Cost-related legal issues and disputes

In the world of construction, disagreements are almost inevitable—particularly when it comes to money. Whether it’s underpayment, disputed variations, or delays in payment, cost-related legal issues are among the most common sources of conflict in construction projects.

As a Quantity Surveyor, your ability to recognise, manage, and help resolve these issues can protect both your client’s interests and the integrity of the project. This topic explores the types of cost-related disputes you might encounter, why they happen, and how to manage or avoid them through good practice.

What Are Cost-Related Legal Issues?

Cost-related legal issues refer to disputes or breaches of contractual agreements involving money or valuation. These can affect any party—client, main contractor, or subcontractor—and usually arise from differing interpretations of contract terms or a failure to follow the contract correctly.

These issues can escalate quickly into formal disputes, which may require adjudication, arbitration, mediation, or even litigation if not managed properly.

Common Types of Cost-Related Disputes

Here are the most frequent issues that can cause friction on a construction project:

1. Disputed Variations

  • One party believes a change constitutes a variation and is entitled to additional payment, while the other disagrees.
  • Common causes: unforeseen circumstances, lack of written confirmation before carrying out the change, the liability of risk items, and the physical inability to continue work, etc.

2. Non-Payment or Late Payment

  • A contractor or subcontractor doesn’t receive payment when it’s due.
  • Common causes: delays in certification, cash flow problems, or disputes over the quality and quantity of work.

3. Final Account Disagreements

  • Disputes at the end of a project over the total amount owed and the scope being delivered. These often involve prolonged negotiations over variations, provisional sums, valuations, and defects.

4. Loss and Expense Claims

  • Contractors claim extra costs due to delays caused by the client (e.g., design changes, site access issues).
  • These require detailed evidence and strict compliance with contractual notice periods.

5. Liquidated and Ascertained Damages (LADs)

  • When a contractor fails to complete the work on time, clients may deduct LADs. Please note that a limit is applied to the LADs, usually a percentage of the total contract sum.
  • Disputes occur when the contractor incurs delays which are due to variations or additional work, that are the client’s liability (as stated within the terms of the contract), after which an Extension of Time would be requested, assessed and granted.

6. Valuation of Work in Progress

  • Issues arise when there’s disagreement over how much work has been completed and its value at interim payment stages or non-agreed variations.

Why These Disputes Happen

Disputes rarely come from bad intentions—they often stem from:

  • Poor communication
  • Unclear or ambiguous contract terms, conflict of clauses or detail within the contractual documentation.
  • Lack of proper documentation or record-keeping
  • Failure to follow procedures (e.g., issuing notices)
  • Subjective valuation
  • Mismatched expectations

That’s why understanding both the legal framework and the practical application of contracts is so important for a QS.

How Quantity Surveyors Help Manage These Issues

As a Quantity Surveyor, you play a crucial role in reducing risk by ensuring that:

  • Contract terms related to cost and payment are understood and followed strictly.
  • All variations are priced and agreed in line with the contract.
  • Payment applications and valuations are backed up with sufficient evidence.
  • Claims are prepared in accordance with the procedures and timeframes set out in the contract.
  • You keep detailed, contemporaneous records (site diaries, instructions, meeting minutes, photographs, etc.).
  • Maintaining a good relationship with the client to ensure effective and collaborative communication. This will ensure disputes are resolved early and amicably.

You may also be asked to help prepare or defend claims by providing cost justifications, timeline evidence, contemporary records, contractual documentation such as early warnings, variation orders, compensation events, etc.

Legal Avenues for Resolving Cost Disputes

Here’s a quick overview of how disputes are formally handled:

1. Negotiation

  • Informal resolution through dialogue—often the quickest and cheapest method.

2. Escalation

  • Escalate disputes to Senior management. This provides a new perspective on the disputes and if resolved at this level, is cheaper than adjudication.

3. Adjudication

  • A legal right in the UK under the Housing Grants, Construction and Regeneration Act 1996 (The Construction Act 1996).
  • An independent adjudicator gives a decision within 28 days. Common for payment disputes.

4. Mediation

  • An impartial mediator/cost adjuster helps the parties reach a mutual agreement. Not legally binding unless formalised.

5. Arbitration

  • A private legal process where an arbitrator makes a binding decision.

6. Litigation

  • Court proceedings—usually the last resort due to time and cost.

Understanding these pathways helps you advise your team or client on their options if a dispute escalates.

Example in Practice: Variation Without Written Instruction

Imagine a subcontractor is asked verbally to install additional lighting on a project. They go ahead without a written instruction. When they submit a variation claim, the main contractor refuses to pay because it wasn’t formally instructed.

As a QS, you would:

  • Check the contract’s variation procedures.
  • Investigate whether the verbal instruction came from someone with authority.
  • Review any site records or correspondence to support the claim.
  • Assist in pricing the work if it qualifies as a valid variation.

Without proper documentation, the subcontractor may struggle to get paid—highlighting the importance of always following contractual procedures.

How to Avoid or Minimise Cost Disputes

  • Follow the contract strictly—especially for variations and claims.
  • Ensure clear, written communication on all changes.
  • Record everything—dates, values, instructions, delays.
  • Agree valuations and variations regularly, not just at the end.
  • Use standard forms and templates for consistency and clarity.
  • Educate all parties on their contractual obligations and procedures.

Summary

Cost-related legal issues are a part of life in construction, but they don’t have to become full-blown disputes. With strong contract knowledge, good record-keeping, and a proactive mindset, a Quantity Surveyor can often prevent minor issues from escalating.

Remember: the more clearly costs are tracked, explained, and supported with documentation, the harder it is for disputes to arise—and the easier they are to resolve if they do.