Disputes can happen at any stage within the construction process, from contract negotiations at the start of a project to non-payment when it’s complete. Contracts are put in place to establish clear guidelines and expectations between various parties during a project, but the end result may not be what was outlined—and a construction lawsuit might be the outcome.
Quick look
- Nonpayment by the project owner is one of the most common reasons for construction lawsuits.
- Construction delays can happen due to labor shortages, material shortages, and weather—they’re the second most common construction project pitfall.
- Workplace injuries are categorized into purposeful injuries by a worker leading to self-inflicted injuries or injury due to a lack of proper safety education or unsafe working conditions.
- Insufficient work quality and failure to meet contractual terms are other reasons for construction litigation.
Top 5 causes of construction litigation
1. Nonpayment
The problem: Contracts are put in place to establish guidelines—including work compensation. When a contractor completes a project and the owner doesn’t provide the agreed-upon compensation, contractors can file a lawsuit and sue for nonpayment.
In most cases of nonpayment, contractors will file a construction lien. Lien documents will typically go further than a lawsuit and will become attached to the title of the property and become available for public record. Once a lien is placed on a deed or property, it cannot be solid until the liens are cleared.
The solution: Unless the contractor has broken the terms of the contract, the project owner is obligated to complete the payment.
2. Failure to meet the terms of the contract
The problem: Project details are outlined in contracts to ensure all parties are on the same page. Omitting key details from a contract paves the way for conflict, and failing to meet the terms outlined in a contract paves the way for profit losses and lost business.
The solution: A well-worded contract in the construction industry can make the difference between a happy client and a messy lawsuit—but don’t include details that you don’t have the tools or manpower to fulfill. Of course, timelines and details may change due to various reasons, so even if you maintain your personal obligations, material suppliers and contractors could cause problems.
3. Workplace injuries
The problem: The construction industry is subject to some of the highest injury rates of any sector—falls, struck-by incidents, caught-between incidents, and electrocutions are the top four injuries experienced in the field. While safety protocols are put into place for a reason, accidents still happen.
Although many safety protocols are set throughout the construction industry, accidents are always likely to occur. There are typically two outcomes of job site injuries:
- A worker purposefully put themselves in danger, and they are responsible for their self-inflicted injuries
- The injury is a result of a lack of proper safety education or unsafe working conditions; the individuals in charge will generally be held responsible for these injuries
The solution: Following a workplace injury, the incident should be reported to the WSIB as soon as possible and within six months. After the WSIB has been notified, you can file a claim with your workers’ compensation insurance to help access important benefits, such as medical treatment coverage. Following up with your company and the WSIB and fixing whatever caused the injury are also essential.
4. Construction delays
The problem: Labor and materials shortages, permit delays, weather—delays like this happen frequently and, in most cases, these factors aren’t within anyone’s control. Construction delays are arguably one of the biggest job site stressors that can quickly derail a project and set you back weeks, sometimes even months.
According to the Crux Insight Report, conflicts over unforeseen physical conditions were the second most common project pitfall in the Americas.
The solution: While delays aren’t usually the contractor’s fault, if a completion day is laid out in a contract, the contractor can incur late penalties.
5. Work quality
The problem: Construction quality is critical for several reasons. If the site doesn’t meet specific standards, it poses a risk to every individual who enters and will likely result in litigation. The same goes for inspections. If building quality isn’t up to par, the project won’t pass inspections, and it will cause further delays and even more financial input.
The solution: In some situations, claims can be refuted—like when a contractor used the agreed upon materials or materials were faulty. But if work quality didn’t meet standards due to inexperienced laborers or the like, legal action will be harder to avoid. The Crux Insight Report showed that deficient workmanship is a significant cause for contention in the Americas on 20.3% of projects.
Tech can help mitigate lawsuits
If contractors and owners want to avoid litigation, there needs to be a fundamental change in the approach to projects. Projects are becoming increasingly more complicated, and with quick delivery expectations in a fast-paced environment, disputes will continue to arise.
Moving towards digitization can help contractors streamline the construction process and integrate every stage into a single construction management tool. While some disputes are inevitable—such as those arising from weather—construction software can support better planning, stronger management, and more efficient project competition.