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Building delays bring rise in contractual disputes

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The construction industry faces a tough year as financially struggling customers will launch more and more contractual dispute cases, experts have warned.

Figures released by the Construction Products Association, the industry’s leading trade body, predict that the output will drop by 3% in the construction industry and will force more customers to seek damages through commercial lawyers.

According to several commercial property lawyers, the number of liquidated damage cases has greatly increased due to overrunning construction projects not delivering the finished property by the dates agreed.

Typically costing a constructor £10,000 for every supplementary week a project takes, liquidated damage cases occur on approximately 10% of all building contracts, up by 2% since last year.

Where the parties agree that in the event of a breach of contract, the party who is in breach will pay a specified sum of money. When making the decision, the Court will have to take into account the terms and inherent circumstances of each particular contract.

In the past, developers and investors were keen to take unfinished projects off constructors to force tenants into properties early and quickly start recouping investment funds. But the current trend of by-the-law contract enforcement is likely to bring increased litigation against weakened developers.

“There is going to be an increase in this kind of problem as projects get squeezed from the top downwards and some of the smaller guys on these sites will be forced out of business,” added Rudi Klein, Chief Executive of the Specialist Engineering Contractors’ Group.

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Written by Andrew Hodges

February 7, 2010 at 6:19 pm

Posted in Comment, LinkedIn

Tagged with , ,

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