Contract Termination in the Construction Industry: A Systematic Literature Review
DOI:
https://doi.org/10.15282/construction.v5i1.11746Keywords:
Contract termination, Construction projects, Causes, Systematic reviewAbstract
Contract termination poses a significant threat to the successful completion of construction projects, with worst-case scenarios leading to project delays or abandonment. Wrongful terminations, particularly in cases where defaults are considered excusable such as the acts of God, can have costly legal consequences. There are several dominant causes of contract termination, and it is essential to recognize potential contractual risks at the earliest opportunity. This study provides a systematic review of contract termination causes in the construction industry across various countries, analysing articles that identified 42 key causes, categorized into financial difficulties, client defaults, contractor shortcomings, economic and marketing factors, and administrative problems, with sub-attributes such as procurement system breaches and regulatory non-compliance. The findings emphasized that contract terminations are often driven by financial mismanagement, unrealistic client expectations, poor contractor performance, and administrative failures. To mitigate these risks, the study recommends enhancing training in contract management practices, improving administrative processes, and fostering stakeholder collaboration to ensure transparency and accountability. The research highlights the need for further investigation into the role of administrative factors in contract termination and provides practical recommendations to enhance contract delivery and project success. These recommendations include suggesting providing comprehensive training in contract management practices to reduce unlawful terminations; implementing robust contract management protocols for clear communications; and developing financial planning strategies to mitigate budget deficits. The implications for both industry and academia include a call for more robust management frameworks to prevent project failures and reduce the frequency of contract terminations.
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