When companies handling multi-million-dollar construction projects find themselves navigating disputes over contracts, it is possible that the only way to reach a just resolution is litigation. While many construction disagreements are resolved through negotiation, some situations demand a litigated response in order to protect a company’s financial interests, reputation and/or contractual rights.
When companies are trying to complete projects valued in the millions, construction contract disputes may easily involve significant financial risks and complex legal challenges. As such, much is generally at stake in such situations. Negotiating a solution amid such complex circumstances simply may not be a viable option.
Significant breaches of contract
In the construction industry, a breach of contract scenario can take many forms, including failure to adhere to timelines, refusal to meet agreed-upon quality standards, noncompliance with project specifications or failure to timely pay. When such breaches threaten a project’s completion and/or a company’s profitability, litigation or arbitration may be necessary to recover damages or enforce specific performance.
Often especially when it comes to large companies and/or projects, such breaches can result in substantial losses, especially if project delays ripple across dependent business operations or affect other contractual obligations. When a breach significantly impacts project milestones or risks client relationships, a litigated or arbitrated response may serve as a strategic tool for enforcing accountability and seeking redress.
Payment disputes and nonpayment
As complex construction projects evolve, payment disputes can become contentious. Issues such as delayed payments, disputes over change orders or disagreements over the valuation of completed work can disrupt project funding. For companies involved in large-scale projects, substantial capital is often tied to each stage of construction, making prompt and accurate payments essential.
If negotiation fails, litigation or arbitration may be necessary to ensure timely payment or resolve disputes about payment terms. A court’s or arbitrator’s intervention can clarify contract terms, validate outstanding invoices and even order specific payment schedules, effectively safeguarding the financial health of a negatively affected business.
Defective work or material issues
The use of substandard materials or poor-quality work can lead to disputes that require legal intervention. Subpar construction can result in extensive remedial costs, project delays and damage to a company’s reputation. When a contractor fails to meet quality standards, litigation or arbitration can potentially help to recover the costs of rectifying defective work or subpar materials.
While the costs of litigation or arbitration are rarely insignificant, it is sometimes necessary for companies to resort to litigation for construction-related contract disputes.
