TYPES OF DISPUTES IN

CONSTRUCTION
CONTRACTS AND
DISPUTE RESOLUTION
RISK MINIMIZATION OF LITIGATION
THROUGH PROPER MANAGEMENT

Submitted to: Minal Mankad

Submitted by: Kishor Khava
Introduction

DISPUTE:
 Disputes is a disagreement between individuals  

 A statement by one person that is contradicted by another

gives rise to a disagreement, but not necessarily a dispute

  The disagreement only becomes a dispute when one or other

party cannot live with the consequences of the disagreement,

and insists on having it resolved
 Disputes mostly arise either from a genuine difference of

opinion or from disingenuous self-interest

 Disputes are really disturbing
 They are emotionally draining, take up time and energy,
costly and socially unacceptable

Dispute Resolution:
The process of resolving disputes between two parties
engaged in a contract by a neutral third party, by themselves
is known as dispute resolution
Or
A mechanism to sort out disagreements between two parties
Types of Disputes

Most common disputes arise over:

 Plans and specifications/scope of work
 Shop drawings and submittals
 Change orders/extra or out-of-scope work
 Differing site conditions
 Construction sequencing/project access
 Subcontractor substitution
 Construction defects
 Payment terms
Dispute resolution methods

The various methods used for dispute resolution are:

 Mediation
 Neutral Evaluation
 Adjudication
 Arbitration
 Litigation
 Expert Determination
A) Mediation
 Mediation is a voluntary non-binding process in which a
neutral Mediator assists the parties to attempt to achieve a
negotiated settlement

 Mediator will be appointed by both the parties at the time of

contracts by the mutual consent of the parties

 Mediation retains the characteristic of negotiation and gives

the parties full control over how their dispute is to be resolved
B) Neutral Evaluation
 Neutral Evaluator analysis the submissions of the parties,
and the evidence adduced, and gives a non-binding
recommendation as to how he thinks the dispute would
be resolved if it were referred to adjudication, arbitration
or litigation

 The evidence adduced to the Neutral Evaluator is not as

exhaustive as in arbitration or litigation, and the method
is used primarily to obtain an independent preliminary
assessment of the merits of a case at reasonable cost, to
assist the parties in their negotiations of a settlement
  The Neutral Evaluator’s evaluation is not binding
on the parties at the time it is given.  Depending on
the parties’ agreement, the Neutral Evaluator’s
evaluation may become binding on the parties if
not rejected by either party within a specified
period of time
C) Adjudication
 Adjudication is a dispute resolution process in which a
neutral adjudicator decides a contractual dispute between the
parties within a predetermined time limit, which is usually quite
short

 The time limit for the decision is the distinguishing

characteristic of adjudication. Adjudication is similar to
arbitration except time limit in adjudication
 The adjudicator’s decision is usually binding but not final,
which means it is enforceable even if a dissatisfied party
subsequently refers the dispute afresh to a more final form of
dispute resolution
D) Arbitration
 Arbitration is a dispute resolution process that is
frequently used as an alternative to litigation in connection
with technical disputes where it is considered desirable
that the skills of the decision-maker should be more
heavily biased towards relevant technical issues, rather
than purely legal issues

 The court system in many national jurisdictions is

supportive of arbitration, but there are significant
differences between arbitration and litigation.  Foremost
amongst these is the private and confidential nature of
arbitration, as compared with the public nature of litigation
 Arbitration has the potential to be quicker and cheaper
than litigation,

 The parties usually have the option to choose their

arbitrator or arbitrators, but failing agreement on that,
they may still choose the appointing body,

 the arbitrator gives equal attention to each party’s

submissions, and not to rely on any special knowledge
of his own, of which the parties may be unaware,
without first putting it to the parties and allowing them
to comment.
E) Litigation

 Litigation, is the State run system of dispute resolution involving

judges and courts

 The judgment of the court is often said to be final and binding

 If the judgment of the court is not complied with by the loser, the
winner may return to court to seek permission to instruct bailiffs
to seize property of the loser to the value of the judgment plus
associated costs
 Because litigation is highly procedural, the parties lose control
of it
 In litigation parties are not given choice of choosing their
judge and judges are allocated on rotation basis
f) Expert determination
 In the dispute resolution method known as expert
determination, an expert is given full authority to decide the
dispute according to his own expertise, without necessarily
sharing that expertise with the parties and inviting them to
comment

 Expert’s determination is usually final and binding upon the

parties, and not subject to appeal to the courts unless experts
negligence can be proved
 Expert determination is arguably the cheapest form of
determinative dispute resolution available, but requires
considerable faith in the integrity and competence of the
expert selected
Risk management as part of contract
management
 Expect the unexpected during implementation phase
 Who does what?
 How?
 By when?
 Example: what happens if increasing costs means concessionaire
is enable to operate NADEX under current agreement?

 Institution’s priorities and relative importance of risks will shift and

change
 Revisit and reconsider on regular basis
 Ensure appropriate risk transfer throughout
To remember…

 Each contract is unique

 Nature of contract
 Construction vs. operations
 Length of contract
 Flow of funds between public and private sector
(availability payments, concession fees, etc…)

 All require periodic monitoring

 What: level of performance
 How: quality control
 If: consequences
 Who: self, institution, independent party
Conclusion

 There is no particular dispute resolution method which is

superior over the other and the choice of the method varies
depending on many factors

 Disputes should be dealt with as early as possible to avoid

time and cost overrun

 Use of force in dispute resolution is ill advised, a blunt,

inelegant and tragic way of addressing the diputes