Construction Claims and Dispute Resolution
Expert-defined terms from the Certificate in Cost Management in Construction course at London School of Planning and Management. Free to read, free to share, paired with a professional course.
Acceleration Claim – A request by a contractor for additional payment whe… #
Related terms: schedule compression, liquidated damages, concurrent delay. The claim quantifies extra costs such as overtime labor, premium equipment rates, and accelerated material procurement. Practical application: a project owner decides to fast‑track a high‑rise office tower to meet a lease deadline; the contractor submits an acceleration claim detailing the increased resource usage. Challenges include proving causation, separating acceleration costs from normal productivity gains, and negotiating fair compensation without triggering liquidated damages for early completion.
Adjudication – A fast‑track dispute resolution method where an independen… #
Related terms: dispute boards, arbitration, dispute resolution clause. It is commonly used in construction contracts to maintain project momentum while disputes are settled. Example: a subcontractor alleges non‑payment for change orders; the parties refer the matter to adjudication, receiving a decision that the owner must pay the disputed amount within the adjudication period. The main challenge is ensuring the adjudicator has sufficient technical expertise and that parties respect the interim binding nature of the award.
Change Order – A written amendment to the original construction contract… #
Related terms: variation, amendment, scope change. Change orders can be initiated by the owner, contractor, or design team and must be documented to avoid later claims. Practical use: a client requests an additional façade material after the contract is signed; a change order records the new material specifications, cost impact, and schedule adjustment. Challenges include controlling scope creep, maintaining accurate cost tracking, and preventing disputes over whether a change order was properly authorized.
Concurrent Delay – Occurs when two or more parties cause delays simultane… #
Related terms: critical path, delay analysis, force majeure. In a concurrent delay scenario, both the contractor’s and owner’s actions may have contributed to the schedule slippage. Example: the contractor experiences a labor shortage while the owner delays provision of essential site access; both delays overlap. The challenge lies in apportioning liability, as many jurisdictions limit recovery when delays are truly concurrent, requiring detailed forensic schedule analysis.
Constructive Change – A situation where the contractor is compelled to pe… #
Related terms: implied change, claim, variation. The contractor may be entitled to compensation for additional effort, materials, or time. Example: the owner insists on using a different concrete mix after the contract is signed, leading the contractor to incur extra costs; this may be treated as a constructive change. The difficulty is proving that the change was not authorized and that the contractor had no alternative but to comply.
Counterclaim – A claim filed by a respondent against the original claiman… #
Related terms: reciprocal claim, cross‑claim, defense. Counterclaims are common in construction disputes where the contractor alleges non‑payment, and the owner responds with a claim for defective work. Practical scenario: a contractor files a payment claim for unpaid variation work; the owner files a counterclaim for rework caused by the contractor’s poor workmanship. The main challenge is managing parallel claim processes and ensuring both parties present credible evidence within contractual timeframes.
Dispute Review Board (DRB) – A panel of independent experts appointed at… #
Related terms: adjudication, mediation, dispute avoidance. DRBs aim to resolve issues before they become litigation, preserving relationships and project momentum. Example: a DRB issues a recommendation on a disputed subcontractor payment, which the parties accept, avoiding arbitration. Challenges include ensuring the board’s recommendations are binding enough to be effective and maintaining impartiality over long‑term projects.
Delay Claim – A contractor’s request for compensation due to schedule ext… #
Related terms: time extension, liquidated damages, schedule impact analysis. The claim must demonstrate the cause of delay, the effect on the critical path, and the resulting cost impact. Practical application: a contractor submits a delay claim after a site access restriction delays foundation work, attaching a revised program showing the extended completion date. The difficulty lies in producing credible forensic schedule analysis and overcoming defenses such as the “no damages” argument.
Dispute Resolution Clause – A contract provision that outlines the proced… #
Related terms: contract administration, dispute avoidance, arbitration agreement. A well‑drafted clause can reduce time and cost by establishing clear steps. Example: a construction contract includes a three‑stage clause: negotiation, followed by mediation, then adjudication if unresolved. The challenge is balancing flexibility with enforceability, ensuring the clause complies with jurisdictional requirements and that parties are committed to using the prescribed processes.
Force Majeure – An event beyond the control of either party that prevents… #
Related terms: unforeseeable event, excuse of performance, contractual relief. Force majeure clauses typically allow for time extensions and may excuse liability for damages. Example: a hurricane destroys a construction site, activating the force majeure clause, granting the contractor a schedule extension without penalty. Challenges include defining the scope of events covered, proving the event’s impact, and preventing parties from abusing the clause to avoid legitimate responsibilities.
Liquidated Damages – A pre‑agreed amount stipulated in the contract that… #
Related terms: penalty clause, delay penalty, performance bond. The purpose is to provide certainty and incentivize timely completion. Practical use: a contract specifies $5,000 per day as liquidated damages for late delivery of a hospital wing. The main challenge is ensuring the amount is a genuine pre‑estimate of loss, not an unlawful penalty, and managing the financial impact on the contractor if delays occur.
Mitigation – Efforts by a party to reduce the severity or impact of a cla… #
Related terms: duty to mitigate, loss reduction, proactive management. In construction disputes, both owners and contractors must take reasonable steps to limit damages. Example: after a material shortage, a contractor seeks alternative suppliers to avoid schedule delays, thereby mitigating potential claims. The difficulty is proving that sufficient mitigation steps were taken and that the other party’s actions prevented further loss.
Notice of Claim – A formal written notice informing the other party of a… #
Related terms: claim submission, notice period, procedural compliance. The notice typically outlines the nature of the claim, supporting facts, and the intended remedy. Practical scenario: a contractor provides a 30‑day notice of a forthcoming payment claim for extra work, triggering the contractual claim process. Challenges include meeting strict timing requirements, ensuring the notice contains adequate detail, and avoiding procedural defaults that could bar the claim.
Owner‑Controlled Schedule (OCS) – A schedule prepared and maintained by t… #
Related terms: master schedule, contractor schedule, schedule integration. The OCS can be a source of disputes if it does not reflect the contractor’s actual progress. Example: an OCS shows a critical path delay due to late delivery of steel, leading the owner to issue a liquidated damages claim. The contractor may challenge the OCS’s accuracy, requiring detailed schedule comparison and forensic analysis. The challenge lies in aligning the OCS with subcontractor schedules and ensuring transparent data sharing.
Payment Bond – A surety instrument that guarantees the contractor’s payme… #
Related terms: performance bond, surety, lien rights. If the contractor defaults, the bond provides financial protection to parties owed money. Practical use: a subcontractor files a claim against the payment bond when the general contractor fails to pay for installed HVAC systems. Challenges include navigating bond claim procedures, meeting notice deadlines, and dealing with surety investigations that may delay payment.
Performance Bond – A guarantee issued by a surety that the contractor wil… #
Related terms: payment bond, surety, contractor default. If the contractor fails to perform, the owner can claim against the bond to secure completion. Example: a contractor abandons a high‑rise project, prompting the owner to invoke the performance bond to engage a new contractor. Challenges include the cost of obtaining bonds, the surety’s assessment of contractor risk, and the administrative steps required for bond claims.
Pre‑Construction Services – Activities performed before the start of actu… #
Related terms: front‑end planning, feasibility study, design‑build. These services are often subject to separate contracts and may generate claims if scope changes occur. Practical example: a client engages a consultant for pre‑construction cost estimating; later, the client changes design assumptions, leading to a claim for additional estimation work. The challenge is clearly defining deliverables and managing expectations for what is included in pre‑construction scope.
Progress Claim – A periodic request submitted by the contractor for payme… #
Related terms: interim payment, schedule of values, invoicing. Progress claims must be supported by documentation such as measurement sheets, photographs, and certifications. Example: a contractor submits a monthly progress claim for the erection of structural steel, attaching a signed measurement statement. Challenges include reconciling differing interpretations of work completeness, timely certification by the architect/engineer, and avoiding cash‑flow disruptions.
Quantification of Claim – The process of calculating the monetary value o… #
Related terms: claim assessment, cost analysis, forensic accounting. Accurate quantification requires detailed records, cost data, and often expert input. Practical application: a consultant prepares a claim quantification for a contractor’s delay, estimating additional overhead, labor overtime, and equipment rental costs. Challenges involve obtaining reliable cost data, adjusting for inflation, and defending the methodology against opposing expert testimony.
Recovery Claim – A claim filed by a contractor seeking reimbursement for… #
Related terms: indemnity, compensation, breach of contract. Recovery claims can be based on time extensions, variation orders, or remedial work. Example: a contractor files a recovery claim for extra foundation work caused by inaccurate geotechnical reports provided by the owner. The challenge is proving causation and that the costs were reasonable and necessary.
Retainage – A portion of each progress payment withheld by the owner (com… #
Related terms: holdback, security, final payment. Retainage is released upon satisfactory completion and issuance of a final certificate. Practical use: an owner withholds 5% retainage on each invoice, releasing it after the contractor provides a warranty certificate. Challenges include disputes over the amount of retainage, timing of release, and the impact on contractor cash flow.
Schedule of Values (SOV) – A detailed breakdown of the contract price int… #
Related terms: cost code, work breakdown structure, billing. The SOV serves as a basis for measuring work completed and for issuing progress claims. Example: a contractor submits an SOV that allocates 20% of the contract sum to concrete work, 30% to steel erection, etc. Issues may arise if the owner disputes the percentage allocation or if the SOV does not reflect actual work progress, leading to payment disputes.
Scope Creep – The gradual expansion of project scope without correspondin… #
related terms: change management, variation, uncontrolled change. Scope creep often leads to claims for additional compensation or schedule extensions. Example: a client repeatedly adds minor design features to a residential project, resulting in increased labor hours. The contractor must document each addition and submit variation claims to avoid unpriced work. The main challenge is early detection and proactive communication to prevent uncontrolled growth.
Settlement Agreement – A legally binding contract in which parties resolv… #
Related terms: compromise, release, mediation outcome. Settlement agreements can be reached through negotiation, mediation, or after adjudication. Practical example: after an adjudication award, the parties sign a settlement agreement that outlines the payment schedule and includes a mutual release of all related claims. Challenges include ensuring the agreement is comprehensive, enforceable, and that both parties fully understand the rights they are relinquishing.
Statutory Lien – A legal claim against a property for unpaid work or mate… #
Related terms: mechanic’s lien, lien rights, lien priority. In many jurisdictions, contractors and subcontractors can file a lien if they are not paid, protecting their financial interests. Example: a subcontractor files a mechanic’s lien against a commercial building after the general contractor fails to pass payment. The challenge is complying with strict filing deadlines, notice requirements, and potential extinguishment of the lien if the property is sold.
Time Extension – An amendment to the contract schedule granting additiona… #
Related terms: schedule extension, extension of time (EOT), delay analysis. The contractor must submit a formal request, often accompanied by supporting documentation. Practical scenario: a contractor requests a 30‑day time extension after a prolonged strike halts site access. Challenges include proving the delay is excusable, meeting notice deadlines, and avoiding liquidated damages for the period beyond the granted extension.
Variation – Any change to the original scope of work, including additions… #
Related terms: change order, amendment, scope change. Variations are usually documented through formal change orders. Example: the owner decides to upgrade the HVAC system to a higher efficiency model, resulting in a variation that increases the contract sum. The difficulty lies in accurate cost estimation, timely approval, and preventing disputes over whether a change qualifies as a variation or a constructive change.
Waiver and Release – A contractual instrument where one party relinquishe… #
Related terms: settlement, discharge, compromise. Waivers are commonly employed in progress payments to protect owners from future claims related to the paid work. Example: a subcontractor signs a waiver of lien upon receipt of a final payment, thereby releasing the owner from any further claims. Challenges include ensuring the waiver does not unintentionally forfeit unrelated rights and that the consideration provided is adequate.
Workmanship Defect – A flaw or deficiency in the quality of construction… #
Related terms: non‑conformance, rework, remediation. Defects may lead to claims for repair costs, schedule impacts, or damages. Practical example: a contractor discovers that installed windows do not meet the specified thermal performance, requiring replacement. The contractor may claim additional costs if the defect resulted from design errors caused by the owner. The main challenge is documenting the defect, establishing responsibility, and negotiating remediation without extensive litigation.
Arbitration – A private dispute resolution process where an impartial arb… #
Related terms: arbitration clause, award, alternative dispute resolution (ADR). Arbitration is favored for its confidentiality and flexibility. Example: a contractor and owner agree to arbitrate a claim for delayed completion, resulting in an award that includes both liquidated damages and a schedule extension. Challenges include selecting a qualified arbitrator, managing costs, and ensuring the award is enforceable in the relevant jurisdiction.
Back Charge – A deduction from a contractor’s payment due to costs incurr… #
Related terms: chargeback, offset, compensation. Back charges are often used when subcontractors fail to complete agreed‑upon tasks. Practical scenario: a subcontractor does not install fireproofing as required; the general contractor hires another firm to complete the work and issues a back charge to the original subcontractor. The difficulty lies in proving the additional cost was reasonable and directly attributable to the non‑performing party.
Claims Management System (CMS) – A software platform used to track, docum… #
Related terms: claim register, document control, project controls. CMS tools enable systematic capture of notices, supporting evidence, and decision outcomes. Example: a contractor uses a CMS to log all variation requests, attach supporting drawings, and monitor claim status. Challenges include ensuring data integrity, integrating with existing project management systems, and training staff to use the system effectively.
Concurrent Possibility – A legal concept where two or more parties may ha… #
Related terms: apportionment, joint liability, contributory negligence. In construction, it may arise when both contractor and owner actions lead to a delay. Practical example: a contractor’s delayed procurement and an owner’s late site handover both cause a schedule impact; each party may be held partially responsible. The challenge is quantifying each party’s share of the loss, often requiring expert testimony.
Contractor’s Risk Register – A documented list of potential risks that co… #
Related terms: risk register, risk mitigation, risk assessment. The register supports proactive risk management and claim avoidance. Example: a contractor includes “material price escalation” in its risk register and implements a hedging strategy to mitigate cost overruns. The difficulty lies in keeping the register up to date, accurately assessing risk probability, and ensuring appropriate contingency allocation.
Damages – Monetary compensation awarded to a party for loss or injury suf… #
Related terms: compensation, restitution, remedial damages. In construction, damages may be direct, consequential, or liquidated. Practical scenario: an owner suffers loss of rental income because a commercial building is delayed; the contractor may be liable for consequential damages if the contract permits. Challenges include proving the amount of loss, establishing causation, and navigating contractual limitations on damages.
Dispute Avoidance – Strategies and practices employed during project exec… #
Related terms: proactive management, conflict resolution, project governance. Effective dispute avoidance reduces the likelihood of costly claims. Example: a project team implements a weekly coordination meeting and uses a shared document repository to capture decisions, thereby minimizing misunderstandings. The challenge is maintaining discipline over the project’s lifecycle and ensuring all parties adhere to agreed‑upon processes.
Earned Value Management (EVM) – A performance measurement technique that… #
Related terms: cost performance index, schedule performance index, variance analysis. EVM provides early warning of potential overruns that may lead to claims. Practical use: a contractor tracks earned value against the baseline and identifies a cost variance that could trigger a claim for additional resources. Challenges include establishing a reliable baseline, accurate data collection, and interpreting EVM metrics in complex, multi‑contract environments.
Expert Witness – A qualified professional who provides specialized testim… #
Related terms: specialist testimony, forensic expert, opinion evidence. Expert witnesses may be retained by either party to support or refute claims. Example: a cost engineer acts as an expert witness to quantify the financial impact of a delay. The difficulty lies in selecting an impartial expert, ensuring the expert’s methodology is defensible, and managing costs associated with expert engagement.
Force Majeure Clause – A contractual provision that defines events consid… #
Related terms: act of God, unforeseeable event, contractual relief. The clause typically allows extensions of time and may excuse performance. Practical scenario: a pandemic leads to material shortages; the clause is invoked to grant the contractor a schedule extension without penalty. Challenges include interpreting the clause’s scope, proving the event’s impact, and preventing parties from misusing the clause to avoid contractual duties.
Indemnity – A contractual obligation where one party agrees to compensate… #
Related terms: hold harmless, liability, risk transfer. Indemnities are common in construction contracts to allocate risk. Example: a subcontractor indemnifies the owner against claims arising from defective workmanship. The challenge is drafting clear indemnity language that defines the scope, limits, and conditions, and ensuring it complies with local law.
Joint Venture (JV) – A business arrangement where two or more parties com… #
Related terms: partnership, consortium, shared risk. JVs often involve complex claim handling due to multiple parties. Practical example: a developer and a construction firm form a JV to deliver a mixed‑use development, agreeing on a shared claim process. Challenges include aligning risk appetites, coordinating claim documentation, and resolving disputes within the JV framework.
Letter of Intent (LOI) – A preliminary agreement that outlines the partie… #
Related terms: preliminary agreement, pre‑contract, provisional sum. LOIs may contain provisions for payments, scope, and dispute mechanisms. Example: an owner issues an LOI to a contractor to start site preparation while negotiations on the full contract continue. The challenge is that LOIs may be ambiguous, leading to disputes over whether they constitute enforceable obligations or merely expressions of intent.
Mitigation Plan – A structured approach detailing actions to reduce the l… #
Related terms: risk mitigation, corrective action, contingency planning. Mitigation plans are often required by contracts during claim negotiations. Practical scenario: after receiving a delay notice, a contractor develops a mitigation plan that reallocates resources to critical path activities to minimize schedule impact. The difficulty is ensuring the plan is realistic, adequately resourced, and accepted by the other party.
Notice of Termination – Formal communication indicating the intention to… #
Related terms: contract termination, default, cure period. The notice must comply with contractual notice periods and may trigger specific rights, such as suspension of work or claim for damages. Example: an owner issues a notice of termination after the contractor repeatedly fails to meet milestone dates. Challenges include ensuring the termination is lawful, managing the transition of work, and handling ensuing claims for compensation or loss.
Pre‑Award Risk Assessment – An analysis performed before contract award t… #
Related terms: risk allocation, due diligence, bid risk. The assessment informs contract negotiations and claim prevention strategies. Practical example: a contractor conducts a pre‑award risk assessment that highlights potential site access issues, leading to specific contractual provisions for extensions of time. The challenge is accurately forecasting risks and negotiating fair risk sharing without inflating bid prices.
Provisional Sum – An estimated amount included in the contract for work t… #
Related terms: allowance, contingency, estimate. Provisional sums allow flexibility but can become sources of disputes if not properly managed. Example: a contract includes a provisional sum for unforeseen underground utilities; when the utilities are discovered, the contractor submits a variation for the actual cost. Challenges include establishing clear measurement criteria and preventing misuse as a “catch‑all” for unpriced work.
Reinstatement Claim – A claim made by a contractor to recover costs incur… #
Related terms: site reinstatement, demobilization, restoration. Reinstatement claims may cover removal of temporary facilities, site cleanup, and reinstatement of services. Practical scenario: a project is halted due to a regulatory stop‑order; the contractor files a reinstatement claim for costs associated with site preservation and later re‑establishment. Challenges include documenting the extent of required reinstatement and negotiating fair compensation.
Retention Release – The process by which the withheld retainage portion o… #
Related terms: final payment, holdback, release of funds. Retention release may be contingent on achieving specific milestones, such as issuance of a completion certificate. Example: an owner releases 5% retention after the contractor submits a warranty certificate and all punch‑list items are addressed. Challenges include disputes over the adequacy of completed work, timing of release, and potential cash‑flow impacts on the contractor.
Schedule Impact Analysis – A detailed examination of how a particular eve… #
Related terms: critical path analysis, time impact analysis, schedule compression. The analysis quantifies the effect on completion dates and may support claims for extensions or damages. Practical example: a contractor conducts a schedule impact analysis after a material shortage, demonstrating a 20‑day delay to the critical path. The challenge is producing a credible, methodologically sound analysis that withstands scrutiny from opposing experts and tribunals.
Security of Payment – Legislative schemes that ensure contractors and sub… #
Related terms: payment legislation, lien rights, prompt payment. These regimes provide mechanisms for rapid dispute resolution over payment issues. Example: a subcontractor invokes the security of payment act to obtain adjudication of a disputed invoice, resulting in an enforceable payment order. Challenges include navigating varying jurisdictional rules, complying with strict notice requirements, and managing the cost of adjudication.
Substantial Completion – The point at which the work is sufficiently comp… #
Related terms: practical completion, punch list, occupancy certificate. Substantial completion often triggers payment of retainage and may limit the contractor’s liability for certain defects. Practical scenario: a hospital wing reaches substantial completion; the owner takes possession, and the contractor is released from further performance except for warranty obligations. Challenges include defining the precise criteria for substantial completion and handling disputes over remaining work.
Technical Evaluation – An assessment performed by qualified professionals… #
Related terms: engineering assessment, forensic analysis, expert review. Technical evaluations support claim substantiation and dispute resolution. Example: an engineer conducts a technical evaluation of a claimed design error, concluding that the owner’s specifications were deficient, thereby supporting the contractor’s variation claim. The difficulty lies in obtaining unbiased evaluations and integrating technical findings into legal arguments.
Time‑Based Claim – A claim that seeks compensation based on the duration… #
Related terms: delay claim, schedule impact, time impact analysis. Time‑based claims require precise measurement of delay periods and correlation to contract provisions. Practical example: a contractor files a time‑based claim for 15 days of delay caused by late delivery of structural steel, requesting both an extension of time and associated cost compensation. Challenges include establishing the critical path impact and overcoming defenses that argue the delay was not excusable.
Variation Order – A formal document authorizing a change to the scope, sc… #
Related terms: amendment, change directive, scope modification. Variation orders must be signed by both parties to be enforceable. Example: a design‑build contractor receives a variation order to increase the building’s floor‑to‑ceiling height, resulting in additional structural work and cost. The difficulty lies in timely issuance, accurate cost estimation, and ensuring the variation does not conflict with other contract provisions.
Warranty Claim – A request for remediation or compensation based on defec… #
Related terms: defect liability, maintenance period, remedial work. Warranty claims may involve repair, replacement, or compensation for loss of use. Practical scenario: a building owner files a warranty claim for water infiltration discovered two months after handover, requiring the contractor to rectify the defect. Challenges include determining whether the defect falls within the warranty scope, the contractor’s liability, and the appropriate remedy.
Work‑Ready Schedule – A schedule that reflects the contractor’s ability t… #
Related terms: mobilization plan, start‑up schedule, readiness assessment. The schedule demonstrates feasibility and helps avoid early‑stage claims. Example: a contractor submits a work‑ready schedule showing that site preparation can begin within ten days of notice to proceed. The challenge is aligning the work‑ready schedule with owner expectations and ensuring it accounts for all logistical constraints.
Yield Analysis – An assessment of the productivity and efficiency of cons… #
Related terms: productivity measurement, performance benchmarking, labor efficiency. Yield analysis compares actual output to planned benchmarks, identifying variances that may underpin a claim. Practical example: a contractor performs yield analysis on concrete pouring rates, demonstrating that adverse site conditions reduced productivity, justifying a claim for additional labor costs. Challenges include obtaining accurate data, accounting for external factors, and presenting the analysis in a manner acceptable to adjudicators.