Construction Leadership Council (CLC) publishes briefing note on claims and disputes in construction

On 11 January 2021, the Construction Leadership Council (CLC) published a briefing note, claims and disputes in construction.

According to the CLC there have been positive reports of proactive and collaborative responses to address issues by parties to construction contracts. However, there remains a real concern that in 2021, as projects reach completion businesses will become embroiled in costly and long-running disputes over the effects of COVID-19 on projects.

The note provides a “snapshot of current thoughts and perceptions” and was prepared following consultation with a range of industry professionals on the nature and volume of potential claims and disputes, both now and in the future.

Construction Partner, Richard Millard comments “that it is encouraging that the report recognised that parties generally were acting collaboratively but it is important to recognise that contracts still remain in force and all contractual obligations and mechanisms for issuing notices etc. need to be followed to minimise the risk of a dispute arising.”

Key findings include:

• An increase in the level of notifications and claims because of COVID-19, along with an increase in the number of claims rejected because of COVID-19. It seems parties may be inclined to settle a claim for additional time for completion, but are reluctant to agree financial losses, costs and expenses.
• Changes in commercial behaviour. During Q2 and Q3 of 2020, there was an increased level of collaboration but commercial behaviour is perceived to be hardening throughout the supply chain, including “greater emphasis on management of existing contracts, increased tender lists and sub-economic pricing, and robust protective discussions on risk allocation in new contracts.
• An anticipated increase in the number of formal disputes. The note identifies a number of triggers for this, such as reaching the final account stage, tightening cash-flow and reduced good will. In addition, as well as claims for time, money, variations, a change in law and force majeure, the note acknowledges an increase in ‘smash and grab adjudications’ (the term used to describe an adjudication seeking payment on the grounds that the contractual payment mechanism has not been followed because the payer has neglected to serve a valid payment or pay less notice but there is a ‘notified sum’ of what is payable and this has not been paid).

In the event that you are involved in a construction contract and are looking for advice on a dispute, the interpretation of the contract or the drafting of the terms of contract on a new project please call Richard Millard on 01908 689382 or email rmillard@geoffreyleaver.com.

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Richard Millard | Managing Partner