Construction projects are inherently complex endeavours that involve multiple participants, demand coordination, and carry inherent risks.[1] They bring together a wide range of stakeholders, technical experts, and layers of documentation that can run to hundreds or even thousands of pages. Every project operates under tight deadlines and budget pressures, where even minor delays or disruptions can have significant financial and practical consequences.
For contract and claims managers, understanding why disputes arise and how to prevent them is important for successful project delivery. For employers, understanding how and why disputes occur is just as relevant, as it helps them manage risks more effectively, make sound commercial decisions, and maintain constructive working relationships with contractors.
This note draws on insights from leading commentators and experienced practitioners. It lays down the framework for understanding the nature and complexity of construction disputes and their common causes, while also offering guidance on effective claims management and dispute prevention.
The Nature and Complexity of Construction Disputes
A Distinct Category of Dispute
The first step is to understand the nature and complexity of construction disputes, what makes them unique, and why they differ from ordinary commercial disputes. Construction disputes typically arise in a setting where technical, legal, financial, and operational issues are all closely connected throughout the life of a project.[2] Unlike a simple contract to supply goods or services, a construction contract governs a project that develops and changes as the work progresses. The design, scope, and methods of performance often develop as work progresses, requiring the parties to coordinate many parallel activities under tight deadlines and changing conditions.
As leading commentators on construction law have observed, several factors make these disputes particularly challenging.[3] The most important of these are outlined below:
- Technical Complexity and Case Management: Construction disputes are inherently technical and often involve complex engineering issues, detailed design work, and large volumes of factual evidence.[4] Each project produces a large amount of documentation, including drawings, schedules, progress reports, and correspondence, among others. All of this information must be carefully reviewed to determine what caused the dispute and who is responsible.
- Multiple Parties and Fragmented Responsibilities: Construction projects almost always involve several layers of participants, including, inter alia, contractors, subcontractors, suppliers, consultants, financiers, and insurers. Even in turnkey projects where a single contractor takes overall responsibility, parts of the work are usually subcontracted to others.[5] This complex network of contractual relationships can make it difficult to determine responsibility when issues arise. A dispute under one contract may easily extend to others, resulting in overlapping or parallel proceedings. In large and complex projects, it is often necessary to join or consolidate related claims to ensure consistency of decisions and avoid conflicting outcomes.[6]
- The Need for Timely Decisions: Unlike most commercial disputes, construction disputes often arise while work on the project is still ongoing. Both the employer and the contractor have a strong interest in keeping the project on track and minimising disruption and unnecessary delays. Because of this, construction disputes require practical and timely decision-making rather than long, drawn-out arbitrations.[7] Mechanisms such as Dispute Adjudication Boards (DABs) and interim determinations are designed to deliver quick and workable solutions. These special procedures are intended to allow the project to continue while safeguarding each party’s rights and ensuring that more complex issues can still be addressed later, if necessary.
- International and Cross-Cultural Dimensions: Many construction projects bring together parties from different countries, legal systems, and professional backgrounds.[8] While this diversity brings valuable expertise and perspective, it can also create misunderstandings. Differences in contract interpretation, communication styles, and expectations of fairness and industry standards can easily lead to tension. Claims managers and legal teams working on international projects must therefore remain aware of these legal and cultural differences at every stage of the project.
In addition, what adds further complexity to construction disputes is the legal and regulatory framework within which projects are carried out. Standard forms, the choice of governing law, and national legislation all have a significant impact on how contracts are interpreted and disputes are resolved.
The Role of Standard Forms of Contract
Standard forms of contract, such as FIDIC, NEC, and the ICE Conditions of Contract, are widely used in the construction industry.[9] They provide structure, promote consistency, and help parties anticipate how risk will be allocated and managed. In reality, though, these standard forms are almost never used as they are. Parties usually modify them to address project-specific risks or to comply with the governing law and local regulations in the country where the project takes place. Such changes, however, can later cause serious issues by creating inconsistencies and uncertainty.
As one of the leading commentators on construction contracts, Jane Jenkins observes, further difficulties arise when a form drafted for one legal system, such as FIDIC under English law, is used with a different governing law.[10] In these situations, familiar clauses may be interpreted differently, and even commonly used terms can take on new meanings, often resulting in disagreements about interpretation and the intended allocation of risk. This is a frequent issue in arbitrations involving FIDIC-based contracts, particularly in developing jurisdictions where local teams may have limited experience with such complex standard forms.
Choosing the Right Governing Law
Choosing the governing law for a construction contract is not that simple, especially on international projects. Some contractors and employers tend to use the same governing law across all their projects to maintain consistency and predictability. However, this can create problems when the selected governing law conflicts with mandatory local legislation in the country where the works are carried out, or when the standard terms used are not fully compatible with it.[11]
Even when a governing law is clearly specified, local rules such as licensing, environmental, and labour regulations will still apply. These mandatory provisions can override parts of the contract and affect how its terms are interpreted or enforced. Understanding how the chosen law works alongside local legal requirements is important for managing risk and avoiding unexpected problems.
Sector-Specific Legislation and Regulatory Frameworks
Construction is strongly influenced by national legislation and regulatory frameworks. In the United Kingdom, for example, the Housing Grants, Construction and Regeneration Act 1996 (“UK Housing Act”) establishes statutory adjudication and payment provisions that take precedence over conflicting contractual terms.[12]
Similar legislation exists elsewhere. In Singapore, the Building and Construction Industry Security of Payment Act 2004 (“SOPA”) grants contractors and subcontractors a statutory right to prompt payment and adjudication, helping to maintain cash flow during the project.[13] In Australia, comparable Security of Payment Acts operate at the state and territory level, providing similar mechanisms for interim payment and dispute resolution.[14]
In many civil law jurisdictions, including France and the United Arab Emirates, detailed building codes provide for mandatory decennial liability imposing a ten-year obligation on contractors and designers for defects that affect the structural integrity or safety of a building.[15]
Understanding these national frameworks is essential for managing risk, ensuring compliance, and maintaining the enforceability of construction contracts across jurisdictions.
Common Causes of Construction Disputes
Although every project is unique, specific patterns appear consistently across regions and industries. As construction arbitration practitioners, we observe the same recurring issues in most cases, including, most commonly, disputes over unpaid invoices, delays and/or disruption and variations. Recognising these common causes allows project teams to identify risks early and take practical steps to try to prevent disputes before they even arise.
Failure to Comply with Contractual Obligations
One of the most common causes of disputes is simply a failure to follow the contract. Parties often misunderstand or overlook key procedural requirements such as notice provisions, change procedures, or time-bar clauses. In many cases, project teams fail to submit formal notices within the time limits set out in the contract, without being aware that they might lose their right to raise claims for additional time or payment later.
From a legal perspective, once the dispute has already arisen, it is not always clear whether a party is invoking a contractual entitlement or alleging a breach of contract. This distinction can have important consequences for how claims are framed, interpreted, and defended. It is also an area where even experienced practitioners sometimes struggle, particularly when contractual mechanisms and common law remedies overlap.
These problems are often the result of inadequate training or the use of standard form contracts without proper adaptation to the specific needs of the project. Ensuring that site staff and project managers understand the key procedures under the contract, especially those governing variations and extensions of time, is essential for effective risk management and to avoid future disputes. When in doubt, notices should always be issued as swiftly as possible.
Variations and Change Orders
No construction project ever goes exactly as planned. Changes in design, scope, quantities, or specifications are a regular part of a construction project, but they need to be managed carefully and in line with the contract. Variations are among the most common causes of disputes, particularly on large or technically complex projects where design development continues alongside construction.[16]
A variation may involve an addition, omission, or alteration to the works, or even a change in the sequence or method of construction. While most standard forms, including FIDIC, allow the employer to instruct such changes, they also set out specific procedures that must be followed.[17]
Disputes often arise when these steps are neglected or ignored. Informal instructions, late approvals, or verbal agreements on-site may lead to confusion about entitlement to payments or their valuation. If the contractor carries out the work without a formal instruction, it may later struggle to recover the associated costs or obtain an extension of time. Conversely, employers may face inflated claims or disagreements over the scope of approved work and additional payments claimed by contractors.
The key to avoiding such disputes lies in strict procedural compliance (see Variation Claims in International Arbitration). Contractors should issue timely notices when a variation affects cost or time, and employers should ensure that any instruction clearly states whether it constitutes a variation. Proper documentation is of utmost importance, as records of instructions, drawings, and correspondence often serve as key evidence once and if a dispute arises. Disagreements also frequently occur over the valuation of variations. Although standard forms set out various valuation methods, parties often differ on which method applies or whether a particular change qualifies as a variation. When variations become numerous or substantial, they can materially alter the scope of the project and give rise to claims for additional payment.
Delay and Disruption
Delay is one of the most frequent and complex causes of dispute in construction projects. It can stem from various events, such as late approvals, design errors, supply chain interruptions, adverse weather, or unforeseen site conditions. Delays may also arise from employer-driven changes, poor coordination among contractors, or slow responses from project managers and engineers. Because time is often critical in construction, even a relatively short delay can have significant financial consequences, such as penalties or liquidated damages, increased financing costs, or lost profit (see Prolongation Claims in Construction Arbitration: Heads of Costs That May Be Claimed; see also Overheads and Profit Claims in Construction Arbitration).
Understanding the cause and impact of a delay is rarely straightforward. Modern projects involve overlapping activities and interdependent workflows, which makes identifying the “critical path”, the sequence of tasks that determine the project’s completion date, even more important.[18] Where more than one cause contributes to the delay, tribunals and experts must consider whether the delays were concurrent and how responsibility should be shared between the parties. This complexity often makes delay analysis one of the most contentious parts of any arbitration.
Disruption, although related, is distinct from delay. It concerns loss of productivity rather than an extension of time.[19] For instance, late instructions or repeated design changes can cause inefficient sequencing or excessive rework. As highlighted in Disruption Claims in Construction Arbitration, disruption claims are among the hardest to prove, as they depend on detailed evidence linking specific events to measurable reductions in output. The most widely used analytical technique, the “measured mile” method, compares productivity in an unaffected portion of the work with that in the disrupted portion.[20] Maintaining accurate daily records of labour, equipment, and progress is therefore critical to substantiate such claims.
Defective Works and Omissions
Defective work is another common and contentious cause of construction disputes. Defects can arise from poor workmanship, design errors, the use of substandard materials, or a failure to follow specifications. In many cases, disputes revolve around who bears responsibility for the defects: the contractor, who executed the works, or the employer, who, in most cases, provided the design or specifications.[21]
Under most standard forms of contract, the contractor is responsible for completing the works in accordance with the agreed specifications and for remedying any defects identified during the defects notification period. Where the employer or its consultant provides the design, however, the allocation of risk may differ. In the FIDIC suite of contracts, the allocation of design responsibility depends on the specific form used. Understanding these differences is important when assessing who is liable for defects and which party carries the related risks.
A frequent point of contention arises where the cause of the defect lies somewhere between design and execution, for example, when a contractor follows defective drawings without raising a timely objection. In such cases, tribunals and courts often examine whether the contractor exercised reasonable skill and care in identifying and addressing potential issues.
As noted earlier, failing to follow the contract’s procedures for notifying and rectifying defects can seriously affect a party’s rights. In most cases, employers are required to give contractors a reasonable opportunity to fix the defects before bringing in third parties or claiming the cost of remedial work. Conversely, contractors who fail to act promptly or who deny responsibility risk losing control over the rectification process and incurring greater costs later.
Contract Administration Failures
Even a well-drafted construction contract can give rise to disputes if it is not properly administered. Many conflicts stem not from unclear clauses but from weaknesses in day-to-day contract management. Common administrative issues include delays in certifying payments, late decisions on extensions of time, failure to respond to claims, and inconsistent communication between the employer, engineer, and contractor.
Under most standard forms, including FIDIC, the engineer or project manager holds a central role in the administration of the contract. Their duties typically include issuing instructions, assessing variations, certifying payments, and determining claims. When these responsibilities are not performed impartially, consistently, or within the time limits prescribed by the contract, minor procedural issues can quickly escalate into major disputes.
Effective contract administration requires more than knowledge of the provisions of the contract itself. It depends on discipline, organisation, and proactive and constant communication. Every instruction, claim, and request for information should be documented. Keeping clear records of correspondence, progress meetings, and site decisions helps demonstrate compliance and transparency if disagreements arise later.[22] For example, the Society of Construction Law Delay and Disruption Protocol (the “SCL Protocol”) encourages contracting parties to agree on record-keeping schemes in advance and discourages a “wait and see” approach to delay, insisting instead on prompt, continuing analysis.[23]
Timely notice is also essential to effective claims management. Contractors frequently lose the right to raise valid claims because they fail to issue notices within the required time frame. Likewise, employers who fail to respond or make determinations within the required time frame risk being seen as acting unfairly or waiving their contractual rights.
Preparing for Effective Claims Management
As discussed above, effective claims management starts long before a dispute arises. As one learned author observed, “probably the most important aspect of dispute management is the avoidance of disputes.”[24] The following practices can help reduce risk and put a party in a stronger position if and when the dispute arises:
- Documentation and Record-Keeping: Keep accurate and contemporaneous records of all instructions, variations, delays, and correspondence.[25] Digital document management tools can be helpful, but they only work if information is entered accurately and on time. The SCL Protocol emphasises that maintaining reliable records from the outset of the project is fundamental to demonstrating entitlement and defending claims later.[26]
- Notice Compliance: Most modern contracts, including FIDIC, require strict adherence to notice procedures. Missing a deadline can lead to the loss of a valid claim. Maintaining a live claims register helps track key dates and ensure compliance.
- Early Warning and Communication: Open communication is central to preventing disputes. Early warning provisions under FIDIC, NEC, and other forms encourage parties to identify and address issues before they escalate.[27] The SCL Protocol similarly recommends early dialogue between the parties and regular updating of programmes to enable mitigation measures and avoid cumulative delay.[28] Prompt and transparent communication builds trust and helps preserve working relationships.
- Training and Capacity Building: Project teams should have a clear understanding of the contract’s risk allocation, notice provisions, and administrative procedures. Regular training helps teams stay aware of their responsibilities and apply the contract consistently throughout the project.
- Engagement of Experts: Bringing in experts early, such as quantity surveyors, delay analysts, or experienced claims managers, helps preserve evidence and align technical and legal positions. Involving experts early helps ensure that delay and disruption are assessed as they occur, consistent with the SCL Protocol’s recommendation to carry out ongoing rather than retrospective analysis.[29]
Conclusion: Prevention Through Preparation
The best way to manage construction disputes is to prevent them from happening in the first place. Clear and organised documentation, timely notices, and open and recorded communication may help reduce the risk of potential disputes. When disputes do arise, clear records and consistent contract management make them much easier to resolve efficiently and cost-effectively.
[1] N.G. Bunni, The FIDIC Forms of Contract (3rd ed., 2005), pp. 94-95. J. Jenkins, International Construction Arbitration Law (2nd ed., Wolters Kluwer, 2014), §1.01, p. 1. A. Nadar, The Contract: the Foundation of Construction Projects, in S. Brekoulakis, D.B. Thomas, The Guide to Construction Arbitration (4th ed., 2021), p. 10.
[2] J. Jenkins, International Construction Arbitration Law (2nd ed., Wolters Kluwer, 2014), §1.01, pp. 1-4.
[3] Ibid.
[4] Id., p. 1.
[5] A. Nadar, The Contract: the Foundation of Construction Projects, in S. Brekoulakis, D.B. Thomas, The Guide to Construction Arbitration (4th ed., 2021), p. 10. See also J. Jenkins, International Construction Arbitration Law (2nd ed., Wolters Kluwer, 2014), §1.01, p. 2.
[6] J. Jenkins, International Construction Arbitration Law (2nd ed., Wolters Kluwer, 2014), §1.01, pp. 1-2.
[7] Id., p. 1.
[8] Id., pp. 1-2.
[9] J. Bailey, Construction Law (2nd ed., 2016), paras. 3.10-3.12.
[10] J. Jenkins, International Construction Arbitration Law (2nd ed., Wolters Kluwer, 2014), §1.01, pp. 2-3.
[11] Id., pp. 2-3.
[12] Id., p. 4; UK Housing Act 1996, S.108.
[13] Building and Construction Industry Security of Payment Act 2004 (SOPA), Part 3 (Payment Claims and Responses).
[14] See, e.g., Building and Construction Industry Security of Payment Act 1999 (NSW), Part 2. Building and Construction Industry Security of Payment Act 2002 (Vic). See also J. Bailey, Construction Law (2nd ed., 2016), para. 6.02.
[15] Art. 1792; Art. 1792-4-1 C. Civ; UAE Civil Code, Art. 880-883.
[16] For further discussion of variations, see J. Bailey, Construction Law (2nd ed., 2016), Chapter 7. See also J. Jenkins, International Construction Arbitration Law (2nd ed., Wolters Kluwer, 2014), §2.08.
[17] The Second Edition of the Conditions of Contract for Construction, published by the Fédération Internationale des Ingénieurs-Conseils (“FIDIC”) as an update of the FIDIC 1999 Conditions of Contract for Construction (Red Book), First Edition.
[18] SCL Delay and Disruption Protocol (2nd ed., 2017), Guidance Part A: Delay, Disruption and Acceleration Concepts.
[19] SCL Delay and Disruption Protocol (2nd ed., 2017), Core Principles, para. 18, Guidance Part A: Delay, Disruption and Acceleration Concepts, para. 5.
[20] SCL Delay and Disruption Protocol, (2nd ed., 2017), para. 18.16 (a).
[21] For further discussion of defects and their treatment under construction contracts, see J. Bailey, Construction Law (2nd ed., 2016), Chapter 14.
[22] For more details on “Administration of the Contract”, see J. Jenkins, International Construction Arbitration Law (2nd ed., Wolters Kluwer, 2014), § 2.07.
[23] SCL Delay and Disruption Protocol (2nd ed., 2017), Core Principles, para. 4.
[24] D.A. Stephenson, Arbitration Practice in Construction Contracts (5th ed., 2000), Chapter 11.1, p. 125.
[25] Id., Chapter 11.1, p. 132.
[26] SCL Delay and Disruption Protocol (2nd ed., 2017), Core Principles, Part A, para. 1; Part B, para. 1.
[27] Id., Chapter 11.1, p. 132.
[28] SCL Delay and Disruption Protocol (2nd ed., 2017), Core Principles, Part B, paras. 1.19, 2.2.
[29] SCL Delay and Disruption Protocol (2nd ed., 2017), Core Principles, para. 4.
