Whenever various parties are brought together to work on a project, the possibility for conflict arises. In construction and engineering, disputes can stem from: inadequate or ambiguous contract conditions or breach of contract; poor communication; design deficiencies; obstacles in the construction process; time or delivery delays; changed conditions; or labour unrest, to name a few.

In the Event of a Dispute

Disputes can become incredibly costly, not only financially, but in terms of project delays as well. While every effort should be made to avoid disputes, it is essential to include guidelines for how to handle disputes in the construction and/or engineering contract. This eliminates any guesswork and allows the dispute resolution process to move forward quickly, to bring the project back on track.

Dispute Resolution Process

The five main dispute resolution processes are:

1. Negotiation: if a negotiation clause is included in the contract, the parties will attempt to negotiate and settle a dispute between themselves before seeking other means of resolution.

2. Mediation: a neutral third party is brought in to consider the facts of the dispute and help the parties resolve the dispute in an amicable manner. The mediator doesn’t make a decision himself, but rather helps the parties to find a resolution which works for all of the parties.

3. Adjudication: a neutral third party is brought in to consider the facts of the dispute and decide how it should be resolved. The adjudicator makes a binding decision (which could be final depending on the contract), which can generally be enforced by a court on application. In most construction and engineering contracts, adjudication is not the final step and there is usually provision for arbitration or litigation to follow, if one of the parties are not happy with the outcome of the decision. Adjudication is intended to be a ‘quick and nasty’ method to find a way forward while the project is ongoing.   

4. Arbitration: in arbitration, although a neutral third party is again involved, the process could become far more expensive. Arbitration is generally a more detailed and lengthy process, which is intended in most modern construction and engineering contracts to be the final port of call where disputes are concerned. In this case the arbitrator may make a decision that favours one party and the decision is usually legally binding, unless an appeal process to court is provided for.  

5. Litigation: this is becoming more and more rare as a separate step in construction and engineering contracts. Where an avenue to litigation is provided, this is usually included to deal with more extreme matters that require urgent decisions by a court, such as where people’s lives may be at stake. In some cases, it is still the last port of call as a further step after arbitration, typically where an appeal process has been provided for.  

To learn more about how to handle engineering and construction disputes, CLICK HERE.

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