The Payment disputes in construction contracts in Sri Lanka and concept for solution

Abstract

The construction contracts suffer with many disputes in every country and treated as world phenomena; it is an inherent features of industry. The payment dispute is significant one among the disputes and need potential solution always. The world uses conventional approaches to respond the payment dispute i.e. contract administration and once it failed a legal action taken. Failing of both, many countries foresee the necessity to look for better solutions than resorting to the existing practices. Since nineteen’s onward a new concept was introduced by UK as potential solution for the payment disputes as ‘Security of Payment (SOP) Act 1996’ which is legislative approach. There are many countries that adopt this concept and practicing for more than decades. Unfortunately, this concept is not adopted for Sri Lankan context. Hence issue of this research has been selected to introduce a SOP concept as a potential solution for payments issues in Local Construction Industry. Currently, there are high scale of construction projects that are in pipe line and carrying out and to be involved by international contractors as well as investors. Therefore, it is the most apt time to adopt the SOP concept. Analytically examined other countries’ SOP practice through literature review and carried out primary data collection through interview in order to identify the local construction industry’s behavior. Findings in the research reveals that payment dispute can be mitigated or avoided through SOP concept. It formulated through particular country’s legislation and parties created their contract provisions or administration practices are to be abide by the new concept. Therefore, victim parties can secure their rights before the dispute starts in most of the time and concept able to play vital role and potential solution for payment dispute.