The Construction Disputes

When a dispute over payment or performance interferes with a construction project or the use of a piece of real estate, all parties involved must critically assess their options with regard to negotiating a settlement or protecting their interests at trial.

For architects, engineers, developers, contractors, subcontractors, property owners and other parties involved in construction projects, a lot needs to go right in order for their project to reach completion without leading to a dispute. From scheduling delays to payment and surety bond issues, one problem will often lead to several others—creating a hostile set of circumstances that is ripe for litigation.

Of course, parties to construction contracts and others involved major development projects will often be able to resolve their differences amicably—and a negotiated resolution will often be in the best interests of all parties. But, depending upon the specific circumstances and parties involved, in some cases going to court will be the only option. With this in mind, here are five examples of construction-related disputes that will often lead to complex litigation:

1. Construction Defects

When a property owner claims that a structure is unsafe or has not been built according to specification, this can lead to complex litigation involving multiple parties. If the owner’s allegations are legitimate, contractors, subcontractors and other companies involved in the project will often be left to sort out liability amongst themselves.

2. Contract Disputes

Construction projects typically involve numerous contracts, from financing agreements to building contracts and contracts establishing payment and performance obligations amongst architects, engineers, builders and suppliers. Contract breaches and disagreements over the proper interpretation of contract provisions can both lead to contentious disputes.

3. “Pay If Paid” and “Pay When Paid” Disputes

These contract clauses frequently lead to disputes among contractors and subcontractors. While a “pay if paid” clause can shift the parties’ entire payment risk to the subcontractor, a “pay when paid” clause may obligate the contractor to compensate the subcontractor regardless of whether payment from the property owner remains outstanding.

4. Professional Liability Claims Against Architects and Engineers

In many cases, disputes involving construction projects’ safety, structural integrity and regulatory compliance will lead to professional liability claims against architects and engineers. Like other types of construction disputes, professional liability claims can lead to litigation involving the parties’ insurance companies as well.

5. Surety Bond Disputes

Statutory provisions for public projects and private construction contracts will frequently require contractors and subcontractors to provide surety bonds. Disputes over bid bonds, performance bonds and payment bonds can lead to multi-party litigation involving the surety, the contractor and the guaranteed party (the “obligee”).