Construction litigation involves legal disputes related to construction projects. These disputes can arise between various parties in the construction industry, including contractors, subcontractors, property owners, developers, architects and engineers. Clients involved in construction projects often face delays, cost overruns, defects or payment problems, leading to litigation to resolve these disputes.
Construction litigation addresses these disputes and ensures that all parties fulfill their contractual obligations. Of course, the best way to try to avoid litigation is to have proper contracts which address many of these issues.
5 common types of construction disputes
Construction projects are complex and can lead to various disputes. Here are five common types of construction disputes that often result in litigation:
- Construction defects: These disputes arise when there are alleged flaws in the construction work, such as structural issues, water leaks or electrical problems. Defects can lead to safety hazards and financial losses for property owners.
- Payment disputes: Contractors and subcontractors may face issues with receiving timely payments for their work. Payment disputes can involve unpaid invoices, underpayment or disagreements over the amount owed.
- Delay claims: Delays in construction projects can cause significant financial losses. Disputes may arise over who is responsible for the delay and whether the affected party is entitled to compensation.
- Breach of contract: When one party fails to fulfill their contractual obligations, it can lead to a breach of contract dispute. This can include issues like not completing work on time, using substandard materials or failing to meet project specifications.
- Liens and bond claims: Contractors and suppliers may file liens or bond claims to secure payment for their work or materials. Disputes can arise over the validity of these claims and the amount owed.
Depending upon the size of the project and the details involved, these cases can involve millions of dollars and take months to years to resolve. Factors which may influence the length of litigation include the amount of evidence to be reviewed and the court’s schedule. Complex cases with multiple parties and extensive discovery processes tend to take longer. Additionally, the duration may be longer if the case goes to trial.
Court determination of damages
In construction litigation, the court may determine several types of damages depending on the nature of the dispute. Damages can include:
- Compensatory damages: These pay the injured party for their actual losses, such as repair costs, lost profits and additional expenses incurred due to the dispute.
- Punitive damages: In cases of severe misconduct or fraud, the court may award punitive damages to punish the wrongdoer and deter similar behavior in the future, provided that such damages are permitted by statute, court rule or the agreement itself.
- Liquidated damages: These are pre-determined amounts specified in the contract, payable if a party does not meet certain conditions, provided they are deemed reasonable.
New Jersey law allows for treble damages (three times the actual damages) in certain cases, such as those involving consumer fraud.
Litigation vs. Alternate dispute resolution
Not every construction dispute ends up in litigation. Alternative dispute resolution (ADR) methods, such as mediation and arbitration, offer many benefits. ADR can be faster, less expensive, and less adversarial than traditional litigation. Mediation allows parties to reach mutually agreeable solutions and maintain their business relationships. Arbitration is a private resolution of the dispute but must be mutually agreeable to the parties especially since arbitration serves to waive the right to a jury trial. If, however, the parties do not agree to arbitration, litigation provides a formal process to protect legal rights and resolve disputes.