The U.S. construction industry is a litigious industry, spending from $4 to $12 billion annually on dispute resolution (Gebken II, 2006). A recent study found that the average cost of individual disputes in the U.S. construction industry during 2011 was $10.5 million. Furthermore, the average length of time required to resolve each dispute was 14.4 months (EC Harris, 2012). In addition to the time and dollars expended, disputes inevitably damage relationships between project team members.
Common causes of construction con-tract disputes include:
ambiguities in the contract;
incomplete design information or employer requirements;
conflicting party interests;
failure to make interim awards on extensions of time and to give associated compensation; and
failure to properly administer the con-tract (EC Harris, 2012).
Contracts are essential to the construction process. In the simplest of terms, a contract is an agreement between two or more parties that is enforceable by law. A more complete definition would also ad-dress the desirability of using a written format, the necessity of an offer and an acceptance, an exchange of consideration and a requirement for competent parties.
Based on either definition, however, a well-formed, properly written contract is essential to the construction industry for at least two basic reasons. First, if a contract is intended to be an agreement between parties, then a written contract is the most reliable record of what the parties presumably agreed to do. Contract language that lacks clarity, includes significant errors and omissions, or contains excessive, nonessential information may result in great ambiguities. Too many ambiguities may put the interpretation of what the parties presumably agreed to in doubt, leading to the impossible accomplishment of the second basic reason for forming a contract: enforcement.
Enforcement is an absolute requirement of any contract. Whether excessive ambiguities in the contract result in a judgment that there was not a true meeting of the minds and, therefore, no agreement, or a refusal of one party to perform contractual obligations, without enforceability no protection whatsoever is provided by the contract for either party. Without a complete agreement in place and the availability of some enforcement procedure, no reasonable party would undertake a construction project.
Contract disputes can be associated with any or all of four major aspects of a construction project: cost, quality, schedule and safety. Many construction practitioners see the contract as a legal reference document to be pulled out only when there is a dispute. However, a more effective approach is to view the contract as a planning tool that can prevent some disputes. Construction safety professionals, whether representing owners or contractors, can help prevent disputes related to safety management by making sure specific safety-related clauses are incorporated into the contract before it is signed by the two parties.
