Why do construction disputes occur?
A combination of environmental and behavioural factors can lead to construction disputes. Projects are usually long-term transactions with high uncertainty and complexity, and it is impossible to resolve every detail and foresee every contingency at the outset. As a result, situations often arise that are not clearly addressed by the contract. The basic factors that drive the development of construction disputes are uncertainty, contractual problems, and behaviour.
Uncertainty is the difference between the amount of information required to do the task and the amount of information available (Galbraith, 1973). The amount of information required depends on the task complexity and the performance requirements, usually measured in time or to a budget. The amount of information available depends on the effectiveness of planning and requires the collection and interpretation of that information for the task.
Uncertainty means that not every detail of a project can be planned before work begins (Laufer, 1991). When uncertainty is high, initial drawings and specification will almost certainly change and the project members will have to work hard to solve problems as work proceeds if disputes are to be avoided.
Standard forms of contract clearly prescribe the risks and obligations each party has agreed to take. Such rigid agreements may not be appropriate for long-term transactions carried out under conditions of uncertainty.
It is not uncommon to find amended terms or bespoke contracts that shift the risk and obligations of the parties, often to the party least capable of carrying that risk. Where amended terms or bespoke contracts are used, they may be unclear and ambiguous. As a consequence, differences may arise in the parties’ perception of the risk allocation under the contract. Where the parties have agreed to amended or bespoke terms, those conditions take effect in addition to the applicable law of the contract, which is continually evolving and being refined to address new issues.
Since contracts cannot cater for every eventuality, wherever problems arise either party may have an interest in gaining as much as they can from the other. Equally, the parties may have a different perception of the facts. At least one of the parties may have unrealistic expectations, affecting their ability to reach agreement. Alternatively, one party may simply deny responsibility in an attempt to avoid liability.