It’s unlikely to be in the construction industry for very long and not run into a dispute. Disagreements between the parties – owners and contractors, contractors and subcontractors, subcontractors and supply houses – can crop up when one party fails to meet its obligations, contractual or otherwise. Sometimes these controversies result from a clear breach of a contract provision; other times they are simply the consequence of a party’s reaction to or disregard of a particular issue.
Maybe it is associated with timing – the job is off track and not moving as quickly as it should. Maybe it is a payment matter – change orders not being paid or payment applications far out pacing the actual progress on the job. Whatever it may be, real or not, a dispute is a serious event on a construction project, often causing progress to screech to a halt. What should you do? Start with a good contract. Negotiate the best terms possible to suit your needs and make sure you understand what you are getting yourself into before you start a job. Then document everything – keep good records as to performance, communication and payment. Corroboration will be needed to either prosecute your position or defend against any claim.
Unfortunately, all too often, dispute resolution alternatives are generally an afterthought for contractors whose attention is generally more focused on scope and price. But it will only take one bad experience with the legal system to bring home the fact that how disputes are addressed is as important as anything else found within one’s contract.
There are essentially four avenues to take when a dispute arises – direct negotiation between the parties, mediation before an impartial intermediary, arbitration before one or three arbitrators, or litigation before a judge or jury in state or federal court. Each comes with benefits and disadvantages, and contractors would be smart to understand the distinctions.
The easiest, and what should absolutely be the first step when any dispute occurs, is a meeting of the parties to discuss their respective positions. It is by far the least expensive and could be the most immediately productive. And if it accomplishes nothing, it at least sets out the actual points of disagreement so the parties know, going forward, where they each stand.
The next, and often the required first step to any eventual arbitration or litigation, is mediation. Often misunderstood as just another form of arbitration,
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