When a construction disagreement emerges, the contracting parties may be confused about the best course of action. Disputes can be time consuming, destructive to a contractor’s reputation, and disruptive to the contractor-client relationship.
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Claims can be costly for both parties and can cause the entire project to be disrupted. There are steps that a contractor might take to avoid a disagreement. Contractors should be aware of six methods for resolving disputes if they develop.
Why Do Construction Disputes Occur?
Construction Dispute develop when the parties to a contract disagree. They occur as a result of a perceived or actual breach of a construction contract and its obligations. Disputes may also emerge as a result of:
- lack of comprehension of contract terms
- contract delays
- contract administration failure
- unfounded or incomplete claims made by the parties concerned.
While disagreements do not constitute a breach of contract in and of themselves, they can lead to contract termination or a claim against the contractor’s surety bonds. All parties to a contract can take proactive efforts before the project begins to lessen the chances of a dispute emerging.
Methods For Resolving Construction Dispute
There are a variety of conflict settlement strategies available when designing a contract, especially the dispute resolution provision. The following are examples of these:
1. Negotiation
A negotiation clause essentially states that if a dispute arises between a contractor and a project owner, the parties will try to resolve it amicably first before resorting to alternative methods.
2. Mediation
A mediation provision advises that a neutral third party be included in the conflict situation to help mediate the resolution process. Mediation is not legally binding in any manner, but it can be a useful tool for resolving a conflict that could otherwise escalate.
3. Expert determination
Though the decision cannot be legally enforced, if the parties agree to it, it may save them time by avoiding more time-consuming procedures.
4. Making a decision
The adjudication process similarly involves a neutral third party, however unlike mediation, the adjudicator makes a decision, whereas the mediator assists parties in reaching an agreement.
If the disagreement is not addressed by the adjudicator’s decision, most adjudication clauses contain the option of going to court to have the decision enforced. It is a low-cost strategy that allows business to continue while the disagreement is settled.
5. Arbitration
If the parties choose arbitration, a neutral third party will be brought into the situation to assist them in resolving it. In arbitration, the parties agree to appoint an arbiter with relevant experience to handle the case. Depending on the jurisdiction, arbitration can be legally binding.
Arbitration costs can be much more than other alternatives, often even exceeding the costs of legal proceedings.
6. Litigation
Lastly, if the parties are unable to resolve their disagreements through other means, litigation is frequently mentioned in the dispute clause. Litigation entails a trial and is legally binding and enforceable, yet it can also be overturned on appeal.
Litigation is by far the most detailed, difficult, time-consuming, and expensive method of settling a dispute. This is why, before resorting to litigation, most parties will try a variety of other options.
The bottom line
Sureties can offer assistance or make suggestions for resolving the issue and reducing losses on both sides. As a result, whenever a dispute arises, contractors must always cooperate with their sureties.