A construction claim is the assertion of a right that requires either more time or/and payment by either party of the contract (often the contractor) for compensation of the losses brought on by the other party's failure to uphold their portion of the responsibilities as defined in the contract.
The compensation often involves extra payment or an extension of time (EOT).
Construction claims often result from efforts made by clients, contractors, and subcontractors in the context of meeting their objectives and goals to increase their benefits.Â
Due to intense competition in the market, contractors are sometimes compelled to propose project bids with low-profit margins to stay competitive.
As a result, contractors face additional pressure to complete the projects while generating lower earnings. In this case, during the execution of the project, there is a high chance that the contractor fails to satisfy the client due to differing expectations and aims, eventually leading to conflicts.
Many project participants have rated construction claims as one of the most stressful and unpleasant project moments. They potentially result in a protracted legal battle or, worse still, bankruptcy.
Several additional factors also cause claims, including poor project planning, scope revisions, change orders, mistakes, and omissions.
Knowing the various forms of construction claims enables owners to identify possible claim circumstances.
Types of Construction Claims
The different types of construction claims are described below:
1. Delay Claim
It occurs when unanticipated events extend a project's completion date beyond the originally set one. If construction is delayed, production and money will be lost. An event even beyond the contractor's control, like flawed designs, bad weather, a pandemic, or an earthquake, can also be the reason for this.
2. Damage Claim
A claim is made when a construction project harms the business location or any nearby property. In these situations, the customer who sustained property loss may hold the contractor accountable for this harm by bringing a claim for damages against the contractor.
3. Price Escalation Claim
Price escalation claims occur when the anticipated project budget rises for finishing the task early or on time. Given that customers are responsible for paying the expenses associated with the accelerated service, clients are the ones that submit claims.
4. Change in Site Condition
The possibility of a different site conditions claim arises when the real state of the project site varies from what the client represented in the contract.
5. Injuries
When accidents occur on construction sites, a claim is sometimes made if site safety regulations were not followed. Both construction workers and onlookers might be involved in the catastrophe.
6. Change of Work
One of the most typical claims in the construction sector is this one. When the project has already begun, and the contractor gets a modification order from the customer, this claim is made. Conflicts arise when the customer and the contractor differ on what is and isn't covered under the contract.
Causes of Construction Claim
Many conflicts occur in the construction industry between the different parties, which mostly give rise to claims. After considering the opinion of experts like experienced contractors, clients, designers, arbitrators, and professors of the construction sector, the causes for construction claims are listed below:
- Delay in supply of drawings, handing over the site, supply of materials, payments, the commencement of work, and completion.Â
- Refund of maintenance deposit
- Loss due to extra overheads on account of extension of the time limit
- Loss due to idle machinery and idle labor
- Due to design errors
- Due to inadequate information related to the design
- Due to a change in work scope
- Due to changes in plans and specifications during construction
- Due to ambiguities in contract documents
- Due to inadequate investigation of the site
- Due to quoting low rates in the tender
- Due to changes made or changes that occur not at the request of the owner
- Due to the extension of time (EOT)
- Due to the financial failure of the contractor
- Due to the technical inadequacy of the contractor
- Due to poor quality of construction work and the use of the wrong equipment
- Due to failure to follow authorized procedures
- Due to damages occurring to adjacent buildings during the work
- Due to the stoppage of work by workersÂ
- Due to accident
- Due to natural calamities
- Due to an increase in material/fuel cost
- Due to weather conditions
- Due to unforeseen ground conditions.
Preventive Measures to Avoid Construction Claims
To avoid the lengthy procedure of construction claims, as contractors, preventive measures are essential to minimize the possibility of being caught up in costly litigation.
The following measures can prevent construction-related disputes in construction contracts:
- Clear terms and conditions in contracts safeguard all parties from legal disputes. A fair distribution of risks among all parties is a feature of good contracts that helps to lower risk and the number of legal conflicts.
- The design team should be given enough time to generate detailed and precise specifications, bills of quantities, and drawings with no or minimal mistakes and inconsistencies.
- The contractors prioritize protecting the employees and the project's property during construction. So, addressing safety concerns and reducing injury risks may be accomplished using a construction safety program.
- Maintain accurate project records in a timely manner, including timesheets, diary entries, reports, photographs, labor records, equipment used on the job site, records of weather and its impact on progress, construction progress, etc.
- Before beginning any modification work on the job site, the contractor should sign change (variant) orders.
- By hiring qualified workers and using sound management practices, the contractor should maintain the quality of his job.
FAQs
The different types of construction claims are,
1. Delay Claim
2. Damage Claim
3. Price Escalation Claim
4. Change in Site Condition
5. Injuries
6. Change of Work
Many conflicts occur in the construction industry between the different parties, which mostly give rise to claims. After considering the opinion of experts like experienced contractors, clients, designers, arbitrators, and professors of the construction sector, the causes for construction claims are listed in the article above.
The following measures can prevent construction-related disputes in construction contracts:
1. Clear terms and conditions in contracts safeguard all parties from legal disputes. A fair distribution of risks among all parties is a feature of good contracts that helps to lower risk and the number of legal conflicts.
2. The design team should be given enough time to generate detailed and precise specifications, bills of quantities, and drawings with no or minimal mistakes and inconsistencies.
3. The contractors prioritize protecting the employees and the project's property during construction. So, addressing safety concerns and reducing injury risks may be accomplished using a construction safety program.
4. Maintain accurate project records in a timely manner, including timesheets, diary entries, reports, photographs, labor records, equipment used on the job site, records of weather and its impact on progress, construction progress, etc.
5. Before beginning any modification work on the job site, the contractor should sign change (variant) orders.
6. By hiring qualified workers and using sound management practices, the contractor should maintain the quality of his job.
Read More