. This will inevitably lead to two sets of fees.

At Arbicon we have both the legal and technical knowledge to combine these two tasks and provide a one stop shop for construction alternative dispute resolution, advising both on the practical and evidential basis of your claim and also managing the submissions in formal dispute resolution processes, in turn leading to a quicker solution and only one set of fees.

The cost of dispute resolution will vary depending upon the required method and the complexity of the case. Please contact us for a budget estimate for your specific situation.

Arbitration

Construction Contracts

Yes. If you do not have a written contract, then your contract will be based on implied terms taken from statute. Your exact rights and remedies will depend on whether the verbal contract is between businesses or whether you are a consumer, however the overarching principle remains that if the contract is breached you shall be entitled to claim for the damages caused.

Contact Arbicon today for advice on your specific legal rights and remedies.

Please read our article: https://arbicon.co.uk/services/construction-contracts/contract-administration

There are a number of standard forms of contract which have been specifically drafted for use in the construction industry and which cover a range of different project sizes and structures. The standard forms are written by a panel of industry experts and are written to clearly set out the agreed project particulars, the processes to be followed in administering the construction project, and the legal rights and remedies of the parties.

The contract will always be the first port of call for establishing your rights should there be a problem and as such it is always recommended to use a written standard form of contract and specifically the standard form designed to suit your project.

If you choose not to use a standard form of contract, then you may end up with a verbal contract which does not capture basic matters such as agreed prices or programmes. This can put you at risk of delays and cost increases, or you may end up with a written agreement based on a quote that fails to set out some of the necessary information or contains clauses that do not comply with statute.

For further contractual advice and assistance with selecting a contract please get in touch today.

Defects

The Building Regulations are a statutory instrument and as such it is a legal requirement that all building works as defined by the statute are built to comply with the Building Regulations.

If the works are of poor quality or defective, then it is likely that the contractor is in breach of contract. Where the contract is breached the innocent party is entitled to be put back into the position that they would have been had the breach not occurred.

Your rights will vary depending on the form of contract you have entered, or whether you have a written or verbal contract. However, most standard construction contracts provide for the power to instruct the contractor to remedy the fault, and should they fail to do so, allow you to employer others and recover the costs from the Contractor.

The process can be complex, contractual and requires accurate record keeping to establish your claim.

Most standard forms of contract will provide for a defects rectification period that gives the contractor the right to return to the site to remedy defects. However, this right only applies if it is written into the contract, if you have no written contract or a bespoke contract that is silent on this point then there is no such right.

Where there is a contractual right to return, then the contract typically sets out a process for the employer to follow to instruct the contractor to return. If the contractor fails to do so, then the most standard contracts then allow the employer to engage others to rectify the works.

Where there is no contractual right for the contractor to return to attend to remedial works then the employer is entitled to employ others to rectify the defects without first inviting the contractor back. Although in practice it may be sensible to do so to mitigate the losses of both parties.

Where there are defects then several remedies may exist. Firstly, the contract will typically provide that where the works are defective due to a breach of contract then the claiming party is entitled to a financial award to put them back into the position it would have been if the work had been correctly carried out. Typically, this is the reasonable cost of repair of the defect work or if the defect is not rectified, the difference in value or loss caused by the defective work.

Contact us today for more advice on the contractual measures and rights and remedies applicable to your specific situation.

Delays

Your rights will vary depending on the form of contract you have entered. Generally if you have agreed a programme with your Contractor and they have failed to adhere to the programme, then they may be in breach of contract (unless they are entitled to additional time under the contract). If the Contractor is in breach, then you may be entitled to instruct them to mitigate the delays and you could be entitled to financial damages for any losses caused by the delay.

If the Contractor has abandoned the works then you may have the right to terminate the contract and employ others to complete the works.

Establishing delay damages or terminating contracts requires specialist advice and the enacting of contractual and legal processes.

Your contract will specify the events that entitle you to claim for an extension of time for delays. In the JCT suite of contracts these are known as the ‘Relevant Events', within the NEC suite of contracts the right to claim additional time is bundled into the ‘Compensation Event' mechanism.

If you do not have a written contract, or if your contract does not contain any extension of time mechanism then the common law principles will apply. Under the prevention principle if you are delayed by the other party then you may be released from your programme and your obligation is replaced with one to complete in a reasonable time.

In all cases, it is necessary to follow the contractual mechanisms in respect of claiming for an extension of time, as if you fail to do so then you may impede or even lose your right to claim. The exact obligations and rights will depend on the nature of your contract and as such you should contact us for detailed advice on the obligations and rights that apply to your specific case.

Dispute Resolution

It is never advisable to pay in cash, however your legal rights and remedies should not be affected and you would have the same rights and remedies that you would have if you had paid by other means.

It is of course advisable that all cash transactions are recorded and documented to be able to prove the amounts you have paid in the event of a dispute as well as for good accounting and taxation purposes.

The exact obligations of the contractor will vary based on your contract and should be expressly captured in the contract terms. However, in broad terms (or if you don't have a written contract capturing the obligations) the contractor is subject to the implied obligation to undertake works with reasonable skill and care and, if a programme has not been agreed, to also undertake the works in a reasonable time.

If the contractor breaches their obligations then they will be in breach of contract, and depending on the nature of the breach and the written terms this may: entitle the employer to seek to have the breach rectified, entitle the employer to seek damages, and in extreme cases allow contract termination.

The exact obligations and rights will depend on the nature of your contract and as such you should contact us for detailed advice on the obligations and rights that apply to your specific case.

Expert Witness & CPR 35 Reports

Read our article to see how Arbicon's Expert Reports can assist with resolving your dispute:

Is an Expert Opinion worth the cost?

Loss and Expense

In order to determine the true entitlement of the party making a loss and expense claim, a detailed forensic assessment of the facts, and the legal and contractual entitlement of the parties is required.

Arbicon's expert team are skilled in undertaking the assessment of loss and expense claims as either a party representative or an independent expert witness.

Loss and expense claims are often associated with delays but can be for any event where the Contractor incurs loss due to the failure of the Employer. It is essential that if there are contract terms relating to loss and expense, especially amended terms, which these are understood fully.

Read more about loss and expense claims here.

Mediation

Mediation is a voluntary dispute resolution process, whereby parties involved agree to appoint an impartial third-party mediator, to assist them in reaching a mutually acceptable, negotiated resolution of their dispute.

Take a look at our dedicated mediation page to find out more.

Pay Less Notice

A Pay Less Notice can be negative, it simply needs to calculate the sum due. If it is negative it is saying the payee has been overpaid. Generally, that means no further sums are due, but if the contract expressly requires an overpayment to be repaid then the payer would be able to demand repayment. How practical that is and depending on the value involved and what stage the project is at determines whether or not an adjudication would be commercially viable.

As noted above the parties are free to agree the “prescribed period” for a Pay Less Notice, that is the deadline before payment is actually due to be made. If the contract has been amended to one day before the Final Date for Payment then this is legally valid. As an example, contracts where 90-day payment terms have been agreed with a provision to allow service of a Pay Less Notice one day before payment is due. That legally entitles the payer to not pay for three months and then at one minute to midnight wipe out the whole agreed payment due with a Pay Less Notice. If you are a victim of this kind of conduct and a dispute arises, the value of works on day 89 needs to be assessed and an adjudication option considered.

There is no legal requirement to sign a Pay Less Notice, the legal requirement is that the sum due is stated and the basis of calculation given. As noted above it needs to be effectively served, that is, received by the payee.

If you are a payee and do not agree to the reductions as often is the case, it is understandable that you will want to challenge the new value. The first thing to do is to raise your objections and seek to negotiate a different payment. For example, contra charges, damages, blame, losses for delays or abatement for quality suddenly appear in the penultimate evaluation in a Pay Less Notice, which sadly is normal and often underhanded. Depending on the extent, dialogue might quash the accusations together with an assessment of the value of work done at the date of the Pay Less Notice and a withdrawal from the battle agreed. However, if a full-blown dispute arises as the payer will not stand down the Notice, if validly served, will need to be challenged formally, mostly practically by adjudication.

The Pay Less Notice might not be validly served, which will mean the Notice falls away legally if so. However, this is a challenge that should be canvassed to the payer to attempt to quash the attempt to pay less or again if that does not work, an adjudicator can determine the validity. See later question on invalid Pay Less Notices.

An adjudicator has the power to deal with any dispute arising under the contract (Section 108 of the Construction Act). A Pay Less Notice dispute arises from the contract, thus an adjudicator can determine the disputed Pay Less Notice as to its true value and order a payment if one is due. The Notice is therefore not set in stone and you can challenge it, but you will need to adjudicate it to determine the true value.

A Pay Less Notice is the opportunity for a paying party to change their mind on what has already been agreed on payment, altering the payment due to the payee near to the end of the payment cycle. It is as defined above already, a legal “Payment Notice” that sets out the “notified sum” for payment even if it is zero or negative. If it is validly served it is the sum due and can only be overturned by an adjudicator, arbitrator or the Court. It means your payment is being legally reduced and you potentially have a dispute.

Conversely, if you are the paying party and you have failed to serve the initial “Payment Notice” within 5 days of the contract Payment Due Date and the payee has made a valid payment application which is required by the contract, if you do not serve a valid Pay Less Notice, it means the payee's payment application becomes a Default Payment Notice automatically and the sum due. You lose the chance to challenge the payee and must pay what the payee has asked for.

If you are the payer and you want to reduce the sum certified already in the same payment period, you should serve a Pay Less Notice. You must make sure you can prove that the other party has received the notice before the “prescribed period” and after the expiry of 5 days from the Payment Due Date. The “prescribed period” is open to agreement, but it must work within the payment period otherwise it will be an inadequate mechanism and the Scheme will apply. By example, the Scheme is 7 days and JCT contracts are 5 days.

There is no particular form that a Pay Less Notice should be in, except that it must be in writing, intentional, unambiguous and clear that it is a Pay Less Notice. It must include a statement of the sum due and how that sum is calculated, including the exact calculation. There is no set level of evidence required to back up the calculation, there just needs to be some kind of basis showing what it is made up of. It would of course be sensible to provide evidence in respect of any reductions, if the reasons are inadequate, false or unreasonable, such will fall foul in adjudication.

One important point that is often missed regarding what should be included in a Pay Less Notice is that the value of works at the date of serving the Notice must be incorporated. Work which could have moved on considerably since the valuation must therefore be included. This point is seldom appreciated or understood by claims consultants or solicitors acting for payees. The value may actually be greater than the original agreed sum due.

As can be drawn from all the points above the Pay Less Notice must comply primarily with the Construction Act, the contract and where the contract is inadequate it must comply with the Scheme. If it does not it will be invalid. Determining that compliance can be a grey area, which is always the cause for legal argument and dispute.

The content of the Pay Less Notice is not relevant to the validity of a Notice, if a basis and calculation is provided it is classed as one. Citing the paying party's reasons for reducing the money is not a Pay Less Notice validity point and will not make it invalid. An adjudicator will determine the disputed content when valuing the Pay Less Notice.

To be valid the Pay Less Notice must have form/substance, intent and timely delivery.

Form and substance – The Pay Less Notice must be presented correctly, clearly and unambiguously showing the amount to be paid/repaid/zero and the basis for calculation included.

Intent – There must be a clear and unambiguous statement to show that the document served is a Pay Less Notice. Simple canvassing of proposed figures and issues without any clear intention, that such canvassing is a Pay Less Notice might later risk losing an argument that the document is in fact a Pay Less Notice and determined as void.

Timely Delivery – The Pay Less Notice must be served within the time parameters set out in the contract after the Payment Due Date, plus 5 days and before the “prescribed period”. It must also be proven to be delivered to the payee. It is possible that a Notice is served, but if the contract terms are in a state of flux and the reality is that the payment periods are different, perhaps due to the Scheme applying. A consequent error in timing might result in the Pay Less Notice being served outside the time period, making the Notice void.

In summary, if a dispute arises from a Pay Less Notice being served, Arbicon can evaluate the validity and the content, including the actual value of work done at the Pay Less Notice date and the spurious or otherwise reasons for paying less. Our expert team can take the matter to adjudication and recover payments due.

Payment Dispute

It is never wise to pay for works in advance of them being undertaken, however if you have done so and the Contractor has not completed the works then all is not necessarily lost. You may have a claim in contract or in restitution to recover the sums paid.

Call today for advice on recovering overpaid sums.

Payment claims are a common cause of dispute in the construction industry, largely caused by disagreement of the costs of changes to the works or prices not being fully agreed in advance. At Arbicon we specialise in the resolution of payment disputes and as Chartered Quantity Surveyors, can assist you to establish the true value of the payment claim. We can also work with you to ensure that the contractor is correctly notified and paid, including obtaining reimbursement for any previous overpayment.

Professional Negligence

It is not uncommon for consultants such as Architects, Engineers and Project Managers to be blamed for losses due to defective design or poor supervision. Common issues are late issue of design information or they simply get it wrong causing delay or loss in the delivery of the building.

Take a look at our legal update on professional negligence claims.

Rights and Remedies

Your rights to engage a third-party contractor will depend on your contract. Most standard form contracts provide an express mechanism for the contractor to undertake instructions and the right to engage others to undertake said instructions if the contractor fails to comply. Similarly, most standard forms of contract also provide a mechanism for terminating the contract for specific breaches which once terminated would allow a third party to be engaged to complete the works. These processes are contractual and must be executed correctly to be enforced as if you terminate or engage others incorrectly then you will be in breach of contract and could become liable for financial damages.

If you do not have a written contract with the contractor, or if you have a bespoke contract that does not have written mechanisms for appointing others then your rights will be dictated by statute and common law. In such instances, your right to engage others may be limited.

If a builder is in breach of contract then you could report them to any trade body they may be a member of, this however would not result in you being compensated.

Any claim for loss would be a civil matter between you and your builder and would need to be advanced under the contract proceedings. Most construction contracts provide the option for adjudication which is an ADR process that is much quicker and cheaper than going to court.

Arbicon specialise in management of ADR processes and as such can handle your case, from establishing your rights, through to valuing your claim and then submitting to formal dispute resolution proceedings.

There are a number of different methods of dispute resolution and the process for each dispute resolution method varies. At Arbicon we can advise on the most suitable method to be adopted for your particular dispute, advise you on the formalities and timescales of the recommended process, and also act as your representative to enact and manage the processes on your behalf.

Your rights will depend on your contract and whether the Contractor has breached the terms of that contract. If the Contractor has breached the contract then you are likely to be entitled to take steps to have the Contractor rectify the breach or recover financial damages.

Quite often when the parties have fallen out or lose faith in the other parties' ability to perform the contract, then most will wish to terminate the contract. Termination is not a process that should be taken lightly, it can be undertaken mutually or through the contract or legal mechanisms. The process can be complex, adversarial, contractual and if undertaken wrongfully can lead to parties becoming liable for financial damages.

If you are considering terminating your contract, then we would strongly recommend contacting us for professional advice on your rights and remedies and for assistance in enacting the process.

If the builder has undertaken works that are not to the contractual specification, have been improperly undertaken, are defective or unsafe, then you may have a claim against the builder. Depending upon the wording in your contract, you may have the right to instruct the builder to remove the defective works and replace the works in accordance with the required standards of the contract. Alternatively, depending on your contract, you may be able to engage others to put the works right and recover the rectification costs as financial damages from the builder.

In either event we would recommend that before acting you contact us for advice on the contractual measures, practical steps to be taken, and the rights and remedies applicable to your contract and your specific situation.

If the other party is making allegations against you then you should not ignore the situation. You should take proactive steps to rebut the allegations prior to them developing into prospective future claims.

At Arbicon we not only act for parties who are making claims but also defend parties against incorrect allegations. As such if you are faced with a prospective claim then we can assist you in the collation of evidence and the development of written submissions based on the facts and your contractual and legal rights in order to defend your position.

The exact obligations of the employer will vary based on your contract and should be expressly captured in the contract terms. However, in broad terms (or if you don't have a written contract) the employer is subject to two general implied obligations. Firstly, a negative obligation not to hinder the other party from performing the contract; and secondly a corresponding positive obligation to do what is necessary to bring about completion of the contract.

If the employer breaches their obligations then they will be in breach of contract, and depending on the nature of the breach and the written terms this may: excuse the builder from meeting certain obligations (e.g. allowing more time to complete), entitle the builder to seek damages, and in extreme cases allow contract termination.

The exact obligations and rights will depend on the nature of your contract and as such you should contact us for detailed advice on the obligations and rights that apply to your specific case.

It is not uncommon for a construction project to vary from the original intent, whether due to additional works being requested, delays, defects, design issues or budgetary problems.

Generally (and depending on the express terms of the contract and legal restrictions) the injured party would have a claim against the guilty party for the financial losses caused as a result of a breach of contract and those losses would be valued at a sum to put the party back into the position it would have been had the breach not occurred.

Typically, a contractor will be entitled to claim against the employer for additional works or delays caused by the employer. Such claims are usually for time and/or money e.g. variations for additional works, extensions of time revising the completion date for the delay, and loss and expense for the costs incurred for the delay or disruption. Common heads of loss and expense include prolongation costs, finance charges, loss of profits, general disruption and wasted management time.

On the other hand, typical claims raised by the employer against the contractor occur when the works are defective, or because the project has been delayed by the contractor. The costs claimed for defects are typically the costs of rectifying the works and the costs for delays are the costs incurred by the employer due to the delay or a pre-agreed liquidated damages rate that is stated in the contract.

There will also be further claims that are less common, such as those losses that may arise if one party abandons the works, or the project is terminated.

In addition to the above, parties may also have claims against their professional for losses occurring as a result of breach of their professional appointment. Typical claims include losses arising from negligent design or negligent contract administration.

In any event, the claim must be advanced properly, with robust evidence and in accordance with the contract mechanism. Arbicon are able to assist in demonstrating your entitlement, preparing a robust substantiated claim, and submission of the claim in accordance with the relevant contractual mechanism and legal requirements.

Forensic Quantity Surveying is a more specialist area that comprises a detailed examination of the RELEVANT facts and evidence in relation to costs or an entitlement under the construction contract.

Please see our guide: https://stage.arbicon.co.uk/services/chartered-quantity-surveyors/forensic-chartered-quantity-surveyors

The process of making a claim will depend upon the written terms of your contract. The contract should include who the claim is to be submitted to, the timescales applicable to submission of the claim, and will also provide a very brief description of what is to be submitted. However, the standard forms of contract rarely provide any detail of the type and nature of the evidence and documents to be included to ensure a successful claim.

Successful claims are those submitted not only in accordance with the contract but those which are robustly evidenced. This requires detailed records and may also require independent expert evidence.

Arbicon specialise in the preparation and submission of claims, please call us to find out how we can assist you.

The timeframe will vary by contract. If the contract includes a ‘time bar' it may specifically require claims to be submitted within a set period and the failure to adhere to that period could result in the nullification of the claim.

If the contract does not contain a time bar then your rights to claim are dictated primarily by the contract processes and then the statute of limitations which can allow disputed claims to be submitted and resolved 6 years after the cause of action (for simple contracts) or 12 years after the cause of action (for contracts executed as a deed). This period could be extended by a further 3 years for latent defects.

Termination / Repudiation

Your right to terminate will depend on the terms of your contract and the applicable statutory provisions.

The right to terminate will only exist in respect of certain types of breach. These rights will arise from the types of breach expressly stated in your contract and/or implied common law rights arising from what is known as a repudiatory breach, which is a breach so serious that it goes to the root of the contract.

Terminating a contract is a complex area of construction law and if you wrongfully terminate a contract then you could be liable to the other party for financial damages. As such care must be taken, we would recommend taking specialist advice on your rights prior to enacting any termination.

Answers to the above FAQs are generic and Arbicon should be contacted directly to discuss specific situations, please get in touch for tailored advice.

If you are being impacted by Covid-19, please take a look at our recent article Q&As Relating to Covid-19 for the Construction Industry where we answer a number of questions to help those in the construction industry understand their rights in this difficult time, and what could make a successful claim.