Formal disputes in the construction industry can occur at any point in the contract period, and generally revolve around cost and time, or liability. Many disputes arise at the time the event occurs, but it is equally possible for a dispute to emerge much later than the event itself. This is either due to a failure to agree a mutually acceptable position on the issue, which then crystallises the disagreement further down the line, or for the point of dispute to arise when brought to light by other events. The classic example of this is a failure in design that leads to damage to a building, only discovered after many years, such as water ingress or structural failure – a latent defect.
While the statute of limitations – the maximum time after an event in which legal proceedings may be initiated – is 12 years for contracts executed as deeds, this relates to the event itself and not the date of the contract. For significant projects carried out over longer time spans, this can mean that disputes arise well after the 12 years generally understood to be the period of liability. Defending such claims can be difficult due to the availability or more likely the ability to locate the information required so long after the contract has completed.
Despite the wide use of email for communication purposes by the turn of the century, many construction professionals were – for many years – reliant on the postal service for contract administration. For example, by default the 1998 JCT contract did not permit electronic communication for formal documents. Unless parties had the foresight to store the information electronically they would have been reliant on hard copies, making it more difficult to locate and retrieve the critical material.
Another factor contributing to the difficulty of defending these claims is staff retention – boom and bust cycles encourage the movement of staff, which together with natural churn, makes it unlikely that many participants in a contract will still be at their original companies more than 12 years later. Although it is almost impossible to pass on all the specific knowledge gained during the process of managing or being involved in such projects, even vague memories can provide important context or reasoning that may not be immediately apparent, and can assist with tracing the information required. Once staff have left the business, however, this is lost and the only point of reference is the paperwork.
If you are responsible for contract administration in any way, shape or form – as an employer's agent, project manager, or in any commercial role on the client or contracting side – anything you put in writing may be read years from now in a court of law, without your ability to provide context or supporting information. It is important, therefore, that key contractual information not only speaks for itself but is accessible should this situation arise.
Technology can help, but it needs to be applied appropriately. It is easy to become dragged into an exchange of back and forth emails, or create only a short summary that makes sense to those currently resolving the issue. It is sometimes necessary to take a step back and record the full picture in a way that would be understood by parties not involved with the subject.
Formal documents issued under construction contracts are generally certificates that state, among other things:
In addition, there will be informal documents including progress meeting minutes and any other recorded meetings relating to the contract; emails, letters and handwritten documents may also be relevant in the event of a dispute.
While it is impractical to review every single piece of communication with a view to ensuring that it would stand alone, it would be prudent for consultants and clients alike to make sure any grey areas or contentious issues are recorded with the insight of contemporaneous knowledge. If the party making the claim has more accurate or informed records regarding a disagreement and the defending organisation has no contextual historic knowledge, the case will be very difficult to defend.
Many disputes will end up in front of an adjudicator where, in general, only written submissions will be reviewed. Evidence from the time of the actual event is critical in painting a picture and will be given significant weight in assessing the balance of liability. For example, a programme issued at the time by the contractor that shows an exaggerated assessment of delays from client instructions, but is not challenged, would indicate that this was accepted by default. All consultants have a responsibility to review contract documents and ensure that both they and the client are protected by acting in good time. This does not have to result in confrontation at every turn – a simple request for more substantiation or noting the flaws in a programme submission can be sufficient to protect the employer's position.
Construction contracts generate huge amounts of data. Ensuring that the information required to protect the employer is relevant, accurately recorded and available would take a relatively small amount of resources at the time – but could avoid problematic situations in the future.
Oliver Sugden MRICS is a managing surveyor at Sanctuary Housing Association email@example.com
Related competencies include: Legal/regulatory compliance