Construction disputes often begin with something practical. Payment has not arrived, additional work has not been agreed, a project is late, defects are alleged, or the parties disagree about what the contract requires.
For contractors, subcontractors, developers and construction professionals, the important question is what to do next. Before sending another letter, withholding payment or starting formal proceedings, check the facts, contract and evidence.
What causes construction disputes?
Most construction disputes involve money, time, work quality or disagreements about contractual responsibility.
The problem can become harder to manage when different issues overlap. An unpaid invoice may turn into a dispute about defects, while a delay claim may also involve variations, extensions of time and additional costs.
Common construction disputes include:
- Unpaid invoices and payment disputes
- Contractor and subcontractor disputes
- Variations and additional work
- Delay and extension of time claims
- Defective works
- Retention disputes
- JCT, FIDIC and NEC contract disputes
- Payment notice disputes
- Contract termination
- Construction adjudication
- Construction litigation
Understanding which issue you are actually dealing with should come before choosing a legal route.
Unpaid construction invoices and payment disputes
“We’ve done the work, but we haven’t been paid.”
This is one of the most common problems construction businesses face. A contractor or subcontractor may have completed the work, paid staff and suppliers, but still be waiting for payment.
Payment disputes can involve:
- Unpaid applications or invoices
- Disputed valuations
- Stage payments
- Final accounts
- Retention
- Variations
- Set-off
- Payment notices
- Pay less notices
- Allegations of delay or defects
The Housing Grants, Construction and Regeneration Act 1996 contains statutory payment provisions for qualifying construction contracts. It also provides that the payer must pay the notified sum by the final date for payment, subject to the applicable statutory and contractual provisions.
However, an unpaid amount should not automatically be treated as straightforward debt recovery.
If the other side disputes the work, valuation, contract or notices, you may be dealing with a wider construction dispute.
Payment applications and notices
Construction payment disputes can turn on the paperwork.
The contract may set out when applications should be submitted, how the amount due is calculated and when payment or pay less notices must be served. Statutory payment rules may also apply depending on the contract.
If a dispute develops, gather the relevant documents before deciding what to do.
These may include:
- The construction contract
- Payment applications
- Invoices
- Payment notices
- Pay less notices
- Valuations
- Certificates
- Emails and project correspondence
- Records showing the work completed
Small differences in dates, wording or contractual procedure can become important once payment is disputed.
Variations and additional work
Construction projects rarely proceed without some change.
A client may ask for additional work, designs may change, site conditions may require a different approach, or the scope may develop as the project progresses.
The dispute often starts later when the contractor expects payment for the additional work and the other party argues that:
- The work was already included
- The variation was never authorised
- The agreed procedure was not followed
- The amount claimed is too high
- The work caused additional delay
Good records matter.
Keep instructions, drawings, quotations, emails, site records and information showing what changed, who requested it and what was said about the cost or programme.
If there is a dispute, the contract should also be checked to understand how variations must be instructed and valued.
Delay and extension of time disputes
Delay is another major source of construction disputes.
The project may finish later than planned because of design information, access problems, variations, late instructions, supply issues, other contractors, employer actions or problems with the contractor’s own performance.
The key question is often responsibility.
A delay dispute may involve:
- Extensions of time
- Notices
- Liquidated damages
- Loss and expense
- Disruption
- Concurrent delay
- Programme changes
- Late information
- Variations
- Compensation events
Different contracts deal with these matters differently.
A JCT contract, NEC contract and bespoke agreement may each require different notices, procedures and evidence.
If delay becomes contentious, project programmes, contemporaneous records, emails, notices, meeting minutes and site records may become important.
Do not assume that being delayed automatically gives a right to additional time or money. The contractual position needs to be checked.
Defective works disputes
Defect disputes often involve disagreement about whether the work meets the required standard.
A developer or employer may argue that work needs to be repaired or replaced. The contractor may argue that the work complies with the contract, that the alleged problem resulted from the design, or that another party is responsible.
Questions may include:
- What standard did the contract require?
- Is the work actually defective?
- Who was responsible for the design?
- Has the contractor been given an opportunity to rectify the work?
- What remedial work is reasonably required?
- What loss has actually resulted?
- Are there allegations against subcontractors or consultants?
Expert evidence may be needed in more technical disputes.
The contract and project evidence still provide the starting point for understanding who was responsible for what.
Building safety and defective construction claims
Building safety issues can also become part of a wider construction dispute, particularly where serious defects are alleged.
The Building Safety Act 2022 made significant changes to some rights and limitation periods relating to defective dwellings. Government guidance states that certain claims under the Defective Premises Act 1972 can have extended limitation periods of 30 years retrospectively and 15 years prospectively, depending on when the relevant work was completed.
That does not mean every defect dispute falls within those provisions.
Building type, work undertaken, dates, parties involved and the legal basis of the claim all matter. Where building safety issues form part of a dispute, specific advice may be needed on the contractual and legal position.
Retention payment disputes
Retention is another frequent source of disagreement.
Part of the contract value may remain withheld after work has been completed. The parties may then disagree about whether the conditions for releasing that money have been satisfied.
Check:
- The retention percentage
- When the first portion should be released
- When the remaining balance becomes payable
- Practical completion provisions
- Defects requirements
- Certificates
- Payment notices
- Any reason given for continuing to withhold the money
A retention clause does not by itself establish that the money can be withheld indefinitely.
If the release date has passed, review the contract and evidence before deciding how to pursue payment.
Contractor and subcontractor disputes
Construction projects involve several contractual relationships.
A dispute between an employer and main contractor may have consequences further down the supply chain. A dispute between a main contractor and subcontractor can also affect payment, programme and completion of the wider project.
Issues may include:
- Unpaid subcontractor accounts
- Scope disagreements
- Delays
- Defects
- Variations
- Performance bonds
- Termination
- Responsibility for work performed by another party
Start by identifying which contract governs the dispute.
Do not assume that obligations under the main contract automatically apply in the same way to a subcontract.
JCT, NEC and FIDIC contract disputes
The wording of the construction contract matters.
Standard forms such as JCT, NEC and FIDIC contain procedures dealing with matters such as payment, changes, notices, extensions of time, compensation, termination and dispute resolution.
However, standard contracts are frequently amended.
That means knowing that the project uses a JCT, NEC or FIDIC form is not enough. You need to check the actual signed contract and any schedules, amendments or additional conditions.
When a dispute begins, identify:
- Which contract applies
- Which edition or form is being used
- What amendments have been made
- Which clauses deal with the disputed issue
- What notices have already been served
- What deadlines may apply
The contract should guide the next step rather than assumptions about how construction disputes normally work.
Can construction disputes go to adjudication?
Adjudication can be an important dispute resolution route in construction.
Under section 108 of the Housing Grants, Construction and Regeneration Act 1996, a party to a qualifying construction contract has a statutory right to refer a dispute arising under the contract to adjudication.
The statutory framework requires a procedure that allows referral to an adjudicator and ordinarily requires a decision within 28 days of referral, subject to permitted extensions.
Adjudication is commonly associated with payment disputes, but it can also concern other contractual disagreements.
However, adjudication should not be treated as the right answer for every construction dispute.
Before proceeding, consider:
- Whether the right to adjudicate applies
- What the dispute actually is
- Whether the claim is ready
- What evidence is available
- The contract terms
- The amount at stake
- The likely response from the other party
- Whether adjudication makes commercial sense
The question is not simply, “Can we adjudicate?”
It is, “Is adjudication the right next step for this dispute?”
What about construction litigation?
Some construction disputes may require court proceedings.
Construction and engineering disputes may be dealt with by the Technology and Construction Court where appropriate, depending on the type and circumstances of the claim.
Litigation may become relevant where:
- A claim cannot be resolved through negotiation
- Court remedies are required
- An adjudication decision needs enforcement
- A party is defending proceedings
- There are complex claims or counterclaims
- Another dispute resolution process has not resolved the matter
Starting litigation is a significant step.
The legal position, evidence, value, cost and commercial objective should be considered before proceedings are issued.
What should you do when a construction dispute starts?
If a construction dispute is developing, avoid reacting only to the latest email.
Start by putting the position together properly.
1. Find the contract
Locate the signed contract and any amendments.
Check which clauses relate to the issue, including payment, variations, delays, defects, notices, termination and dispute resolution.
2. Build a timeline
Write down the important dates.
Include when the contract was agreed, work was completed, applications were made, notices were sent and the dispute began.
3. Gather the evidence
Keep the documents that support your position.
Depending on the dispute, this might include contracts, invoices, applications, certificates, emails, photographs, site records, programmes, meeting minutes and notices.
4. Check what has already been said
Review correspondence before sending another response.
An angry email, admission or poorly worded threat can make the dispute harder to manage.
5. Decide what you want to achieve
Ask what a sensible commercial outcome looks like.
You may want payment, additional time, a defence against allegations, completion of work, termination of a relationship or settlement.
6. Consider whether the dispute is worth pursuing
A legal right does not always mean legal action makes commercial sense.
Consider the amount at stake, evidence, strength of the position, possible counterclaims, cost and likely benefit before deciding the route.
Should you try to resolve a construction dispute yourself?
Many businesses try to resolve disputes themselves first.
That may involve phone calls, meetings, payment chasers or further emails. Some disputes can be resolved without formal legal action.
The difficulty comes when the same arguments continue and neither party moves.
You may also reach a point where contractual notices, deadlines or allegations become important.
Early advice does not mean that you have to start adjudication or court proceedings.
It can help you understand the position before taking a step that is difficult or costly to reverse.
How My Commercial Lawyers can help
My Commercial Lawyers provides barrister-led construction dispute support for contractors, subcontractors, developers, architects, consultants and construction professionals.
The first step is to understand the facts, contract and evidence.
Depending on the dispute, possible routes may include:
- Negotiation
- A formal response
- Payment recovery
- Construction adjudication
- Litigation
- Another appropriate dispute resolution step
My Commercial Lawyers has experience with employer and subcontractor contract disputes, JCT contract issues, non-payment and unpaid professional fees. The firm’s existing experience also includes major FIDIC-related construction arbitration matters involving defects, extensions of time, variations, payment rights, delay and liquidated damages.
Barrister-led support and litigation conduct are available where suitable.
What happens next?
If you are dealing with a construction dispute and need to know where you stand:
- Complete the website form.
- Download Trello and join your matter board.
- Share the issue, contract and key facts.
- The team reviews the facts, contract and evidence.
- Suitability is checked.
- If suitable, the next step, fixed instruction fee, client care letter and invoice are arranged before work begins.
My Commercial Lawyers works on a fixed instruction fee basis.
The scope and fee for each instruction are confirmed before that instruction begins.
You can find out whether your matter fits before committing to the next step.
Check your construction dispute options
If payment, delay, defects, contract terms or project disagreements are becoming difficult to resolve, you need to know where you stand before deciding what to do next.
Share the issue, contract and key facts so the team can review whether this is something they can help with.