Construction Claim Settlement Agreement

There are many factors to address when settling any construction dispute, including the parties to be bound, dealing with any formal proceedings, payment provisions, the scope of the settlement, costs and interest. .When construction disputes arise, it is vital that you have an effective, early and successful resolution. With any construction contract, the intention is for the project to run as smoothly as possible from the outset, with parties hopeful that the works will be completed on time and to budget. However, projects do not always go as planned. The construction industry has a reputation for attracting disputes. Additional works may be requested by the employer or works may become necessary because something unforeseen is discovered on site. These scenarios are likely to result in works taking longer than expected which, in turn, will generally result in an increased cost to the project. This will often lead to a claim by one of the parties if it cannot be resolved through negotiation. In this article, construction claim settlement agreement, we take a look at the options open to you and the process involved.

Free Initial Telephone Discussion

For a free initial discussion on how we can help you deal with a construction claim settlement agreement, get in touch with us today. We will review your situation and discuss the options open to you in a clear and approachable manner. Early expert legal assistance can help you avoid making mistakes, saving you money and also avoiding the stress of dealing with these issues on your own. Simply call us on 0345 901 0445 or complete our online enquiry form and a member of the team will get back to you.

Typical causes of dispute

These can include:

• A contractor claiming against the employer for delay or a change to the scope of works.
• A professional consultant claiming against the employer for non-payment of fees.
• The employer claiming against a professional consultant for shortcomings in the design or a failure to properly supervise the works.
• The employer claiming against the contractor for delay or defective works.

What is being settled and what is the basis of the settlement?

Parties must be clear on the effect that any settlement has on the existing dispute and/or any other disputes (current or future).  If the settled dispute is not clearly or accurately documented, parties run the risk of committing to more (or less) than they bargained for, and severely prejudicing their future position. It is important to understand the breadth of issues that may arise, and consider how any court/tribunal may approach such issues in light of the settlement agreement that is being concluded.

Have the requirements for a valid settlement been met?

The creation of a valid settlement requires:

• an actual or potential dispute which is capable of settlement;
• consideration, which can include the exchange of mutual promises, an identifiable agreement which is complete and certain; and
• an intention to create legal relations.

The “complete and certain” requirement is the one that attracts the most controversy.  In determining if a settlement is “complete and certain”, the English courts look at the whole course of negotiations.  For the settlement agreement to be “complete and certain”, all of the material terms must have been agreed and expressed with sufficient clarity.

Can the settlement be considered to be reasonable?

Employers and Contractors commonly settle disputes which arise in respect of sub-contracted elements of the project.  In such instances, the Contractor will wish to protect its right to seek a recovery for the settlement from the relevant subcontractor.  Primarily, the Contractor will be concerned that it has fully reserved its rights as against the relevant subcontractor.  However, the general principle is that, in order to sustain a claim for recovery against a third party following settlement, a Claimant must be able to demonstrate that the relevant settlement (and crucially the settlement sum) are reasonable.

Should third party rights be preserved or excluded?

Parties should carefully consider any third party rights in relation to the settlement, and whether the settlement should:

• confer a benefit upon a third party; or
• enable recovery from a third party.

In the UK, the Contracts (Rights of Third Parties) Act 1999  means that a settlement may affect a third party. The Third Party Rights Act entitles a non-contracting party to enforce a contract’s terms if:

• the contract expressly provides that it may; or
• the contract purports to confer a benefit on the party and the contracting parties cannot show that they did not intend the contract to be enforceable by him.

The third-party must be expressly identified by name, as a member of a class, or a particular description. The third party need not be in existence when the settlement is entered into.

Is the settlement agreement a construction contract in its own right?

In the UK, the right to refer a dispute under a construction contract to adjudication at any time is a powerful tool. However, the courts have seen a number of attempts to resist the enforcement of adjudications on the grounds that they concerned the settlement of a construction contract dispute (rather than a construction contract). In practice, there is little a party can do to prevent a counterpart from bringing an adjudication in relation to a construction contract as the right to adjudicate is a statutory one. However, express wording confirming that a settlement agreement is not considered to be a construction contract and/or the inclusion of a tailored dispute resolution procedure should encourage parties down other routes, rather than jumping straight to adjudication.

How we can help

We have a proven track-record of helping clients deal with construction claim settlement agreements. We will guide you through all the necessary legal due diligence in a comprehensive and timely manner and support and advise you with all the negotiations. We firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.

How to Contact our Construction Solicitors

It is important for you to be well informed about the issues and obstacles you are facing. However, expert legal support is crucial in terms of saving you money and ensuring you achieve a positive outcome.

To speak to our Construction solicitors today, simply call us on 0345 901 0445, or allow a member of the team to get back to you by filling in our online contact form. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.

Authored by Ben Posted in Construction, News Tagged as