The construction industry often involves high stakes with multiple parties, expensive properties and various relationships.  This can increase the likelihood of a dispute arising within this context.  While litigation has been a common way to resolve legal issues involved in construction disputes, this option does not always offer the best outcomes or protect the interests of the parties.  In the last few decades, a variety of options to resolve disputes have grown in popularity, especially in the construction industry.

These dispute resolution methods have helped resolve issues related to contract delays, breach of contract, quality concerns and lien issues.  Construction contracts can include one of the methods discussed below or the parties can voluntarily agree to participate in the method.  These various options are discussed below, along with the advantages and disadvantages of each option.

Mediation

Mediation is one of the most common ways to resolve disputes in the construction industry. This collaborative method focuses on minimizing conflict and improving communication between the parties.  A neutral third-party mediator facilitates communication between the parties.  He or she is independently selected by the parties and often is an expert on the subject matter so that he or she can talk from a position of authority.  The mediator does not impose a decision on the parties.  Instead, he or she helps the parties communicate more effectively and get to the bottom of their dispute.

The mediator may meet with the parties privately and discuss the strengths and weaknesses of their case so that they have a more realistic idea of it.  The mediator finds points of compromise between the parties, such as continuing the contract or agreeing to offset additional work with a new amount of payment.  Ultimately, the mediator guides the parties to settle their claim outside the courtroom.

Mediation is an effective way to resolve these disputes because it allows the parties to work together toward mutual goals.  They are often able to retain their business relationship with each other.  It also provides a template on how to resolve issues that may arise in the future.  Because the parties are allowed to openly communicate with each other, they are more honest and have a better understanding of the other party’s position.

 

The mediation process is confidential, so nothing said during it can later be used against the parties if they do not reach an agreement.  Mediation is often much faster than litigation and may be resolved in a fraction of the time it would take to litigate the case.  It is also much more affordable than litigation and the costs can be split between the parties.  The parties can make creative agreements that might not be permitted in court.

Arbitration

Arbitration is a process in which the parties refer their dispute to a third party who makes a final decision on the case.  The arbitrator is often selected based on subject matter expertise.  The arbitrator applies legal principles to the case and analyzes evidence.  The parties can make agreements regarding the limitation of discovery and whether the decision will be binding or non-binding.

Arbitration is confidential.  It is typically faster than litigation.  It can also be flexible when compared to court proceedings.  However, the costs are sometimes similar to litigated disputes.  There are also limited rights to appeal a decision reached in arbitration.

Adjudication

Adjudication refers a case to a qualified adjudicator who makes a binding decision on the case.  The adjudicator is a neutral person who is not involved in the construction contract.  Adjudication is quick and puts an end to a case quickly so that the project can get back on track.  This option is usually less expensive than litigation.

Typically, the parties must exhaust other methods to resolve the dispute before they can use adjudication.  If the losing party does not pay any ordered damages, the winning party will still need to turn to the court for enforcement of the order.

Mini Trial

A mini trial is similar to adjudication in that a case is tried in an abbreviated form in front of a decision maker.  The decision makers are usually lawyers or experts in the construction field.  They evaluate the laws and the facts involved in the case to make a decision.  The decision is typically non-binding.

This method is effective in seeing how outside parties may evaluate the case.  It can also help the parties see the potential impact of a decision on the case, such as substantial damages.

Expert Determination

Another dispute resolution method for construction disputes is expert determination.  This option allows a selected expert to make a determination on the case.  This process is informal.  It is cost-effective and quicker than pursuing a formal way to resolve the dispute.  The expert renders a decision, which is typically binding on the parties.  This method is the least legal in nature since the expert relies on his or her background in the construction industry rather than on legal principles.  Additionally, an expert’s determination will not usually be enforced without arbitration or litigation.

Litigation

Litigation should be used as a last resort to resolve disputes in the construction industry due to the expense, its public nature and length of time that it takes to resolve a dispute.  That being said, litigation does offer some advantages to disputing parties.  Litigating a case may be the only way to secure the remedy that you want.  The court can impose judgments that a party would not otherwise agree to without the court’s enforcement, such as specific performance to complete the job.  Additionally, a court judgment results in a binding and enforceable decision.  However, these decisions can often be appealed, which may make the case last even longer.

These are a few options that can resolve disputes that arise within the construction context.  It is important for project managers, investors and contractors to understand their options and to be proactive about preventing and resolving disputes.  David John can explain your options to you and how he can help you resolve a construction dispute affecting your project.

David John
Arbitrator | Mediator
www.davidjohnmediation.com