What are the common causes of payment disputes in construction?

On Behalf of | Mar 5, 2024 | Construction Contracts |

In the construction industry, payment disputes are all too common. When contractors complete their work, they naturally expect due payment. However, various disagreements may arise, leading to delays and strained relationships. Sometimes, it may even lead to potential legal action.

Understanding the roots of these disputes is essential in mitigating financial loss and preserving business relationships.

So, here’s a look at five common causes of payment disputes.

Misunderstandings over scope of work

Payment disputes often arise when a client and contractor have misunderstandings over the scope of work. When both interpret the contract differently, it can cause confusion about the extent of the work required. This can prolong the resolution process and potentially delay payment completion.

Change orders

Change orders, or requests to change the original contract, can also lead to issues with payment. If both parties fail to keep track of and agree on these changes, misunderstandings can occur. This could cause confusion over extra costs and responsibilities.

Delays in completing the project

Disputes often occur when projects run over their scheduled timelines. At times, a project can take longer than initially planned. While it may seem harmless at first, these delays can lead to additional costs, such as extended equipment rentals or increased work hours. This can lead to disagreements over who should cover these unexpected expenses.

Quality of work

There can also be disputes over the quality of work performed. If a client doesn’t find the completed work satisfactory, they might withhold payment or pay less than the agreed amount. This can result in extended negotiations over payment, potentially delaying settlement.

Incomplete or incorrect invoices

Payment issues can also arise from incomplete or incorrect invoices. If an invoice fails to clearly detail the work performed and its costs, it can lead to a lengthy back-and-forth clarification. This not only can delay the payment process, but also cause confusion about the final payment amount.

Preserving the business relationship

Understanding these common causes of payment disputes can help contractors and clients work together more smoothly, reducing disagreements. Clear communication, thorough documentation, and a shared understanding of the contract can prevent many disputes. For those needing help in collecting outstanding balances, consider seeking an attorney. A legal professional can provide guidance and support in settling issues in a fair and efficient manner.

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