What Is the Cost of Contract Disputes?

Wednesday, October 7th, 2015
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Unfortunately, disputes are common within the building and construction industry and can often be difficult to avoid.

For those who own a building company, it is essential that their employees have an understanding of contract law to negate the risk of a dispute. If construction companies equipped their builders to get the job done right from the start and set realistic expectations for home owners, they would have a better chance of mitigating risk and avoiding unnecessary litigation and disputes.

Apart from the financial cost of building disputes, other problems can also arise making the whole process a nightmare including:

  • Loss of time and production
  • Loss of income
  • Sleep deprivation and anxiety
  • Loss of credibility (which is hard to get back)
  • Loss of family time
  •  Mental anguish such as loss of self-confidence as a builder

Builders need to follow two essential steps to avoid building disputes:

  1. Open and honest communication: This boils down to keeping in regular contact with the owner, site staff and contractors.
  2. Put everything in writing: Building works under certain values do not need a written contract, however, if you always have a written acknowledged contact, the dispute diminishes. This includes any variations to the project no matter how insignificant they may seem.

Builders who have a thorough understanding of the five elements of contract law will be better equipped to avoid costly and emotional building disputes. The five elements of contract law are:


This can include expressions of interest, letters of intent, estimates and requests for proposals. Consider this as the preliminary when it comes to negotiations and offers.


Tell them the price. There must be clearly stated instructions on what is being offered or promised as to cost. The offer is legally binding once both parties have accepted the terms of the contract. This is where the builder needs to be specific with details, inclusions, and what’s not included.

Valuable Consideration

The offer of a monetary value must be accepted exactly as offered without conditions. If the terms are not accepted, then a counter offer can be made and either accepted or rejected. This process can involve many counter offers until both parties are in agreement, thus the consideration.


This is when both parties have agreed to the offer and the terms and conditions of the contract have been accepted.


Both parties enter into a legally binding agreement, which can be enforced by law.

These five elements are found to be the actual eliminator of all disputes, especially once acknowledgment is confirmed. There is no going back once the five are fulfilled, and this is proven in court and tribunal hearings time and time again.

Builders who follow these principles will be more likely to avoid disputes. It’s a matter of open communication, copious and contemporaneous note taking between both parties, and stating exactly what is expected, but in most cases overlooked.

Far too many builders end up in costly and emotionally draining disputes because they don’t document everything and haven’t taken the necessary steps to enter into a solid contract.

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