Payment, Delays and Defects: The Legal Issues That Derail Construction Projects
Introduction
Construction projects begin with a clear vision. Disputes arise when expectations, paperwork, and the realities on site fall out of step. Most problems cluster around three themes: who pays what and when, whether the works finish on time, and whether the finished site meets the agreed standard. Getting the basics right early prevents small issues turning into costly disputes.
Payment
Payment disputes are the most common source of friction. They usually stem from uncertainty about price, scope, or timing.
COMMON CAUSES
Valuation disputes arise when the parties disagree about the value of work done to date or materials on site. Variations (change orders) alter the scope but are not recorded or priced clearly, producing surprises in interim or final accounts. Retention — the sum held back to secure completion and the rectification of defects — generates arguments over how much can be held and when it must be released. Final accounts are disputed at the end of the job over adjustments for variations, delays, provisional sums, and defects.
A particular trap is the pay-when-paid clause, which tries to make a subcontractor's payment depend on the main contractor being paid first. On UK construction contracts these clauses are, with one exception, ineffective. The exception is where the party further up the chain is insolvent, in which case the clause can bite. Subcontractors asked to accept such terms should not assume they are bound by them.
PRACTICAL STEPS
Set out a clear payment schedule with due dates, valuation rules, and the evidence required. Insist on written instructions for every variation before starting the changed work, including the price and time impact where possible. Keep contemporaneous records — timesheets, delivery notes, site diaries, photographs. Issue any required notices on time and in the form the contract demands. Escalate early through named contacts before issues harden into disputes.
WHEN NON-PAYMENT BECOMES A BIGGER PROBLEM
The Construction Act gives a party the right to suspend performance for non-payment, subject to giving the required notice and observing the waiting period. Persistent or serious non-payment can justify termination where the contract allows and the correct steps are followed.
The Act also confers a right to refer any dispute (payment or otherwise) to adjudication at any time. The adjudicator's decision is usually delivered within 28 days and is binding: it must be complied with unless and until overturned by court proceedings, arbitration, or agreement. Adjudication is the principal reason construction cash-flow disputes can be resolved in weeks rather than years. Negotiation and mediation remain useful in parallel, particularly where preserving the working relationship matters.
Delays
Time is money on a construction project. Delay increases cost, strains relationships, and triggers claims.
TYPICAL CAUSES
Late or incomplete design information slows progress. Adverse weather, supply-chain shortages, or lack of access disrupts planned sequences. Client changes and late approvals push activities off their planned dates.
KEY CONCEPTS
The critical path is the sequence of tasks that determines the overall completion date; delay to a critical-path activity usually delays completion. An extension of time adjusts the completion date where a qualifying event under the contract has delayed the critical path. Liquidated damages are a pre-agreed daily or weekly sum payable for late completion — but they must protect a legitimate commercial interest and not amount to a penalty, or a court may refuse to enforce them. Where no pre-agreed rate applies, general damages are assessed after the event. Concurrent delay — where a contractor delay and a client delay overlap — affects entitlement to time and money, and how the contract deals with it matters.
PRACTICAL STEPS
Update the programme regularly and show the impact of events. Give early warnings and timely notices of delay. Mitigate by resequencing, accelerating where agreed, or finding alternatives — and record what was done. Agree revised completion dates and any associated costs in writing as soon as the impact is clear.
Defects
Quality issues range from minor snagging to serious structural problems. Clear responsibility and prompt action limit cost and risk.
TYPES
Patent defects are visible or discoverable on inspection at completion. Latent defects emerge later and were not apparent at handover. Workmanship responsibility usually sits with the contractor; design responsibility may sit with the designer or, on a design-and-
build contract, the contractor. Snagging covers minor items to be finished or corrected; serious defects affect safety, performance, or compliance.
KEY CONCEPTS
Defect rectification periods give the contractor a defined window after completion to return and fix notified defects. Warranties and guarantees make promises about materials, equipment, or workmanship; collateral warranties may give rights to parties who were not the original client.
PRACTICAL STEPS
Carry out staged inspections during the works and at completion, with clear sign-off procedures. Keep photographic evidence and records of tests, certifications, and approvals. Commission independent surveys where issues are complex or safety-critical, and notify the other party promptly with a clear description of the problem and proposed access for investigation.
Dispute avoidance and resolution
Good project hygiene prevents most disputes. Where they still arise, early and proportionate resolution saves time and cost. The warning signs to watch for include:
Unpriced or undocumented changes proceeding on trust.
Repeated late or incomplete payment applications or certificates.
Programme updates that do not reflect site reality.
Reluctance to disclose records, test results, or inspection reports.
Silence or delay in responding to notices.
Conclusion
Clarity, communication, and records are the backbone of a successful project. Agree scope and price changes before doing the work. Update the programme and notify delays promptly. Inspect and document quality, and use the defect rectification process. Escalate early, and choose a resolution path that fits the problem — remembering that the Construction Act gives powerful, fast remedies for payment disputes, and that recent limitation changes have widened the window for defect claims. These steps reduce risk for homeowners, small developers, and subcontractors alike.
This article is intended for information purposes only and provides a general overview of the relevant legal topic. It does not constitute legal advice and should not be relied upon as such. While we strive for accuracy, the law is subject to change, and we cannot guarantee that the information is current or applicable to specific circumstances. Costigan King accepts no liability for any reliance placed on this material. For further details concerning the subject of the article or for specific advice, please contact a member of our team.
Julian Critchlow
Construction Specialist
Paola Kryemadhi
Trainee Solicitor
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