Disclaimer: This essay has been written by a law student and not by our expert law writers. View examples of our professional work here.

Any opinions, findings, conclusions, or recommendations expressed in this material are those of the authors and do not reflect the views of LawTeacher.net. You should not treat any information in this essay as being authoritative.

Dispute Resolution - Construction Contracts

Info: 4272 words (17 pages) Essay
Published: 20th Aug 2019

Reference this

Jurisdiction / Tag(s): UK Law

Introduction

Over the years there has been much research in the subject of dispute resolution. This literature review aims to analyse the applicability of informal mediation, partnering and framework agreements to avoid disputes. Over the last few years there is little information to suggest whether the methods are still as pertinent. However, regardless of the issue, the critical review will analyse other literature in order to support this argument.

In order to attain the aims and objectives of this dissertation the critical literature review will evaluate a number of issues surrounding dispute resolution and avoidance methods. The literature review has therefore been broken down into the following sections:

2.2 Conflict & Disputes

2.3 An introduction to alternative dispute resolution

2.4 The applicability of mediation

2.5 Disputes in traditional & partnering based contracts

2.6 An introduction to construction alliances

2.6 Partnering: reducing the incidence of disputes

2.7 Framework agreements

2.2 Conflict & Disputes

A “conflict” is heavily based on when two or more parties lack commonality and they each have a different agenda. An individual is indefinitely in conflict when a party is asked to pay and the other party refuses. Brown and Marriot (1993) offer many variations in relation to disputes. They believe that there are many factors which can influence parties to disagree and not only of them can be amendable in the dispute resolution process. As Mackie (1991, pg 27) points out “that the nature of the dispute is important, certain matters being better left to the courts”.

Most people probably do not realise there is a difference between the term “conflict” and “dispute”. However, academics in construction do draw a variation between the two meanings. Disputes are generally “short-term” difference of opinions that can be resolved through negotiations and mediation etc whereas conflicts are typically long-term non-negotiable issues that are opposed to dispute resolution. See diagram 2.2.1

Diagram 2.1.1

.

Disputes are inevitable in construction projects. Skills in dispute resolution should be part of the resources of any professional in a managerial position. There are various dispute resolution mechanisms and procedures such as litigation, negotiation, meditation, arbitration and adjudication. With consideration to the main features and characteristics it can be determined which dispute resolution strategy should be adopted after deliberation of the nature of the dispute.

2.3 Introduction to ADR

Alternative dispute resolution (ADR) is a collective term describing dispute resolution strategies and may be defined as a range of procedures which serve as alternatives to the legal procedures of litigation and UK adjudication. Brown and Marriot (1993). Often these are described as ‘flexible’ because strict regulation and legal rules are not applied. Simplified, the outcome of the dispute more than likely lies in the neutral’s ability to analyse the facts of a case and provide constructive solutions. In order for this to be carried out, the neutral party will require professional training, experience, good communication skills. In litigation, the contents and strategies involved are highly regulated by the law, and therefore flexibility is somewhat compromised.

According to Mackie (1991), alternative dispute resolution is a more efficient way to divert many types of cases from ordinary litigation, to cheaper, quicker and more efficient “alternatives”.

In November 1990 the Centre for Effective Dispute Resolution (CEDR), a non profit making body was set up with the support of the Confederation of British Industry (CBI) to promote knowledge and use of ADR processes to resolve commercial disputes in the UK. In the period which has followed the launch, the growth of ADR in the UK has been steady with a particularly rapid increase in the last five years. The CEDR now report that a total claims value of over £4billion have been referred to them from a wide range of industry sectors, with the construction industry one of the largest users being responsible for 6% of the total number of mediations. CEDR (Online).

The use of ADR requires the appointment of a neutral, who does not necessarily have to be a lawyer. Lawyers will often base their opinion on what the law dictates and the previous decisions made by the courts without taking full consideration of the situation for individual disputes. This is important as the requirement of the neutral is not to interpret and make judgements that pertain to the law, but to bring the parties together in order to reach an acceptable agreement even if it does not conform to previous judgements made. CEDR (Online).

The four main types of ADR are:

Negotiation

Mediation

Adjudication

Arbitration

2.3.1 Negotiation

Negotiation has been defined as “the process we use to satisfy our needs when someone else controls what we want”. It is the most common form of dispute resolution. Brown and Marriot (1993). It forms an important part of everyday life not only for lawyers but also for all people. It is based on informal discussions, speedy and economical way or resolving disputes that are not complex in nature. Due to its simplicity, negotiation is often used by the parties as a 1st option before considering alternative means of dispute resolution or more formal strategies.

Negotiation is also a form of ADR. For negotiation to be successful it is important for both parties to be willing to reach an amicable agreement, which both parties feel is acceptable and once the process is complete the parties should feel that the outcome has been beneficial. Mackie (1991).

Bingham (online) illustrates that negotiation is voluntary in the sense that negotiations can be broken off at any time by simply refusing to continue, and no one can coerce a reluctant party to negotiate. This makes negotiation non-determinative, as there is no guarantee that it will end with a mutual agreement that resolves the matter at hand.

There are many great benefits of negotiation, from the parties point of view, are firstly that the parties can do it on their own, thus minimising costs, and secondly they retain control of how the dispute is resolved.

There may be different reasons for entering into negotiation. One may be due to the need to resolve a problematic area which is accepted by the other party with a degree of understanding, which can then be resolved; this allows the parties to retain mutual trust. There is also the opportunity for negotiations, which may be based on financial gain, the change of specification or a change of the contract. Brown and Marriot (1993, pg 89) believe that “the problem solving approach to negotiation is very helpful to ADR practice”.

Before the negotiation process commences each party should know where their strengths and weaknesses lie. Once this has been identified the others parties position should be evaluated and both arguments compared. This will determine how the negotiation will proceed, if both parties have the same desire to settle and what the final outcome will be.

Both parties will leave the negotiation with a particular sense of the outcome of the event whether it is positive or negative. The timing of the negotiation in relation to the project can also be significant in the future relations between the parties.

It is important that both parties in the negotiation process have all relevant information available to refer to at negotiation meetings. During negotiation both parties should be clear on their stance with relation to the dispute, stating it clearly and concisely. This should include explaining the situation and how it arose as well as its affect on the party. The other party should then provide a response.

Once this is complete the area of contention should be discussed by both parties and any areas of agreement identified. In the event that neither party is able to reach an acceptable agreement, it is important that the reason for the failure to negotiate is assessed, in order to pave the way to an amicable solution which satisfies both parties’ requirements.

For a negotiation to be successful the representatives of both parties should have a detailed understanding of the project and allow for sufficient preparation of the case. Also positions of the party should be made clear and reasonable, with the aim of ensuring mutual respect. Trust is also necessary for the process to succeed, with a willingness to negotiate, each party should be able to speak with experience and know the intricate details of the dispute. Brown and Marriot (1993).

Mediation

Mediation is a structured form of ADR, with one respective from each parties side meeting with a mediator to resolve the dispute. Mackie (1991, pg 87) defines mediation as the “intervention by a third party to assist disputing parties to reach a settlement”.

It is a voluntary, non-binding process in which a neutral party, known as a mediator, helps to guide the parties towards a mutually beneficial resolution. The mediator plays a facultative role (see diagram below) in the resolution process by assisting the parties to decide for themselves whether to settle and on what terms. A mediator does not impose a decision or attempt to judge the case. The mediator’s skills help the parties to move away from trying to demonstrate that they are ‘right’ instead the emphasis is placed on the resolution of the problem. The mediator helps the parties to achieve a settlement by focusing on what is to be done rather that pointing the blame. Bingham (online).

Mediation gives parties involved much more control over the way their dispute or difference of opinion is dealt with and over the outcome. If negotiation as previously mentioned has failed, mediation provides alternative to pursuing litigation etc. The scope for solutions is usually greater than the solutions available in courts and tribunals, or even prolonged negotiation.

Adjudication

Similarly to ADR, Adjudication is a process of decision making which involves a neutral third party. The neutral has the authority to determine a binding resolution through some form of judgement or award. Adjudication is commonly carried out in the form of the court system. Brown and Marriot (1993). Although binding, but not necessarily final outcome to disputes on construction contracts. It is mainly for disputes that will otherwise hold up cash flow, by obtaining a quick decision by an impartial third party while the contract is in progress.

Court based Adjudication is found to be significantly more formal than arbitration and the ADR process which may be used in the settlement of a dispute. Adjudication is not a voluntary process; each party presents their case which results in a final win lose outcome. Once the Adjudication process commences both parties are obligated by law to participate in the proceedings. If the case does go to trial each side must present evidence to support their argument and cause for dispute. Once the evidence of each party has been presented, a judge or jury will then make their decision based on the cases presented from both parties. Once a decision has been made the losing party has the right of appeal which may be filed and taken to a higher court. Mackie (1991).

Construction generally offers its clients great flexibility. Changes are inevitable therefore there will be changes in price and programme. This makes for disputes and if it is not efficiently managed it reduces itself to conflict. All other aspects in the project will suffer. The adjudicator will quickly identify dodgy claims and the project will not be damaged with poor relations.

Adjudication offers many advantages including the following:-

Cost Efficient – The parties split the cost of a highly credentialed Adjudicator who efficiently decides the dispute after zealously researching the law and facts with the assistance of an expert legal staff. Intelligent Justice informs the parties of the total cost at the very beginning of the process and payment is made through capped monthly installments.

Time reduced – Adjudication will commence immediately with an analysis of the applicable legal authorities and identification of the evidence that supports the positions of each party to the dispute. The Adjudicator will promptly examine material witnesses under oath in the locations where they are found. There is no need to repeat the process years later in an expensive trial.

Adjudicators Experience –The parties jointly approve the selection of their Adjudicator in advance, Intelligent Justice eliminates the risk and uncertainty that occurs when judges and jurors with unknown qualifications, backgrounds, biases and abilities are used to decide complex legal disputes in the public court system.

Enforceable – When the adjudication is completed the verdict may be quickly confirmed as an enforceable court judgment or appealed as permitted by the parties’ agreement and applicable law. Brown and Marriot (1993).

Arbitration

Arbitration is a procedure for the settlement of disputes under which the resultant disputants agree to be bound by the decision of an arbitrator who decision is final and enforced by the law.

Arbitration is a voluntary, binding alternative to court litigation. It is a consensual process based on an agreement between parties to submit their disputes to an independent person or tribunal for final verdict of the disagreement between the two parties.

MacRoberts, (2008) states “An arbitration has been defined as the method of procedure by which parties who are in dispute with each other agree to submit their dispute to the decision of one or more persons, traditionally in Scotland described as ‘arbiters’, rather than resort to the courts of law.”

In Scotland arbitration has played a pivotal role in settling disputes and as a result Scotland has its own highly regarded and developed body of arbitration law. The Scottish courts have always recognised the right of parties to agree to exclude the jurisdiction of the courts to inquire into the merits of their disputes and instead to refer any disputes to arbitration.

Traditionally, the means of conflict resolution have been very simple. Construction disputes were resolved by arbitration. Arbitration could have been regarded as the primary provisional response when in need of a conflict or dispute resolution. The main purpose of arbitration was to avoid the flaws that litigation along with the court based proceedings had. Arbitration became popular widely but in recent times has fell into the same bracket as litigation. Brooker & Lavers (1997). According to Flood and Caiger (1993) arbitration is likely to lead to delays and high costs. The imitation of legal procedures According to Flood and Caiger (1993) is described as the “jurisdication of arbitration”.

According to Brown and Marriot (1993), there are many differences between Arbitration and the “alternatives”. Firstly mediation and negotiation is are both consensual and rest on agreement, similar to arbitration, however arbitration is more legalistic and enforced by the courts whereas agreements in the ADR process will not be.

2.4 The applicability of mediation

As this review has previously established, mediation is usually one of the first stages of the legal process. However the main questions the author seeks to answer are firstly when a dispute arises, is mediation today currently the first choice and how many disputes under the legal process even now go to mediation? And secondly is mediation the best way to solve disputes?

Strategic Alliances

Alliances in Construction: An Introduction

In the construction industry various forms of alliances are now being offered such as a series of major long term construction commitments and opportunities. There are various forms of strategic alliances such as partnering and joint ventures which have allowed separate companies to co-operate in developing new projects. The structure for such schemes is simple its is wholly based on a risk/award structure i.e. each company sharing each other’s “pain and gain” during the course of the project. Ngowi and Pienaar (2005). Ingirige and Sexton (2006) point out that alliances on the whole provide opportunities for individuals and groups to gain mutual benefits such as reducing uncertainties, the product of such benefit is now providing the concept of alliancing in the construction industry an increased momentum.

Harris and McCaffer (2001) concur with this idea stating that the construction and design team prepare targets and objectives united to a structure which includes the risks and rewards based on the final outcome. The suggestion being that further collaborations will be readily available if the final outcome meets the client’s approval.

According to Ngowi and Pienaar (2005) there are many reasons as to why firms form an alliance. Not only do they provide pulling together the costs and risks they can also “trim product and service development times, penetrate new markets, and gain access to new technologies and economics of scale.” Ngowi and Pienaar (2005, p 268).

Alliances are loosely based on the important factor of trust, something which in practice should alleviate common conflicts. Coleman (1990, p 78) illustrates trust as “committing to an exchange before you know how the other person will reciprocate”. The foundations of trust being confidence and dependence. Sabel (1993) as cited in Ngowi and Pienaar (2005, p 268) puts it more pithily believing it be defined as “the mutual confidence that no party to an exchange will exploit another’s vulnerabilities”.

Ultimately the main characteristics of alliances are the combination of cooperation and competition. This combination of joint reliance between the partners with elements of conflict can add risk and caution to the cooperation. This can be overcome by the primary factor of trust as illustrated above by Coleman (1990) and Sabel (1993). The trust between partners helps overcome this threat.

Harris and McCaffer (2004) makes it clear that originally partnering is primarily regarded as the standard form of strategic alliancing. This form of construction alliance usually provides a long-term commitment between partners to work together on a series of projects or developments. Fryer(2006) makes it clear that partnering as a process is fully and completely aimed at prevention prior to a dispute evolving and one of the benefits attributable to partnering is reduced exposure to litigation through issues being resolved through strategies and communication.

Partnering

For a number of years now partnering has become one of the most practical concepts in dispute avoidance. Fryer (2004) illustrates that the increased promotion of partnering between the design and construction teams in the industry has displayed effective tactics for profitability and cost effectiveness.

Egan’s report “Rethinking Construction” in 1998 contained promising developments in Section 12 of the report which demonstrated “tools” to tackle fragmentation between parties. This was the idea of partnering and framework agreements which at the time were picking up increased popularity by firms as a substitute for traditional contract based procurement and project management. The main aspect for this was the opportunity for parties to share in the rewards of improved performance. The report’s definition of partnering is as follows:

“Partnering involves two or more organisations working together to improve performance through agreeing mutual objectives, devising a way for resolving any disputes and commiting themselves to continous improvement, measuring progress and sharing gains”.

The aspect of a partnering approach provides a harmonious agreement from the outset. The structure of which purely focuses on co-operation and teamwork to avoid adversarial confrontation. Fryer (2004) supports this view further by providing the view that partnering is increasingly becoming acknowledged as a way of addressing the industry’s fragmentation and confrontation. Harris and McCaffer (2001) believes the way partnering reduces disputes is based on the fact that problems can be foreseen and mutually resolved i.e disputes and claims. Fryer (2009) concludes that there are three core principles providing the foundation for the partnering relationship: good communications, commitments and conflict avoidance and resolution.

Gardiner (2005, p 152) states that “fostering of a mutual interdependence and trust rather than a blame culture” is fundamentally the concept of the strategy. It is also a methodology for avoiding and resolving disputes, mitigation of conflict and avoiding litigation.

Framework Agreements

A framework agreement is a general document which suits long-term collaborations between two parties or organisations. Framework agreements are loosely based on an “umbrella” agreement in which the parties enter into a number of specific contracts. Harris and McCaffer (2001).

Barr construction currently have numerous framework agreements in place in the retail industry with Tesco stores. The agreement itself has according to Barr (Online) has resulted in over forty project with the retailer. The main reason companies such as Barr will enter into framework agreements is to exchange innovations, reduce tendering from project to project and ultimately improve costs. Fryer (2004).

The framework agreement established and was recommended in Sir John Egan’s report “Re-thinking Construction” and “Accelerating Change”. The JCT contract also contains a JCT 2005 Framework Agreement whereby it is understood that through the encouragement of collaboration, the main objectives include team working and consideration of others and also the avoidance of disputes. JCT (2005) acknowledges that “frameworking arrangements are really only likely to pay dividends on larger, lengthier projects which give the project participants the opportunity and incentive to invest in people, processes and products and develop as a team”.

Klimt (2005) explains that in 2005 the Joint Contracts Tribunal published two versions of the Framework Agreement, binding and non-binding. These framework agreements are based around the concept of replacing blame with cooperation. The main purpose being providing “best practice”. He explains that traditional contracts in the past have been poor and impractical in dealing with problems and therefore they have festered unresolved and become more complex. The Framework Agreement has been published so that identification of problems is early on and resolved. Any disputes or conflict is recorded on a form. If the problem cannot be resolved it is passed up to the next hierarchical level. If the dispute is still not resolved then formal dispute resolution procedures will be implemented as outlined in the Project Specific Order.

Conclusion

This literature review has provided an extensive analysis into the main methods of dispute resolution and avoidance which are currently available in the construction industry. This conflict resolution procedure is useful for both researchers and practitioners to better deal with the dispute-prone nature of the construction industry.It would not be a mistake to conclude that disputes are inevitable in any project and whether it should be resolved at the time through ADR or avoided completely through Strategic alliances is determined by the scope of the project itself. In recent times negotiation, mediation, arbitration and adjudication have provided professionals with a procedure which could prevent individuals from the more formal hearings of litigation.

The literature review also examined the use of strategic alliances in today’s industry. In a construction alliance, there are cooperation aspects between the parties involved. The study intended to determine the applicability of such alliances in preventing disputes and conflict through the foundations of long-term commitments and collaborations. Partnering has long been a proven method of avoiding conflict through the basis of mutual trust and the idea of sharing each other’s “pain and gain” through the lifespan of their partnership. The author has also studied the use of framework agreements in the construction industry. It is evident that framework agreements providing yet-again long term collaborations between parties. The use of framework agreements in retail is immensely popular in today’s industry due to the concept being loosely based on providing “best practice”. Such purposes have allowed framework agreements to replace blame and the natural “pointing the finger” notion with cooperation and understanding.

Cite This Work

To export a reference to this article please select a referencing stye below:

Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.
Reference Copied to Clipboard.

Related Services

View all

Related Content

Jurisdictions / Tags

Content relating to: "UK Law"

UK law covers the laws and legislation of England, Wales, Northern Ireland and Scotland. Essays, case summaries, problem questions and dissertations here are relevant to law students from the United Kingdom and Great Britain, as well as students wishing to learn more about the UK legal system from overseas.

Related Articles

DMCA / Removal Request

If you are the original writer of this essay and no longer wish to have your work published on LawTeacher.net then please: