When you hire contractors for a construction project, you usually expect them to complete their job on time, within budget, and with the quality you specified. However, things aren’t always that simple. Contractors and construction companies will often clash over issues like payment, timelines, and scope of work. These kinds of disputes are not uncommon in the construction industry but can be avoided if both parties are careful during the bidding process and during contract negotiations. Contractors will typically submit one or more contracts to perform work at your building site. You will then review the bids and select the person or company that you want to work on your project. Before signing any contract, make sure you understand its terms and conditions. It is also important to understand the general nature of construction disputes before they happen and what you can do if they arise. This guide will help you understand common construction disputes and how you can avoid or resolve them if they happen.
No Contract and No Payment?
One of the most frequent construction disputes is over whether the contractor is being paid correctly and on time. If the contractor is not paid correctly or on time, the contractor might refuse to work on the project and claim that it is owed a certain amount of money. This is known as a “pay or play” dispute - one of the most classic construction disputes. If the contractor is not paid, it has a legal obligation to continue working on the project. If the contractor fails to continue working, the owner might be held liable for violating a state’s contractor licensing laws. Contractors will often use this to their advantage when attempting to get their unpaid invoices paid. If the owner fails to pay the contractor, the contractor may have to stop working on the project. If the owner can’t find another contractor to finish the project immediately, the owner might also have to pay for the contractor’s materials and services.
Inadequate Scope of Work
Another frequent dispute is over the scope of work. The contractor’s scope of work is the description of what the contractor will do during the project. The owner’s scope of work is the description of what the owner expects the contractor to do. If the contractor’s scope of work does not align with the owner’s scope of work, the contractor might refuse to work. This is also known as a “scope of work” dispute. There are two types of scope of work disputes: “change order” and “no-change” disputes. A change order is when the owner and contractor agree to expand the project’s scope of work but don’t specify how much the project will cost. If the contractor begins work, he or she might discover that the project’s scope of work is actually more expensive than anticipated and the contractor might refuse to work. If the contractor refuses to work, the owner might have to hire another contractor at great expense. If the contractor finishes the project and submits an invoice for the agreed-upon amount, the owner might refuse to pay the invoice. No-change disputes occur when the owner and contractor agree on a project’s scope of work but later discover that they miscommunicated about the project’s scope of work. If the contractor begins work, the owner might discover that the project’s scope of work is actually less expensive than expected and refuse to pay the contractor. Alternatively, if the contractor finishes the project and submits an invoice for the agreed-upon amount, the owner might refuse to pay the invoice.
Subcontractor Disputes
If you hire a sub contractor to perform a portion of the construction work, the sub contractor will likely ask you to sign a subcontract agreement. If you sign a subcontract agreement, you will be a “general contractor” and responsible for the end of the project. If a sub contractor claims that you did not pay them correctly or that the project is not finished on time, they might refuse to finish the project. This is known as a “sub contractor dispute” and can be especially difficult to resolve. If the sub contractor walks off the job, you might have to hire another contractor to finish the project. If you signed a general contractor contract, you are likely liable for any costs incurred by hiring another contractor.
Wrongful Termination and Breach of Contract
A contractor might walk off the job and refuse to finish the project if they see that the owner is not properly managing the project. If a contractor feels that the owner is not managing the project properly, the contractor might claim that the owner has breached the construction contract. A contractor might also walk off the job if they discover that a co-owner is not qualified to manage the project. If the contractor walks off the job, the owner might be liable for paying the contractor’s labor and materials. However, the contractor might also be liable for any damages. The contractor might be able to recover these damages if they had a valid contract with the owner and the owner breached the construction contract.
Change Orders
A change order is a written agreement that specifies a change to the project’s scope of work. A change order is different from a change request. A change order is a written document that states that a change was approved by the owner and contractor. A change request is a written document that states that the owner and contractor agreed to consider a change. If a contractor begins work on the project and discovers that the scope of work is much more expensive than anticipated, the contractor might ask the owner to sign a change order. The change order will specify the amount that the owner will pay for the additional work.
Conclusion
Construction disputes are not uncommon, but they can be avoided if both parties are careful during the bidding process and during contract negotiations. Before signing any contract, make sure you understand its terms and conditions. It is also important to understand the general nature of construction disputes before they happen and what you can do if they arise.