Common Legal Issues in the Construction Industry You Should Know

Jun 23, 2023 | Construction Law

The construction industry serves as the backbone of our society, shaping the cities we live in and building the infrastructure that supports our everyday lives. However, this thriving industry can present legal challenges that may disrupt the progress of a construction project and have financial implications for stakeholders.

Understanding Common Legal Issues in the Construction Industry

The construction industry is susceptible to various legal issues that can emerge at different stages of a construction project. These issues can give rise to disputes, cause delays, and result in financial consequences for all parties involved. Some of the most common legal issues in construction include:

Contract Disputes

Contract disputes are a prevalent legal issue in the construction industry. These disputes stem from various sources, such as breaking a contract, disagreements over project scope, changes in orders, delays, cost overruns, and non-performance by one or more parties involved. 

One of the primary causes of contract disputes is poorly drafted or ambiguous contract terms. When the terms and conditions of a contract are unclear or open to interpretation, disputes can arise as each party may have a different understanding of their obligations and responsibilities. Inadequate project planning can also contribute to contract disputes, as it may result in unrealistic timelines, insufficient resources, or lack of clarity regarding project objectives.

Construction Defects and Warranties

Construction defects refer to flaws or deficiencies in the design, materials, workmanship, or functionality of a completed project. These defects can result in significant financial losses, property damage, and safety hazards. Common construction defects include structural issues, water intrusion, electrical and plumbing problems, faulty installations, and building code violations. 

Construction warranties, on the other hand, are contractual guarantees provided by contractors, subcontractors, or manufacturers, ensuring the quality and durability of their work or products. When there is a breach of warranties, it means that the delivered work or products do not meet the promised standards or fail to serve their intended purpose.

Mechanic’s Liens and Payment Disputes

Payment disputes commonly occur when parties fail to meet payment obligations, withhold payment without valid reasons, or disagree on the amount owed. For example, wrongfully withholding payment based on unsubstantiated claims, such as alleged defects, work not being performed according to specifications, or contractual violations, can be considered a breach of contract, leading to payment disputes.

Mechanic’s liens serve as a legal remedy for contractors, subcontractors, or suppliers who have not been fully paid for their work or materials supplied on a construction project. These liens provide a security interest in the constructed or improved property, allowing the unpaid party to assert a claim against the property’s title. The presence of a mechanic’s lien on a property can complicate its sale or financing until the dispute is resolved. The Michigan Construction Lien Act provides the legal framework and guidelines for filing and enforcing mechanic’s liens in Michigan.

Regulatory Compliance and Permits

Regulatory compliance in the construction industry encompasses a wide range of areas, including zoning and land use regulations, building codes, environmental regulations, health and safety standards, and licensing requirements. Each of these areas has its own set of rules and guidelines that must be followed in order to remain compliant with the law. 

The Michigan Occupational Safety and Health Act (MIOSHA), for instance, establishes health and safety standards for the construction industry in Michigan. Compliance with MIOSHA regulations is essential to prevent workplace accidents, injuries, and fatalities. Failure to comply can lead to serious legal consequences, project disruptions, fines, and even project shutdowns.

Insurance and Indemnity Issues

Construction projects involve multiple parties, such as owners, contractors, subcontractors, architects, and engineers, each with their own insurance policies. Each party’s insurance policy may have different coverage limits, exclusions, and conditions. Disputes can arise when determining which insurance policy applies to a particular claim and which party is responsible for providing coverage.

Indemnity agreements, which allocate liability between parties, can also be a source of contention in insurance disputes. In construction contracts, indemnity provisions outline the responsibility of each party for potential losses or damages. Issues may occur when one party seeks indemnification from another party for a disputed claim or when the indemnitor contests their obligation to provide coverage.

Dispute Resolution 

Despite efforts to avoid disputes, construction projects often involve complex issues that cannot be resolved amicably. In such cases, dispute resolution becomes necessary. Construction disputes can be settled through negotiation, mediation, arbitration, or litigation.

    • Negotiation involves direct discussions between parties to reach a mutually acceptable resolution.
    • Mediation involves a neutral third party assisting in reaching an agreement. 
    • Arbitration is a more formal process where a neutral arbitrator or panel renders a binding decision.
    • Litigation resolves disputes through the court system. 

Each dispute resolution method has its advantages and disadvantages, and the choice depends on factors such as the nature of the dispute, contractual provisions, and the preferences of the parties involved.

Infographic image of common legal issues in the construction industry

Why You Need a Muskegon Construction Lawyer

Construction projects are complex undertakings that require careful planning, coordination, and collaboration among various parties. However, legal issues can often arise, posing risks and potential disruptions to the progress of your projects. A competent construction lawyer can assist you in addressing common legal concerns in construction projects effectively. With their expertise and in-depth knowledge of construction law, construction lawyers can guide you through the necessary legal procedures, protect your rights, and help you achieve successful outcomes.

At Bowen Law, we specialize in providing effective legal solutions tailored to your specific needs. Our experienced team of Muskegon construction lawyers is well-versed in handling construction-related issues in Michigan, ensuring that your construction projects are executed smoothly and in compliance with the law. If you’re involved in the construction industry and find yourself facing legal challenges, don’t hesitate to reach us at (231)-726-4484 or contact us here.


The information provided on this website does not, and is not intended to, constitute legal advice. All information, content, and materials available on this site are for general informational purposes only.

Only your individual attorney can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation.

If you have legal questions, please contact us at: (231) 726-4484

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The information provided on this website does not, and is not intended to, constitute legal advice. All information, content, and materials available on this site are for general informational purposes only.

Only your individual attorney can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation.

If you have legal questions, please contact us at:
(231) 726-4484

Muskegon Business Law Attorneys of David T. Bowen, P.C. pursue cases of Business Law, Real Estate, and Estate Planning in Muskegon Michigan

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