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February 7, 2017

What does it mean to ‘avoid disputes’, and why is a dispute resolution practice advising that disputes should be avoided?

We can consider disputes in its widest sense, that is any disagreement or difference of understanding. These disputes are inevitable and will arise from mistakes, misunderstandings or just simply from the inherent imprecision of the English language. Tens, hundreds of even thousands of these small disputes will arise on any construction project; the proper response it to ensure those minor disputes do not escalate into something more substantial.

What happens if they do escalate? Parties become entrenched in their positions and they become more mistrustful. Any working relationship the Parties may have previously enjoyed is eroded. Future minor disputes become caught up in this new attitude and mindset and whereas those disputes may, previously, have been resolvable; they are no longer. The disputes, big and small, become a barrier to the successful, efficient construction of the project.

In those circumstances, the only solution may be to refer to formal dispute resolution processes.

Which leads us to the narrower definition of dispute, i.e. the actual referral of a disagreement to an impartial third party for resolution (for those familiar with the NEC3 form of contract, a dispute does not actually exist until referred to Adjudication).

There are, of course, advantages to this…….there are also many disadvantages:

  • No outcome is guaranteed. It is extremely rare to have a so-called ‘cast iron’ case and even then, an Adjudicator or even a court may well decide against it.
  • Costs can spiral out of control very quickly. Depending on the dispute resolution forum, cost may be incurred in solicitors, barristers, expert witnesses, claims consultants etc. The party that loses may end up paying all the other party’s costs.
  • The costs incurred may exceed the amount in dispute.
  • Some dispute resolution processes can take a long time and can be more focussed on the process than effectively resolving the dispute.
  • Relationships may be incurably affected.

For the above reasons, and more, we only recommend formal dispute resolution as a last resort; we would much rather help to avoid disputes than resolve them.

Accordingly, we recommend that our involvement starts early in a construction project to:

  • Train staff in the proper use of the contract in question.
  • Ensure the correct contractual processes and procedures are in place.
  • Provide guidance to ensure the most appropriate response to emerging disputes is made.
  • Assist with the management of difficult clients, contractors, project managers or subcontractors.

Above all, we will ensure you comply strictly with the terms of the contract. It has often been said that doing so is ‘being contractual’. But what else is there to be?

I will leave you with this – it would not be surprising to buy an expensive item of electrical equipment, ignore the instructions and expect it to work properly or at all. By analogy, it should not be surprising that if the instructions for a construction project, i.e. the contract, is ignored then the result will be increased costs, delays, disputes and defects.

Read, understand and apply the contract. Only good things can result.

Written by Steven C Evans (steven.evans@cmcasiapacific.com)

This article is for general information purposes only and should not be relied upon in any specific situation without appropriate legal advice. If you require that advice or wish to discuss any of the issues raised in this article, please contact us.

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