Construction project management involves balancing time, cost, and quality, known as the “Classic Triangle”. Tensions between these competing priorities, such as delays or cost-cutting, can give rise to disputes if left unaddressed, and ultimately escalate into legal issues with serious consequences for all parties. Once dispute arises, how should the parties respond?

What are the characteristics of construction disputes?

When a dispute or conflict arises during a construction project, it is crucial that the contracting parties first determine the factual character of that conflict. Proper classification of the dispute enables the parties to identify the root cause, focus on the relevant contractual or legal provisions, and avoid misdirected efforts that could generate further unnecessary conflict or dispute.

Key dispute arising in construction works may generally be classified into three (3) primary categories as follows:

Default: These disputes arise from breaches of the construction contract, such as non-performance, delayed payments, or contractual violations. Disagreements over contract interpretation also fall into this category;

Delay: These disputes involve time overruns past the agreed-upon Date for Completion, including missed milestones, extension requests, or other schedule disruptions; or

Defect: These disputes relate to quality deficiencies, such as substandard workmanship, failure to comply with technical specifications, or failure to meet the performance standards required under the contract.

However, construction disputes often have characteristics that are more specific and nuanced than the above general categories. Identifying and classifying the core nature of the dispute can help the parties better understand the underlying issues, facilitate clearer communication, and enable a more targeted legal and commercial response, including the use of appropriate contractual protections, remedies, and dispute resolution mechanisms.

What can you prepare for when a construction dispute arises?

Based on practical experience and legal analysis, there are three (3) key areas that the parties should thoroughly prepare for when a construction dispute emerges.

Attitude: A key but often overlooked aspect of construction dispute preparation is the attitude of the parties involved. Disputes, regardless of size, can lead to delays, higher costs, and quality issues, often affecting multiple parties. Employers, contractors, consultants, and other parties should therefore prioritize cooperation, transparency, and mutual understanding. A constructive working relationship is not just a matter of courtesy, but an important factor in achieving a successful project outcome.

Documents: In Thai construction disputes, the outcome of a case often depends heavily on documentary evidence. Clear and well-organized contemporaneous records are therefore essential. These documents help establish the facts, evidence the parties’ obligations, and show whether there has been compliance or breach. In Thai construction litigation and arbitration, standard project documents often form the core evidentiary record and should be maintained throughout the project lifecycle.

Examples of key documents include:

Letters & Contracts

  • Letter of Tender
  • Letter of Acceptance
  • Construction Contract
  • Contract Data

Technical & Scope Documentation

  • Specifications
  • Drawings / Building Information Model (BIM)
  • Bill of Quantities (BOQ)
  • Daywork Schedule

Scheduling & Control

  • Construction Schedule
  • Project Timelines
  • Weekly and Monthly Meeting Minutes
  • Consultant / Engineer Reports

Correspondence & Communication

  • Email Correspondence
  • Formal Notifications
  • Letters During Project Execution

Financial & Performance Guarantees

  • Performance Guarantees
  • Advance Payment Guarantees
  • Defects Liability Guarantees

Project Certification & Progress

  • Certificates issued under the Construction Contract

Team: Attitudes and project documents should be communicated by those involved in the construction project, such as the project owner, designer, engineer, architect, contractor, subcontractor, consultant, project manager, or quantity surveyor. All of them must identify the root of the conflict, and the team members will develop and guide the appropriate course of action. These steps are essential for managing construction dispute resolution.

What are the types of construction dispute resolution methods?

As a matter of good practice, parties must initially review the governing contract to identify the agreed dispute resolution mechanism. Selecting the appropriate dispute resolution method is vital for maintaining project progress and minimizing the financial and contractual consequences of unresolved issues. Standardized construction contracts, such as the FIDIC Red Book (2017 Edition) and the Joint Contracts Tribunal (JCT), for example, often specify a multi-stage dispute resolution process that begins with informal procedures and escalates only when necessary.

Negotiation: It is the most fundamental and preferred method of dispute resolution in construction projects. It involves direct communication between parties to reach a mutually acceptable resolution without third-party intervention. It is cost-effective, promotes cooperation, and preserves commercial relationships. In most standard contracts, including FIDIC, negotiation is the first step before triggering any formal mechanism.

Mediation: It involves the appointment of a neutral third party (the mediator) who facilitates structured discussions between the parties. The mediator does not issue a binding decision but assists the parties in reaching a voluntary settlement. Mediation is flexible, confidential, and non-adversarial, and is typically used when negotiation has failed but the parties wish to avoid adjudication, arbitration, or litigation.

Adjudication / Dispute Avoidance and Adjudication Board (DAAB): There is a quasi-judicial process wherein a neutral adjudicator (or panel) issues a binding, but interim decision, which the parties must comply with unless and until it is overturned by arbitration or litigation. This mechanism originated in the UK under the Housing Grants, Construction and Regeneration Act 1996 and has since been adopted across numerous common law jurisdictions and many standard contract forms, such as JCT. While the DAAB, as introduced in the International Federation of Consulting Engineers (FIDIC), is a standing body constituted at the beginning of the contract. It is tasked with both dispute adjudication and dispute avoidance. While the DAAB provides a decision within strict time limits (typically 84 days), it ensures that project cash flow and performance are not unduly disrupted.

Arbitration: It is a formal dispute resolution mechanism wherein parties present their case before an arbitral tribunal, which issues a final and binding award. It is governed by either institutional rules (e.g., ICC, LCIA, THAC, TAI) or ad hoc procedures. It is often preferred in international construction contracts due to its confidentiality, enforceability under the New York Convention, and party autonomy in selecting arbitrators.

Litigation: It involves resolving disputes in the courts of the relevant jurisdiction. It is typically pursued where the contract provides for the jurisdiction of the courts, or where arbitration is unavailable, invalid, or otherwise inappropriate in the circumstances. Court proceedings in Thailand are generally public, formal, and governed by the Civil Procedure Code. A final judgment of the court is binding on the parties, subject to any appeal rights available under Thai law.

From a practical perspective, effective construction dispute management is not only about resolving issues after they arise, but also about preparing for them from the beginning of the project. Clear contracts, proper project administration, well-maintained records, and a cooperative approach among the parties can help minimize the risk of disputes escalating into formal legal proceedings. In the Thai construction context, where documentary evidence often plays a central role, early preparation and disciplined project management remain key to protecting both legal and commercial interests.

For more information, please get in touch with Construction and Engineering Sectors, or alternatively, please contact the author at [email protected],or visit www.kap.co.th