Most construction projects that end badly showed the signs early. The difference between a difficult project and a catastrophic one is usually what was documented and notified while it was still recoverable.
The early warning signs
- Programme slipping without a documented cause.
- Variations being instructed verbally and priced later, or not at all.
- Payment claims not being responded to, or being paid short without a schedule.
- Design information arriving late or inconsistently.
- Subcontractors raising concerns about payment upstream.
- The relationship becoming adversarial in correspondence.
Each of these is manageable at the point it appears and much harder six months later.
Notices are where entitlement is won or lost
Most contracts require notice of delay events within a defined period, sometimes short. Missing it can extinguish an otherwise valid entitlement regardless of how clearly the other party caused the delay.
The discipline is to notify early and generously. Notice costs nothing; an out-of-time claim is worth nothing.
The same applies to variations. Where you are asked to do something extra and commercial reality means you proceed, confirm in writing the same day — what was asked, by whom, that cost will follow, and that you are proceeding on that basis. That email converts a disputed conversation into a documented instruction.
Records that decide disputes
Contemporaneous documentation beats reconstruction and beats expert evidence prepared afterwards:
- Daily site diary — who was on site, what was done, weather, deliveries, delays, instructions, visitors. Written daily.
- Photographs, dated.
- The programme and updates showing the effect of events as they occur.
- Correspondence confirming verbal discussions same-day.
- Variation and instruction registers kept current.
A foreman’s diary written each afternoon is the single most valuable document in most construction disputes.
Payment claims remain the strongest tool
Under the Construction Contracts Act, a compliant payment claim obliges the payer to respond with a payment schedule within the required timeframe. Failure to respond generally makes the claimed amount due in full and recoverable as a debt, with limited grounds to argue about the underlying work.
Contractors under pressure sometimes stop issuing formal claims because the relationship feels adversarial. That is exactly backwards — it surrenders the statutory advantage at the point it matters most.
Adjudication
Disputes under the Act can be referred to adjudication, producing a binding determination on a fast timetable, enforceable while other proceedings continue. It is designed to keep money moving.
It favours the party whose records are already in order. Timeframes move quickly once started, and there is no time to assemble a file.
For a contractor owed money by a solvent payer, it is usually the right tool. It is not a solution where the payer has no money.
When the other party is in trouble
Watch for deteriorating payment behaviour, part payments without explanation, suppliers refusing to deliver to the site, and key staff departing.
If the payer becomes insolvent, stop work and take advice before doing anything else. Continuing to supply an insolvent customer increases the loss.
Your position depends on what you hold: retention money held on trust in a separate account sits outside the general asset pool; a registered security interest ranks ahead of unsecured creditors; a personal guarantee gives a claim against the guarantor. Unsecured creditors typically recover little.
When to stop
Suspension has to be handled carefully. Suspending without a contractual or statutory right is itself a breach, and it can be treated as repudiation.
The Construction Contracts Act provides a right to suspend in defined circumstances where a payment claim has not been paid and the required notice has been given. Follow the process precisely.
Take advice before suspending or cancelling. Getting it wrong converts your claim into their claim.
The commercial decision
At some point the question is whether to fight or settle. Considerations: the strength of your documentation, the other party’s ability to pay, the cost and duration of the process, the management time it will consume, and whether you want to work with them again.
A settlement that recovers most of the money now is frequently better than a determination that recovers more from a company that has since failed.
Afterwards
Projects that go wrong usually reveal a pattern — a client type, a contract form, a scope you consistently underestimate. Review what happened while it is fresh, and change what you accept.
MBIE publishes Construction Contracts Act guidance free at building.govt.nz, including material on payment claims, schedules and adjudication.
General information only, not legal advice. Take advice before suspending, cancelling or adjudicating.
