Litigation is very common in the construction industry, and contractors have to deal with various risks, including workplace safety, legal disputes, financial risks, etc. Smaller construction contracting firms are more prone to the risks of bankruptcy due to costly claims and disputes. Legal claims and litigation are especially very harmful to contractors as they can affect them years after the job has been done.
Did you know the construction contracting business has the second-highest rate of bankruptcy compared to other private companies! One single change order or late payment can result in drastic changes and the potential to derail your progress. Construction claims and disputes are a major hassle, but there are ways to avoid them.
7 Most Common Types of Construction Claims to Avoid
Construction claims usually arise because one of the parties asks for compensation that is outside the provisions of the contract. To help you understand commercial claims in the construction contracts, we have compiled a list of the most common construction claims that contractors should look out for.
The list does not include all types of claims, but it should help you get an idea of the general types of disputes that result in litigation.
When accidents happen on the construction job site, a claim is often filed against not following site safety standards. The accident could involve construction workers or bystanders.
2). Change of Work
This is one of the most common types of claims in the construction industry. This claim arises when the contractor receives a change order from the client when the project has started. The disputes occur when the client and the contractor disagree about what does and doesn’t fall within the scope of the contract.
Construction claims are also filed when construction activity causes damage to the commercial site or any adjacent property. In such cases, the client suffering property damage can file a claim against the contractor.
4). Schedule Acceleration
Under certain circumstances, the contractors are demanded or need to exceed the budget that was agreed upon during the bidding and contract to stay on schedule. In such cases, when the contractor and the client don’t agree to cover the extra costs, a schedule acceleration claim is filed.
5). Change in Site Conditions
This type of claim occurs because of differing site conditions. This happens when the conditions at the construction site differ from what is specified in the contract, or the actual conditions are not encountered in the area.
6). Construction Defects
Construction defects claim is often filed long after the contractor has finished the job. The client files the claim alleging that the contractor’s work has some errors that are causing issues and damage to the building or the construction property.
These are the most common types of claims in construction contracts. It occurs when the project takes too long to complete as opposed to what was agreed in the contract. Delay in construction results in a loss in productivity and also financial loss. This can also occur due to a situation that is out of the contractor’s control, such as weather, a pandemic like the COVID-19, or an earthquake.
How Can Contractors Avoid These Construction Claims?
No contract in the construction industry is claim-proof. However, you can take some precautionary measures to minimize the risk of being dragged into costly litigation. The following are some of the tips to avoid construction claims in commercial contracts.
a). Well Written Contracts
Construction business is all about communication as it helps resolve issues efficiently. Good contracts define clear terms and conditions that protect all the concerned parties from legal claims. Good contracts have a fair allocation of risks across all the parties, which helps mitigate the risk and reduce disputes.
It is essential for contractors to hire construction claims consultants beforehand to help design contracts that protect them from all adverse situations. These experts make sure that your contract includes all the important clauses to protect you against unexpected and legal claims.
b). Good Project Record Keeping
One of the most complicated aspects of construction is that there are so many tasks happening at the same time. With so much information, it is easy to get detracted and get confused. However, by keeping accurate records of all the activities on the Jobsite, you can communicate more effectively, and it helps resolve disputes.
c). Construction Safety Practices
It is the foremost responsibility of the contractors to protect the workers and the property during the construction of the project. Hence, having a construction safety program in place can help tackle safety issues and mitigate injury risks.
Get Help for Resolving Different Types of Claims in Construction Contracts!
These are some of the most common types of claims in the construction industry and ways to avoid them. However, when things heat up, and you cannot reach an agreement, your best option is to hire construction claims consultants in Dubai to ensure that things are resolved in your best interest. Don’t take any chances and end up losing the money that you are owed. Get professional help to resolve disputes with the least hassle possible.