An A to Z of construction dispute avoidance and resolution – Part 1
Contractual disputes are common in the construction industry. As a result, a number of construction-specific methods of dispute avoidance and resolution have arisen – both industry-led and by way of legislation. This two-part article provides an alphabetical run through of some of the more common concepts a construction practitioner is likely to encounter and has been written with commercial personnel, transactional and disputes-focussed lawyers in mind.
In part 1 below we look at A to M of construction dispute avoidance and resolution.
A is for Arbitration
Arbitration is one of the primary methods of dispute resolution used in construction and engineering contracts. One of the perceived advantages of arbitration is that the process is generally confidential in that the parties are not permitted to disclose to third parties any information or documents that are generated or disclosed during the course of the proceedings. The private nature of such proceedings may make it a good choice for contracts where the subject matter is sensitive.
See also N for New York Convention.
B is for Breach
If a party to a contract does not comply with its obligations (whether express or implied), then they will be in breach of the contract. The key remedy for a breach of contract is damages, which are awarded to compensate for loss. If you think that the other party to a contract is in breach of their obligations, first carefully check the contract – it may provide for a specific remedy for that breach (eg liquidated damages) or set out a specific course of action which must be taken (eg notification of the breach and an opportunity to remedy). If the breach gives rise to a dispute, it will be important that any contractually prescribed procedures were followed.
C is for the Construction Act
The Housing Grants, Construction and Regeneration Act 1996 (as amended by the Local Democracy, Economic Development and Construction Act 2009), to give it its full name, governs construction contracts and gives parties the right to refer a dispute for adjudication at any time. For straightforward disputes and/or those of moderate value - such as interim payment disputes – adjudication (a form of specialist tribunal where an independent third party gives a binding decision on the dispute) can be a quick, inexpensive and less disruptive way of disposing of disputes. If your contract is not caught by the Construction Act (or may only partially qualify), you can still include adjudication as a contractual right.
D is for Dispute avoidance panels
As the name suggests, dispute avoidance panels aim to catch potential disputes early and address their root cause before a dispute can crystallise. They typically involve a pre-agreed panel of impartial experts whose role is to provide practical advice at an early stage of issues arising. High-profile examples include Transport for London's Conflict Avoidance Panel, Network Rail's Dispute Avoidance Panel and the Conflict Avoidance Pledge.
E is for Enforcement
If a party refuses to abide by an adjudicator’s decision, it is open for the other party to enforce the adjudicator’s decision via an application to the Technology and Construction Court (TCC). In general terms, the TCC will enforce an adjudicator’s decision unless the adjudicator has exceeded their jurisdiction or materially breached the rules of natural justice and has a quick and efficient process in place for this.
F is for Fax
Most contracts will include a “Notices” provision, stipulating the methods by which contractual notices may be served and the addresses and contact details to be used. If your contract, as many do (especially those entered into a number of years ago and those based on pre-existing standard terms), includes fax as a permitted method then you will need to ensure that the relevant fax number is monitored in order to avoid missing any key notices.
G is for Governing law
If the counterparty to a construction contract is based overseas, or if the project in question is outside the jurisdiction it is wise to agree and specify in the contract both the governing law of the contract (the country’s law which will apply to the interpretation of the contract) and the jurisdiction (the courts which will hear and dispose of any dispute).
See also O for overseas.
H is for Hard work
Even with a trusted and hard-working legal team backing you up, any dispute - no matter the method of resolution used – is likely to divert the time and attention of your commercial, technical and managerial staff. We recommend a frank and pragmatic discussion with your legal team early in the life of any dispute to help you understand and plan for any key busy spells.
I is for Interim binding
Whilst a determination by a judge or arbitrator will bind the parties, the decision of an adjudicator is binding in the interim only. In other words, a decision is binding unless and until finally determined by legal proceedings.
J is for Joinder
When drafting contract suites for complex, multi-party projects, we suggest that a specific joinder provision is included allowing the consolidation of proceedings concerning the same or related facts, matters or issues but arising under different contracts. This is of particular importance where the specified means of dispute resolution is arbitration, where it may not otherwise be possible.
K is for Keeping up-to-date
You can follow us on Twitter for regular insights and updates on dispute resolution.
L is for Litigation
If no dispute resolution method is provided for in a contract then, unless the parties agree otherwise, recourse will be to the courts (and, if the contract is a construction contract for the purposes of the Construction Act, adjudication). Construction claims are generally brought in the Technology and Construction Court (TCC). TCC business can be heard in London or in any of the 11 designated County Courts - Birmingham, Bristol, Cardiff, Chester, Exeter, Leeds, Liverpool, Manchester, Mold, Newcastle upon Tyne and Nottingham.
M is for Mediation
Mediation is a form of alternative dispute resolution in which an independent third party (the mediator) helps the parties to reach a mutually acceptable position. Mediation is non-binding (unless recorded in a settlement agreement) and may or may not result in agreement. It can be useful to include mediation as part of an escalation procedure, as it can help with earlier resolution of disputes or to narrow the number of issues in dispute before formal proceedings are commenced. There is a duty on all parties to consider mediation before commencing litigation.
Look out for Part 2 of this article, exploring N to Z of construction dispute avoidance and resolution.