LEGAL OPTIONS WHEN DEALING WITH CONTRACTOR DISPUTES

When a property owner is in a dispute with a contractor, it is important to know the best possible legal options available to end the conflict as quickly as possible.

CHAMAN LAW FIRM

5/25/2022 6 min read

LEGAL OPTIONS WHEN DEALING WITH CONTRACTOR DISPUTES

When a property owner is in a dispute with a contractor, it is important to know the best possible legal options available to end the conflict as quickly as possible. To ensuring that the construction project is completed as expected according to the terms of the agreement. A dispute between the owner and the contractor could lead to litigation, mediation, arbitration, and a settlement. These legal options generally depend on the attitudes and conflict between the owner and general contractor.

If the matter is clear or could resolve through no legal action, the two parties may ensure the project completes with little more argument. However, other options become available when there is no peaceful way through the issue. If both are amenable to conclude the matter, mediation is possible. If one party wants to finish without a lawsuit, a settlement is the better option.

OUT OF COURT SETTLEMENT

It is generally important to avoid litigation for everyone. This process is costly and will take significant time to conclude. It is possible to settle the matter out of court but between legal representation. The owner may need to contact or hire a lawyer to pose a possible settlement or a remedy through the project that may either conclude the job or ensure that the contractor disputes end with little complication. The lawyer may need to communicate with the contractor involved to ensure the matter remains peaceful. A settlement may process through payment to the contractor or some other remedy negotiated between the lawyers.

NEGOTIATION

Direct negotiation is a common dispute resolution process in which parties themselves, or their representatives, try to resolve the dispute. Without involving any neutral third party. It is a voluntary and an unstructured process agreed by both parties, privately and confidentially. The features that contribute to the success of direct negotiation include avoiding taking entrenched positions in the dispute, but rather seeking solutions, which meet the needs and interest of both parties. However, the success of negotiation depends on interpersonal communication skills of the parties during the entire process. Negotiation would be the first port of call when a dispute occurs and should resolve a dispute at this stage.

LITIGATION

Litigation as a means of resolving disputes focuses on the (legal) rights of the parties and tends to be very confrontational and, as some may say, akin to washing dirty linens in public. This is to a large degree unavoidable if one resorts to litigation given the adversarial nature of the (common law) litigation process. However, much as the very point that litigation is the very ultimate and final means of resolving disputes (other than the appellate system within the litigation process itself), the use of litigation as a means of dispute resolution mechanism has in recent years been eroded. It may not be wrong to say that the trend is towards the use of litigation as a means to supervise, or support, other dispute resolution mechanisms and/or as a means of enforcing, or to a lesser degree avoiding, the end result of other dispute resolution mechanisms: it provides a supporting role for the efficient implementation of other methods of resolving disputes. The disadvantages of litigation are rather well known. Backlog of cases and the consequent delay in the parties‟ own cases are often being heard: the usual adage “justice delayed is justice denied” has very often been invoked. Technical points of law not having direct relevance to the issues in disputes may be raised; technical and complex and some may say inflexible rules of evidence will need to be adhered to; the frequent postponements of cases already fixed for hearing mean further delay; judges are not quite appreciative the facts due to the highly technical nature of the disputes and the issues involved; and many others tend to point to the erosion of litigation as a means of resolving disputes.

If no peaceful resolution is available or foreseeable between the contractor and owner, the matter may progress to a lawsuit. The contract between the two parties may explain what type of and how much in damages is necessary for delays or other disputes that arise. Hiring a lawyer is standard to either negotiate a settlement or proceed through the civil suit process. If needed, the plaintiff may gather evidence and use his or her legal representative to review the contract for enforceability through a judge. This may include the provisions for damages and how they apply to the situation specifically. Then, the owner or contractor may resolve the matter legally. The judgment sits with the court, and the decision can be legally enforced.

ARBITRATION

Arbitration as a means of resolving construction industry dispute will be the subject of the next paper. It may be important however to observe that arbitration, like litigation, focuses on the parties‟ legal rights and an arbitral proceeding is sometime not much different from a court proceeding except that in the case of arbitration, the principle of privacy is upheld and outsiders are not allowed, unless with the tacit approval of the parties and the arbitrator, to be present during the hearing. It is due to this that arbitration is sometime referred, not with commendation it may be said, as “privatized litigation”. The advantages attributed to arbitration, often stated as a comparison vis-à-vis litigation, will often include privacy, confidentiality, cost effectiveness, speedy resolution, flexibility, finality and, with special reference to construction contracts, the power of the arbitrator to “open up, review and revise” the (Architect‟s, Engineer‟s or S.O.‟s) certificates and the decisions of the Architect, Engineer or S.O. The main drawbacks of arbitrations are often stated to be those associated with the question of an Arbitrator‟s jurisdiction and his degree of competence.

MEDIATION

Mediation is a facilitative process in which the disputing parties engage the assistance of an impartial third party, the mediator, who helps them to try to arrive at an agreed resolution of their dispute. Mediation as a means of dispute resolution mechanism is thus a consensual process; it is in a sense a “brokered negotiation” or facilitated negotiation between the two parties to the dispute with the mediator being the facilitator. Unlike in arbitration or litigation where the arbitrator or the judge will pronounce the legal rights of the parties in the form of an award or a judgment, a mediator does not make decision for the parties. A mediator thus has no authority to adjudicate or determine the rights or wrongs of the parties and their disputes; the parties themselves have to come to a settlement acceptable to them, or not too unacceptable to them. In this aspect lies the fundamental difference between mediation and arbitration as a means of dispute resolution mechanism. ADJUDICATION Very often, arbitration clauses in construction contracts are drafted in such a way that referral to arbitration can only be commenced upon the completion or alleged completion of the works. The reason for this is that due to the adversarial nature of the arbitral process, the conduct of the arbitration may be too disruptive to the continued execution of the works. This reason is not without justification. However, the fact that some disputes have to wait until the completion of the works for their attempt at resolution cannot be said to have justification. These disputes include, for example, the withholding of certificates, deposit of retention monies in a separate bank account and others. Besides, and from the Contractors‟ perspective, their cash flow can be severely and adversely affected. It is in this situation that adjudication can find a useful place as a means of resolving construction disputes.

CONCILIATION

Conciliation is used synonymously with mediation in some references and the same is also used herein. It involves am type of shuttle diplomacy in which an independent third party listens to the disputants and facilitates settlement. He does not meet any of them in private, as usually the case in mediation. Instead he runs formal conciliation proceedings in which all discussion take place when both parties and their Representative’s legal advisers are present. Based on what goes on during the proceedings, the conciliator puts forward the proposed resolution in writing.

It is clear that for both conciliation and mediation, a neutral adviser who is able to offer an independent assessment is sought. The parties may agree on an acceptable settlement, but they are not obliged to, and they retain the right to refer the cases to arbitration or litigation, if an amicable settlement cannot be reached. Neither the conciliator nor the mediator can be appointed as an arbitrator in any subsequent arbitration relating to any dispute under the questioned contract unless both parties agree in writing.

DISPUTE REVIEW BOARD

The settlement of dispute through Dispute Review Board s, also known as Dispute Resolution Boards, is another method of alternative dispute resolution system. It is common in long- term contracts involving construction works and similar contracts. Resolution of disputes through Dispute Review Board is fast, inexpensive and avoids disruption of the construction work. Dispute Review Board is generally set up or established immediately after the contract is made. It functions with relative informality. The review board, a panel of three experienced, respected, and impartial reviewers, takes in all the facts of a dispute and make recommendation on the basis of those facts and the board’s own expertise. This trend in “preventive law” has been taking hold all over the world, saving time, project costs, and legal fees.

The DRB and its procedures are organized before construction begins. The contractor selects one member and the owner another (each must approve the other’s choice); and a third is and the board’s procedures are spelled out beforehand in the contract.

In Conclusion No matter which legal option the contractor or owner takes, a lawyer’s hire is a usual action both may take. To resolve the dispute, the lawyer may need to review and communicate about contract agreement obligation or advise on the best course of action.

NB: This article is not a legal advice, and under no circumstance should you take it as such. All information provided are for general purpose only. For information, please contact chamanlawfirm@gmail.com

WRITTEN BY CHAMAN LAW FIRM TEAM

EMAIL: chamanlawfirm@gmail.com

TEL: 08065553671, 08024230080