If one party to a construction contract becomes insolvent, the other may have the right to terminate. But that step must be handled carefully, as a flawed termination could expose the solvent party to a repudiatory breach claim. Insolvency can also shape how any dispute is resolved, affecting everything from the forum available to the practical prospects of enforcement and recovery.

Insolvency levels remain high in the construction industry. In addition to thin margins and persistent cash flow pressure, firms are being affected by many factors, such as geopolitical instability and price volatility, which makes it harder for businesses, particularly smaller and specialist contractors, to preserve liquidity and absorb shocks even where underlying demand is good. It is therefore important for those in the sector to understand the risk of insolvency leading to disputes and how to recover losses that flow from this. 

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