Key Takeaways
- Construction claims require both entitlement (the right to additional compensation) and damages (the quantified amount).
- The most common reason claims fail is lack of contemporaneous documentation, not lack of merit.
- Mediation resolves approximately 70-80% of construction disputes at $2,000-$10,000 per party.
- Contract notice requirements (typically 7-21 days) are strictly enforced—late notice can bar an otherwise valid claim.
Construction claims are formal demands for additional compensation or time based on contract rights. Claims management—both making and defending claims—is a specialized competency that protects margins and relationships. This lesson covers the types of construction claims, the documentation required to support them, and the resolution mechanisms available.
Types of Construction Claims
Construction claims fall into several categories. Delay claims seek compensation for extended project duration caused by events outside the contractor’s control: owner-caused delays (late decisions, drawing revisions, access restrictions), force majeure (weather, pandemics, natural disasters), and third-party delays (utility companies, permitting agencies, adjacent contractors). Differing site conditions claims arise when actual subsurface or concealed conditions differ materially from what was represented in the contract documents or from what a reasonable contractor would have expected. Change order claims seek additional compensation for work directed by the owner that differs from the original contract scope—either through formal change orders or through constructive changes (oral directives, drawing revisions, specification changes). Acceleration claims seek compensation when the owner requires the contractor to complete work faster than the original schedule (actual acceleration) or refuses to grant justified time extensions, forcing the contractor to add resources to meet the original completion date (constructive acceleration). Each claim type requires specific documentation and analysis to establish entitlement (the right to additional compensation) and damages (the amount of additional compensation).
Claims Documentation Requirements
Successful claims require contemporaneous documentation—records created at or near the time events occurred, not reconstructed after the fact. Essential documentation includes: daily reports (weather, crew counts, work activities, equipment, visitors, directives), correspondence (letters, emails, meeting minutes documenting communications about changes, delays, or issues), photographs and video (time-stamped visual records of site conditions, work progress, and problems), schedule updates (CPM schedule revisions showing the impact of delays on the critical path), cost records (labor timesheets, material invoices, equipment logs, and subcontractor change orders attributable to the claimed event), and notice letters (formal written notice to the owner as required by the contract’s claims provisions—typically within 7-21 days of the event giving rise to the claim). The most common reason claims fail is not lack of merit but lack of contemporaneous documentation. Courts and arbitrators consistently hold that claims supported by detailed, contemporaneous records are far more credible than those relying on after-the-fact reconstruction.
Dispute Resolution Mechanisms
Construction dispute resolution follows an escalation path. Negotiation: direct discussion between the parties, often the most efficient resolution when both sides are reasonable and the dispute amount is moderate. Mediation: a neutral third party facilitates negotiation without binding authority—construction mediation resolves approximately 70-80% of disputes at a cost of $2,000-$10,000 per party. Arbitration: a neutral arbitrator (or panel) hears evidence and renders a binding decision—faster and less expensive than litigation ($10,000-$50,000 per party for a mid-size dispute) but with limited appeal rights. Litigation: court proceedings with full discovery, motions, trial, and appeal rights—the most expensive ($50,000-$500,000+ per party) and time-consuming (1-3 years) but providing the most complete procedural protections. Most construction contracts specify the dispute resolution mechanism—typically requiring negotiation, then mediation, then either arbitration or litigation. Understanding the contract’s dispute resolution provisions before signing is critical because the choice of forum significantly affects cost, timeline, and outcome probability.
Watch Out For
Failing to provide written notice within the contract’s specified timeframe when a change or delay event occurs
Courts routinely enforce notice provisions, barring otherwise valid claims because the contractor failed to provide timely written notice to the owner.
Fix: Calendar all contract notice deadlines, train superintendents to recognize claim-triggering events, and send written notice within 48 hours of any event that may give rise to additional cost or time.
Continuing to perform changed work without pricing agreement because the project must stay on schedule
The contractor performs additional work at its own risk, and the owner may later dispute the scope, pricing, or even the existence of the directive.
Fix: Document every change directive in writing, submit a change order proposal within the contract-specified timeframe, and note on the daily log that work is proceeding under protest if pricing is not yet agreed.
Relying on oral agreements or handshake deals for scope changes with the owner or GC
When disputes arise, oral agreements are nearly impossible to prove, and the contractor bears the burden of demonstrating that the work was directed and authorized.
Fix: Confirm every oral directive in writing within 24 hours via email or letter, stating the scope discussed, the cost impact, and requesting written confirmation.
Key Takeaways
- ✓Construction claims require both entitlement (the right to additional compensation) and damages (the quantified amount).
- ✓The most common reason claims fail is lack of contemporaneous documentation, not lack of merit.
- ✓Mediation resolves approximately 70-80% of construction disputes at $2,000-$10,000 per party.
- ✓Contract notice requirements (typically 7-21 days) are strictly enforced—late notice can bar an otherwise valid claim.
Sources
Common Mistakes to Avoid
Failing to provide written notice within the contract’s specified timeframe when a change or delay event occurs
Consequence: Courts routinely enforce notice provisions, barring otherwise valid claims because the contractor failed to provide timely written notice to the owner.
Correction: Calendar all contract notice deadlines, train superintendents to recognize claim-triggering events, and send written notice within 48 hours of any event that may give rise to additional cost or time.
Continuing to perform changed work without pricing agreement because the project must stay on schedule
Consequence: The contractor performs additional work at its own risk, and the owner may later dispute the scope, pricing, or even the existence of the directive.
Correction: Document every change directive in writing, submit a change order proposal within the contract-specified timeframe, and note on the daily log that work is proceeding under protest if pricing is not yet agreed.
Relying on oral agreements or handshake deals for scope changes with the owner or GC
Consequence: When disputes arise, oral agreements are nearly impossible to prove, and the contractor bears the burden of demonstrating that the work was directed and authorized.
Correction: Confirm every oral directive in writing within 24 hours via email or letter, stating the scope discussed, the cost impact, and requesting written confirmation.
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Test Your Knowledge
1.What is a construction claim?
2.What is the most important practice for successfully prosecuting or defending construction claims?
3.What is the typical escalation path for construction dispute resolution?