The 5 Most Common Causes of Construction Disputes & How to Avoid Them
The construction industry thrives on contracts, deadlines, and collaboration—but when things go wrong, disputes arise quickly, leading to costly delays, lawsuits, and financial strain on all parties involved. Contractors, insurance adjusters, and developers must be aware of common legal pitfalls to avoid unnecessary litigation and protect their businesses.
At Almazan Law, we work closely with contractors, insurers, and construction professionals to resolve disputes efficiently and help them stay ahead of contractual and legal risks. Here are the five most common causes of construction disputes—and how to avoid them.
Poorly Written Contracts& Undefined Responsibilities
The Problem: Vague or poorly drafted contracts are a major source of litigation in construction. Missing details regarding indemnification, duty to defend, scope of work, and payment obligations often lead to misinterpretation and legal disputes.
Key Areas of Risk:
- Indemnification Clauses: Failing to define who assumes liability for claims, damages, or injuries can result in unexpected legal exposure.
- Duty to Defend: Contractors may be required to cover legal costs for owners or subcontractors—often a hidden risk in contracts
- Master Trade Agreements: If using a Master Trade Agreement, ensure that addendums clearly define the project it applies to—every single time.
How to Avoid It:
- Ensure all contracts explicitly outline risk allocation, payment terms, and change order procedures.
- Consult a construction law attorney to review contracts before signing.
- Clearly define who is responsible for workers' compensation coverage when loaning or borrowing employees.
Pro Tip: “My friend is a contractor” is NOT a substitute for a well-written contract. Some of the most heated construction disputes arise between friends or family members who fail to put agreements in writing. Protect the relationship—and the project—with a legally sound contract.
Project Delays & Missed Deadlines
The Problem: Time is money in construction. Delays caused by labor shortages, material supply issues, or mismanagement often lead to contract disputes over liability and financial penalties.
How to avoid it:
- Establish realistic project timelines and include liquidated damages clauses to outline the financial impact of delays.
- Require regular progress reports to track project status.
- Document any unexpected obstacles (weather, supply chain delays) to avoid wrongful delay claims.
Pro Tip: Keep detailed records (emails, photos, daily logs) to defend against claims that delays were preventable.
Payment Disputes & Unpaid Work – Leading to Construction Defect Claims
The Problem: One of the most litigated areas in construction law involves contractors attempting to collect balances from property owners. What often happens?
- Contractor sues homeowner for unpaid work.
- Homeowner countersues, claiming construction defects.
- Insurance company is forced to get involved to defend the contractor, triggering a liability claim—even when the original issue was a payment dispute.
How to Avoid It:
- Clearly define payment terms in contracts with milestone-based compensation.
- Ensure all payment agreements & modifications are in writing—verbal agreements are not enforceable.
- Work with a construction law attorney before filing a mechanic’s lien or foreclosure action—it may trigger unexpected defect claims.
Pro Tip: Small disputes often escalate into major legal battles. Before filing a claim against a homeowner, consult legal counsel to assess risk vs. reward.
Defective Work & Construction Quality Issues
The Problem: Claims related to poor workmanship, use of substandard materials, or failure to meet building codes can result in expensive litigation, insurance claims, and reputational damage.
How to Avoid It:
- Include quality control standards and required inspections in contracts.
- Ensure contractors & subcontractors follow local building codes and industry best practices.
- Clearly define who is responsible for defects & how warranty claims will be handled.
Pro Tip: Avoid liability disputes by keeping detailed documentation of inspections, materials used, and compliance with local building codes.
Unclear Change Orders & Scope Creep
The Problem: Projects that start simple but grow over time without documented approvals lead to disputes over cost overruns, unpaid work, and delays.
How to Avoid It:
- All change orders must be in writing before additional work begins.
- Define cost impact upfront for any scope changes.
- Keep detailed records of all modifications to avoid disagreements.
Pro Tip: Verbal change orders lead to legal battles. Always get client approval in writing before making modifications.
Final Thoughts: Protect Your Projects with Smart Legal Strategies
Construction disputes can be time-consuming and costly, but proactive planning, clear contracts, and legal safeguards can help you avoid legal battles before they start.
Key Takeaways for Contractors & Adjusters:
- Ensure contracts clearly define responsibilities, indemnification, and duty to defend.
- Avoid small payment disputes escalating into construction defect claims triggering liability insurance.
- Require change orders & agreements to be in writing to avoid misunderstandings.
- Keep detailed documentation of inspections, delays, and payment discussions to defend against claims.