A Guide to Resolving Construction Disputes

Even in the most well-planned construction project disputes are common and can arise at any point. Disputes happen due to different reasons. A project related to construction involves numerous parties and contractors, a variety of technical issues, and complex contracts. With so many criticalities involved, disagreements are not surprising. 

When disputes arise, resolving matters effectively and on time is critical. Resolving disputes successfully is essential to avoid costly expenses incurred due to delays, probable litigations, and damaged relationships. Two primary methods of resolving construction disputes are litigation and arbitration. 

In this article, we will discuss how effective these construction dispute resolution processes are, and what factors you need to keep in mind while selecting one method among the two:

How does a construction dispute arise?

In a construction project, there are many stakeholders. These include the owners, suppliers, contractors, and subcontractors. Disagreements and conflicts usually occur or happen between these stakeholders. 

There can be various reasons for such disputes. Usually, some of the common reasons include delays in the project, changes in designs, changes in work scope, payment issues, or faults in designs. Not following the contract is another major reason behind such disputes. 

When the disputes are kept unresolved it increases the project expenses and delays in completion. The year-long legal proceedings further add up to the cost burden. Therefore, resolving construction disputes on time is crucial. 

What are the different methods of resolving construction disputes?

The resolution of the construction dispute begins with the inclusion of dispute clauses while making the contract. When signing the contract, the parties involved must take certain preventive measures to avoid disputes. They must:

• Read the contract properly and understand the terms and conditions mentioned in it

• Negotiate the clauses that are unclear or seem problematic

• Ensuring all schedules and monetary calculations are feasible, and include provisions for delays and changes

• Document all the potential challenges and issues that may happen during the execution of the project

Even after following all these a dispute arises, and there are several ways to deal with it. These are:

Negotiation

It is one of the most common methods used for construction dispute resolution in Lithuania and many other places around the world. The parties having disagreements try to settle on their own without involving any third party. This is the first step taken by the stakeholders to resolve disputes among themselves. In a negotiation process, the stakeholders try to find a solution that satisfies the concerns of all the parties involved. The success of any negotiation depends on how well the parties can communicate. The only drawback with the negotiation process is that the parties must be willing to talk and come to a mutual understanding. If no acceptable agreement can be reached, the stakeholders have to resolve the matters in another way. 

Mediation

In the process of mediation, a neutral third party is involved to assist the conflicting parties in an understanding. The role of the mediator is just to facilitate communication between the parties, but they do not pass any judgment or get involved in the decision-making process. The parties only decide the terms of the agreement. If the agreement cannot be reached, the stakeholders have to take further action. 

Conciliation

The process of conciliation is similar to that of mediation, the only difference being the neutral third party tries to settle in the presence of disputing parties. The independent third party listens to the arguments of both parties and proposes a resolution in writing. It depends on the parties whether they will accept it or not.  If they do not obey the outcome, the parties can move to arbitration. 

Arbitration

The conflicting parties can submit their dispute to one or more arbitrators. The proceedings of arbitration are similar to that of court proceedings, though there are no legal bindings or judicial enforcement. However, the conflicting parties have to obey the arbitration procedure as they have chosen the arbitrator on mutual understanding. 

Adjudication

It is similar to arbitration, the only exception it is legally binding. In arbitration, the disputes are resolved privately. On the other hand, a judge or panel of judges resolves the disputes between the parties based on formal procedures. The adjudicators’ power is however limited.

Litigation

Litigation is practicing legal rights for resolving any disputes. In this process, one party confronts the other party using formal legal procedures. Litigation is the ultimate means of resolving disputes. However, the parties try to avoid it because it takes a long time to reach a verdict following this method. Therefore, they try to resolve the matters following the previous alternative procedures. 

Now, you must keep in mind that which method will be best to resolve the constructional disputes depends on how complex the matter is and the circumstances.