5 Tips for Resolving Construction Disputes

As a construction manager, you’re bound to encounter a dispute or two in some of the construction projects you’re working on. After all, construction sites often involve legally binding documents, strict deadlines, and influential investors.

What are the typical construction disputes?

The most typical construction disputes in Canada have to do with documentation and licensing issues, payment delays, defects, negligence, and design changes—all of which can lead to costly delays and a tough construction dispute if you’re not careful.

Given how much is at stake, a poorly handled construction dispute will not only damage relationships between contractors and project owners, but likely lead to additional expenses, major delays, and lengthy legal battles for all parties involved.

In this article, we’ll be walking you through five tips for handling construction disputes and avoiding unnecessary costs and complications!

1. Set Clear Objectives

If you’re trying to resolve a construction dispute, step one is setting clear objectives for all parties involved in the contract. Outlining your objectives helps foster effective and clear communication between relevant stakeholders.

Effective communication is crucial in all forms of project management, not just construction disputes. So, even if you have a good and long standing relationship with the other party you’re doing business with, it’s important to define each party’s objectives, performance requirements, and deliverables within a given time period.

Setting clearly defined goals also helps divide responsibilities so there are no mysteries if someone is falling short. It won’t feel like anyone is pointing fingers if your objectives have been clearly defined. Ambiguity makes accountability impossible!

2. Keep Proper Documentation

So, avoid and resolve issues by ensuring you have clear documentation in place before agreeing to anything. Construction contracts should define the details of the project, the responsibilities of the parties involved, their obligations, and the risks involved before, during, and after the construction project has been completed.

However, documentation should be kept while you work. Keep note of any changes in plans, how things are progressing, and where issues have arisen to ensure you have something to stand on during a construction dispute.

3. Focus on Interests, Not Positions

An essential tip in dispute resolution is to focus on what matters most—such as the facts and the objectives you need to meet as a team—rather than your position.

Force yourself not to lose sight of what matters most: resolving the construction dispute by reaching a productive solution. While it can be easy to get frustrated with someone who is arguing against you, remind yourself that they likely also have the same end goal and want to see the project through to completion.

The best way to do this? Focus on your common interest. If you find yourself getting frustrated, resist the urge to “take a side” and instead focus on finding common ground in your shared interest in finishing the project. This mindset shift can go a long way.

4. Seek Formal Construction Dispute Resolution

Sometimes, despite your best efforts, it might be impossible to resolve a construction dispute without some extra help. In these cases, you should look to bring in a mediator to facilitate the negotiation (or re-negotiation) of a contract.

The four main formal dispute resolution methods are mediation, arbitration, conciliation, and adjudication. Each of these involves a neutral third party, but they differ based on how much power that third party actually has over the involved parties.

Mediation

Mediation is a non-binding dispute resolution method that is a quick and inexpensive way of settling a construction dispute before it escalates into litigation.

Do note, however, that mediators do not make judgements or will not decide on a solution for the parties involved. Instead, they direct the conversation to a mutually acceptable solution and find common goals to achieve.

Arbitration or Conciliation

Similar to mediation, both arbitration and conciliation have the same purpose: to direct a dispute into a mutually beneficial resolution between the parties. However, they take a different approach when a construction dispute arises.

In arbitration, the parties involved don’t have a lot of control over the outcome of construction disputes because the arbitrator is who ultimately makes the final call. Arbitration cases are also private and treated as confidential.

Meanwhile, conciliation is an informal process where the conciliator will propose a resolution that the involved parties can then choose to accept or reject. This process is more open to bargaining and doesn’t involve a civil suit.

Adjudication

Adjudication is similar to arbitration, but it is a more public process. Consent from all the parties involved must be given to provide key documents or evidence before a judge or a panel of judges when instructed.

Adjudication is an ideal way of resolving disputes in construction projects that are worth millions as the solution can often include surety bonds. These can protect the contractor’s cash flow in disputes, or a performance bond can be triggered to ensure work will be done per the contract’s stipulations.

5. Protect Yourself With Insurance

The construction industry is rife with complex projects and development plans, meaning you can expect that some disputes will end up in court.

If you find yourself in the middle of a formal construction dispute or common construction project claims, chances are you’ll get involved in a lengthy litigation process that can result in your construction projects being disrupted or stalled.

However, arming yourself with comprehensive insurance policies can help mitigate the costs arising from claims and legal fees. Doing so ensures your financial losses are covered before you ever start working on the construction project.

Insurance coverage also improves your credibility and increases customer trust. This is because it shows you’ve taken the necessary steps to protect not only yourself but also everyone on your team and the project itself. This can be meaningful if you’re looking to build long-term relationships with clients, suppliers, and vendors.

Feel Secure During a Construction Dispute

Not every construction dispute can be avoided, especially if you work on construction projects worth big money. When the stakes are high, you’ll feel better if you’ve secured yourself and your business with the right insurance policies—we can help.

Contractors Insurance is the leading Toronto insurance provider of customized insurance bundles that protect your business’s assets with no unnecessary riders. We’ll give you the coverage you need to feel confident navigating even the most bitter dispute.

Contact us today to get started with a quote!