Common Types of Construction Disputes

Construction is an incredibly complex field that requires the coordination of many parties. A project must go through numerous stages, processes, and procedures to be completed and put into use. During this process, disputes can arise due to disagreements, errors by the parties involved, or even other objective reasons. Resolving disputes quickly and effectively is always the top priority of the parties involved. This article will discuss the common types of construction disputes in Vietnam today and some methods to effectively resolve these disputes.

What are Construction Disputes?

Like other types of disputes, construction disputes arise from violations of the obligations of the parties in the construction field, mainly defined in contracts related to construction projects, from selecting contractors, design, construction, to payment and warranty.

Thus, construction disputes can be understood as disputes arising from construction contracts, where parties dispute when their legal rights and interests in the contract are infringed. Therefore, the mechanism for resolving construction disputes is similar to resolving contract disputes in general.

Common Types of Construction Disputes

Based on construction contracts, construction disputes can arise from various factors. Below are the most common types of construction disputes:

1. Disputes arising from payment obligations violation:

Essentially, the investor or contracting party must pay the full (100%) contract value to the contractor based on the agreement in the contract. However, disputes often arise when contractors have completed their construction obligations under the contract, but the investor alleges various reasons such as lack of acceptance documents, construction items not meeting safety requirements, or failure to perform warranty procedures to refuse or make incomplete payments.

2. Disputes arising from construction progress:

This type of dispute can originate from both sides in the construction relationship. Contractors may be affected by subjective and objective factors such as weather, labor, accidents at the site, etc. On the investor’s side, there may be design flaws leading to design changes or issues with land clearance, affecting other related construction items, prolonging the project timeline, causing capital loss, and failing to ensure project progress.

3. Disputes regarding scope of work:

During construction, the investor may make demands exceeding the scope of work, or the contractor may fail to perform certain construction items, leading to disputes.

4. Disputes arising from inspection and handover procedures:

After completing the construction process, disputes may arise during the inspection and handover phase due to incomplete inspection documents, inaccurate inspection information, unauthorized signatories, damaged or non-compliant items for inspection, and other contract-related issues.

5. Disputes arising from warranty obligations:

According to construction laws, contractors are responsible for warranty of the completed construction. However, in practice, when investors discover defects or safety issues in construction items, contractors may evade warranty responsibility or not fully honor their warranty commitments, leading to disputes.

6. Disputes arising from unilateral termination of contracts:

Similar to other types of contracts, construction contracts can be unilaterally terminated by one of the parties for various reasons. In such cases, penalties and compensation obligations resulting from unilateral termination may be imposed on the breaching party, leading to disputes.

7. Disputes arising from policy changes by competent authorities:

Nowadays, numerous laws regulate construction relationships, from Construction Law, Audit Law, Commercial Law to Civil Law, Bidding Law, and accordingly, the number of guidance documents is substantial and regularly updated over time. On the other hand, a construction project from approval to completion may take several years. Therefore, a significant risk for parties is failing to timely update new legal policies, resulting in violations and disputes over infringement of legal rights and interests of the other party.

What to Do When Construction Disputes Arise?

Construction disputes are very common, and therefore, there are many dispute resolution methods that parties can choose to apply to save time and money for all involved parties while achieving effective dispute resolution. Some common methods for resolving construction disputes include:

1. Negotiation:

Parties can negotiate and discuss to find a resolution. This method is recommended because it is cost-effective, not bound by complex legal procedures, ensures maximum business confidentiality, and minimizes damage to cooperative relationships, even enhancing mutual understanding and cooperation after successful negotiations.

2. Mediation:

Similar to negotiation, mediation involves a neutral third party acting as a mediator to assist the parties in finding common ground. This method still ensures confidentiality, and the mediation agreement can be recognized by the court and enforced.

3. Arbitration:

Arbitration is an effective method for resolving construction disputes. Arbitrators will consider and make binding decisions that ensure the confidentiality of the parties’ information and can involve construction experts to ensure expertise in dispute resolution.

4. Litigation:

Despite potential delays, the court is still an effective dispute resolution authority, and court judgments are generally enforceable.

Above is a general overview of common types of construction disputes provided by A&D Law Firm. If you encounter any difficulties related to further disputes, please contact us.

What are Construction Disputes?

Common Types of Construction Disputes

1. Disputes arising from payment obligations violation:

2. Disputes arising from construction progress:

3. Disputes regarding scope of work:

4. Disputes arising from inspection and handover procedures:

5. Disputes arising from warranty obligations:

6. Disputes arising from unilateral termination of contracts:

7. Disputes arising from policy changes by competent authorities:

What to Do When Construction Disputes Arise?

1. Negotiation:

2. Mediation:

3. Arbitration:

4. Litigation:

Above is a general overview of common types of construction disputes provided by A&D Law Firm. If you encounter any difficulties related to further disputes, please contact us.

Case Study

Let us help you!