What can we learn from the construction sector about dispute resolution?
The construction sector is renowned for having particularly complex projects, which can leave greater room for potential disputes.
However, in terms of avoiding litigation, there are more similarities between construction and your industry than you may think.
Gillian Scribbins, associate solicitor in our dispute resolution team, explains more.
Think about this question – why do we have contracts?
The lawyer’s answer might be something like, to manage risks and liabilities, and set out clear obligations of the parties; but the practical answer might be to keep everyone in check and on task under threat of clear, specified consequences if things go wrong.
Enforcing those contractual consequences is much easier said than done.
Dispute resolution in construction
The construction industry is good at coming up with practical ways to resolve disputes without having to incur the time and costs of going to court. Top of the list is adjudication. Whilst we encounter a fair amount of wariness due to the sometimes unanticipated decisions made by adjudicators, what they do do is get you an independent decision, and fast.
More recently we have seen one standard form contract providing the option of a Dispute Avoidance Board. An excellent idea in principle.
It is not uncommon to find a dispute settles when clients manage to get key (and slightly removed from the project in question) decision makers of the opposing parties into a room together.
A Dispute Avoidance Board is meant to be made up of a representative from each party and a third, independent, pre-nominated individual who acts as chair of that board.
Their job, should the senior executives have been unable to decide upon a resolution, is to consider the dispute at hand and make a recommendation, for the disputing parties to implement.
This is a departure from adversarial adjudication, and provides a formal resolution procedure in the overarching spirit of collaboration and good faith being wound into construction contracts.
Construction bods in the know will be aware that the JCT has released the 2024 version of its standard form Design & Build construction contract, last updated in 2016.
In a similar approach, the JCT 2024 standard terms make collaborative working, working in good faith and addressing non-collaborative behaviour a mandatory condition, breach of which in theory would be suable for financial damages.
A recent case (Re Compound Photonics Group Ltd) has given a warning to the construction industry that where parties have contracted to operate in good faith, that dishonesty and bad actors to those contracts can and should be held to account.
In short, the name of the current game is collaboration and dispute avoidance – a common sense approach which we like to think must be working in the majority of construction cases.
Whether there is any real consequence of failing to have early warning conversations, collaborate or act in good faith will remain to be tested case by case.
But what does this mean for me?
Whilst these forms of dispute resolution are specific to the construction industry, the same principles can apply across all sectors.
It’s important to remember that, with the best will in the world, disputes do happen.
Despite or notwithstanding any intended collaboration, parties do have a right to take matters to a court, which no clever contract drafting can overrule.
The solution? Good contracts, good contract management, accurate record-keeping, and failing all that, a carefully thought-through resolution strategy.
For more information on construction law disputes, or general dispute resolution advice, contact Gillian using [email protected] or 0191 211 7955.