Whether it is a residential or commercial construction project, sometimes things go wrong and a disagreement arises.
The options for resolving a disagreement are typically:
- Adjudication (pay now – argue later)
- Litigation (actioned in court)
- Arbitration (private process outside the courts)
- Expert Determination (industry expert decides on issue)
- Alternative Dispute Resolution (alternative informal negotiation)
However, the most important question is – what does the contract state?
If the agreement between the parties is a standard form of contract, for example a JCT or NEC suite of contracts, then the method(s) of dispute resolution will be stipulated. However, you should pay specific attention to any amendments that have been made to the dispute resolution clauses.
Below are descriptions of the dispute resolution options that are available:
Adjudication applies to all construction contracts, except contracts with a residential occupier.
Adjudication is a 28-day procedure. The parties set out their respective cases and an adjudicator provides a decision which has interim binding effect; this means it can be altered by a subsequent arbitration or litigation.
Adjudication is known as the ‘pay now – argue later’ mechanism and is ideal for non-complex disputes.
This applies to all construction contracts and is the process of taking legal action in the Court. A Judge will make a Judgment which is binding on the parties.
There is a specialist Technology and Construction Court which can deal with complex disputes.
Before issuing proceedings, parties are expected to follow a Pre-Action Protocol for Construction and Engineering disputes; which encourages the early exchange of information to enable the parties to avoid litigation by agreeing an early settlement.
The parties set out their respective cases and an independent arbitrator will make an award of its decision. The award is binding on the parties.
If arbitration is stipulated in the contract, and a party chooses litigation instead, the Court can halt that litigation and direct the parties back to arbitration.
When a disagreement is wholly technical, an expert can be appointed to evaluate an issue and its decision is contractually binding on the parties.
Alternative Dispute Resolution (ADR)
A common form of ADR is mediation. This is where the parties, with the assistance of an independent third party, explores the issues and tries to narrow those in attempt to reach a resolution. Mediation is a flexible, voluntary, private and a non-binding option.
Finally, construction disputes can be expensive and time consuming on any individual or business, so it is best to get professional legal advice early on so that you know your options and the best way to resolve your disagreement.
For further advice please contact Michelle Dixon, an associate solicitor in the Humphries Kirk construction department, at the Humphries Kirk Poole office on 01202 725400.