Alternative Dispute Resolution in Construction Contracts

Alternative Dispute Resolution in Construction Contracts

In this article we will discuss the techniques for Alternative dispute resolution in construction contracts which is affordable and time saving .

In construction contracts, disputes are inevitable. Disputes can arise during the project management process when parties to the contract do not agree. However litigation process can be costly. This is where alternative dispute resolution (ADR) is helpful for finding solutions by avoiding conflicts.

What are the Common causes of construction disputes?

Construction disputes arise due to many reasons during the construction process. Common causes include claims, payments, delay in construction progress and errors in documents.

Read this article for more details on most common causes of construction disputes.

What is Alternative Dispute Resolution (ADR)

If any dispute situation arise during the construction process cannot be solved by negotiation among parties to the contract, then alternative dispute resolution methods are available.

ADR or Alternative Dispute Resolution prevents expensive litigation processes. Further these methods are confidential and provide the parties alternative ways to settle the disputes.

Many construction companies and employers find ADR as an effective way to dealing with challenging issues in construction projects.

Alternative Dispute Resolution methods In Construction Disputes

The most common methods of Alternative Dispute Resolution (ADR) in construction industry include mediation, arbitration and adjudication. Specially trained and neutral third party will involve in dispute resolution process when the parties to the contract choose any of the ADR methods to resolve their issue. Further if settled, Alternative Dispute Resolution (ADR) prevent the need of   court hearing or litigation.

Mediation

Mediation is one of the Alternative Dispute Resolution method used in construction industry which needs the involvement of a trained mediator.

The mediator is an independent third party who facilitates the communication of both parties who face the dispute. During the mediation process it is aimed to achieve a settlement for the disputed issue with better communication.

Advantages of mediation:

Mediation is low costly compared to other ADR methods.

Mediator facilitates the parties to come up with their own solutions of resolution.

Mediator can suggest and recommend solutions without representing any party.

Mediation process is confidential.

It helps resolving issues of both parties.

When to seek mediation?

When the parties in dispute cannot find a solution by negotiation then it is time to seek mediation. Mediation is also helpful when the parties require a quick resolution.

Arbitration

Arbitration is another alternative dispute resolution method which can be used for finding solutions for construction disputes. However the contract should include a clause about arbitration in order to refer to arbitration process. A private tribunal will determine the outcome and it is final and binding the parties involved. This final outcome is known as the Award.

In arbitration process, the arbitrator acts as a neutral third party.  

Adjudication

Adjudication is another method of alternative dispute resolutions.(ADR) used in construction industry. Adjudication process involves few steps. It is necessary to appoint an adjudicator. Further there will be a written notice of adjudication issued which describes the dispute in detail.

When to use Alternative Dispute Resolution for your Construction Contract?

Alternative Dispute Resolution is typically faster and affordable compared to the litigation process. However it is important to know when should ADR to be used for your construction dispute and when should not be used.

If the communications between the parties are totally broken then it may necessary to consider litigation process than spending time on ADR such as mediation and arbitration. Further if there is an imbalance of power between the parties then ADR may not be the solution.

However if communication between the parties are not broken entirely then they can consider Alternative dispute resolutions to find solutions for their disputes. Further ADR processes are confidential and will help the parties to maintain their privacy.

Conclusion

ADR is more common in construction industry in order to resolve disputes. Each ADR methods have advantages and disadvantages. Parties to the contract should choose the particular type of Alternative dispute resolution to find solution for their disputes depending on the situation and type of dispute.

Further, this article is   for information purpose only and you should seek professional legal advice before choosing any ADR solution.

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About Author

Amila Gamage

A well experienced Contracts Engineer/ Trainer/ Quantity Surveyor with over 16 years of industry experience in both high rise buildings and civil engineering projects.

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