10/27/2014

Contents

Construction Management (for HND)

Negotiation
Mediation
Adjudication

Arbitration

Claims and Disputes

Dr Motiar Rahman

L11: Week 12

CM for HND

Definitions of claim and dispute

Industry Environment / Sources
Legal Basis / Categories of claims
Causes of claims and disputes
Dispute resolution

L11: Week 12

CM for HND

Why to Claim?

Definitions (Gould et. al. 1999)

Gould, N., Capper, O., Dixon, G. and Cohen, M. (1999). Dispute
resolution in the construction industry: an evaluation of British
practice. Thomas Telford: London. ISBN: 0-7277-2836-9

From the viewpoint of target(s): why claim?

Claim:
Dictionary: voicing grievance to person believed to be at fault.
In construction industry practice: A request or a demand
whether rightly or wrongly, to which one party considers itself
entitled.

Claim to money;
Claim to extension of time (EOT); OR
Claim to both money and time together.

Dispute:
Dictionary: argue, debate, quarrel, question the truth or
validity of.
In construction industry practice: A dispute occurs when the
claim is rejected in whole or in part or ignored.
It is essentially objective in nature.
L11: Week 12

CM for HND

L11: Week 12

Industry Environment
Clients:

Poor communication between the parties.

Tendering policies and procedures not sound.
Decision making among all the parties involved in the project.
Compromise between cost , quality and time.

complete and not liable to change,

completed but liable to change,
incomplete and is made known,
Incomplete and not revealed.

L11: Week 12

CM for HND

Poor briefing, changes and variations, delayed payments

Changes to contracts, interferences to contractual duties

Consultants
Inadequate design, information, and format
Lack of experience, competence and coordination
Unclear delegation and variations

Design status as at tender:

Industry Environment

The adversarial nature of the construction industry:

CM for HND

Contractors
Poor planning, programming and work standards
Inadequate site management, coordination & capability
5

L11: Week 12

CM for HND

10/27/2014

Categories / Legal basis of claims

under the contract conditions themselves,

remedy /damages are prescribed in contract.
Engineer can decide, e.g. variations / Change Orders

For breach of contract, but remedy is not given in contract:

the contractor's remedy will be damages in accordance with common law
e.g. for late possession of site to contractor. >> Delayed site access

Non-contractual claims / common law claims:

For breach of a duty, direct or implied, remedy is not in contract:

as they are covered by common law, not by the contract.

Duties / responsibilities are mentioned in contract, but not remedy /
damage
Client & contractor to agree, otherwise Formal dispute,
e.g. delayed supply of drawings, delayed site access

Common law claims: 3 types

Contractual Claims:

Categories / Legal basis of claims

Damages decided following common law in tort,

e.g. incomplete or misleading documentation.

On a quasi-contractual or restitutionary basis, often called a

quantum meruit claim: as much deserved, e.g.
work done without agreed price, or
original contract was void and work paid under new contract, or
Work done on a letter of intent but discontinued before formal contract

Ex-gratia claims:

no client obligation, not covered by contract or under common law

out of kindness to help contractors, because of losing money.
Only client.

L11: Week 12

CM for HND

L11: Week 12

Causes of claims

Common causes of claims:

Root causes and Proximate causes

Root causes: not immediately observable

Seeds of potential claim, e.g.
unfair/unclear risk allocation, unrealistic tender price, etc.

Proximate causes: immediately apparent, e.g.

Inadequate or inappropriate design information,
incomplete brief or specification, etc.
Leads to claims under contractual provisions, e.g.
variations, delays, etc.

CM for HND

Poor quality documents: lack of clarity/foresight, ambiguities,

discrepancies, incompleteness >> errors & omissions
Instructions: delay, improper form, without due authority.
Notices not given or not given on time
Delay in issuing drawings and working details,
Delayed access to the site.
Problems reg. nominated SC and other SCs / Contractors
Variations
Acts of God / Force Mejeure

L11: Week 12

Claims Documentation and submission

A contract is an exchange of promises for the breach of

which the Law will provide a remedy.

Formal Dispute resolution mechanism

A letter showing intention

Include the circumstances that the claim is necessary
Explanation of the reason
The relevant clause under which the claim is being made

Then:

Determining the loss and expenses: direct cost + Overheads

Preparing the documents
The submissions: Introduction, basis of the claim, details of
the claim, evaluation, supporting technical data
(appendices)
CM for HND

10

Dispute Resolution

First step: to give a notice:

L11: Week 12

CM for HND

Commercial Exchange:

The procedure is given in contracts

Collation of all facts and evidence to substantiate

Causes of claims

Two types:

L11: Week 12

CM for HND

11

Court of Law >>> Litigation: Not by construction experts

Costly: many hidden costs
Time consuming: may run years after project completion
Work may be stopped project be abandoned !!!
Disruption of relationships: harms industry environment,
potential business, overall industry development

Main beneficiaries: Lawyers only

L11: Week 12

CM for HND

12

10/27/2014

Alternative Dispute Resolution (ADR)

Benefits / Disadvantages of ADR

Main benefits

What is ADR?
Any process involving the use of a third party neutral as an alternative to
litigation, i.e. other than the court of Law
Can be used in addition to or alongside litigation (or arbitration?), as an
alternative.

Available ADR Techniques:

Negotiation
Mediation conciliation
Adjudication and Expert Determination
Arbitration
Multi-use: Dispute Review Boards (DRB), Dispute Review Advisor (DRA)
/Use of a neutral
Hybrid techniques, e.g. Med-Arb, Med-rec, mini-trial, etc.

L11: Week 12

CM for HND

13

Maintains a business relationship

Less time and lower cost
Confidentiality
Flexibility: according to parties needs & interests
Use of construction experts
Greater satisfaction

Perceived disadvantages
I will disclose my hands: information / argument
There is a pressure to settle
Impression of weakness or liability

L11: Week 12

Negotiation ?

Mediation:
a private, informal, voluntary process
parties are assisted by one or more neutral third parties in
their efforts towards settlement.
Outcome rests with the parties.

a process of working out an agreement

by direct communication of the parties
with or without advisors
voluntary and non-binding
and parties control the outcome

Mediator(s):

Two basic approaches to negotiation:

1. Positional, competitive or distributional negotiation
2. Principled, problem-solving, interest-based,
cooperative, or win/win negotiation.

L11: Week 12

CM for HND

15

act as a peacemaker (/ pacifier) between disputants

do not judge or arbitrate the dispute
Matchmaker?
advise and consult parties impartially
to assist parties in bringing about a mutually agreeable
solution to the problem

L11: Week 12

Adjudication

CM for HND

16

Expert Determination

Adjudication:

Expert determination:

an independent third party considers the claims of both

sides and makes a decision.
The adjudicator is usually an expert in the subject matter
in dispute.
Adjudicators are not bound by the rules of litigation or
arbitration.
Their decisions are often interim ones, but may be binding
by prior agreement.

L11: Week 12

14

Mediation and Mediator

Negotiation:

CM for HND

CM for HND

17

an independent third party considers the claims made by

each side and issues a binding decision.
The third party is usually an expert in the subject of the
dispute and is chosen by the parties,
who agree at the outset to be bound by the expert's
decision.
It can be most suitable for determining technical aspects of
a complex dispute.
Expert determination is also a process of adjudication (as
in last slide), and parties agree at the outset to be bound
by the expert's decision, very good for technical issues

L11: Week 12

CM for HND

18

10/27/2014

Arbitration
Arbitration:
an independent, impartial third party hears both sides and makes a
decision,
The decision is legally binding on both sides in most cases.
It is private, with procedural rules, but less formal, although bound by
certain rules / framework.

THANK YOU

The sequence of events

Dispute arises; Notice to refer; Notice to concur

Agree /Disagree to Arbitrator, then
Apply to President ICE / IAA; President appoints
Preliminary meeting; Order for directions
Exchange of pleadings
Discovery; Inspection
Proof of evidence / Experts reports
Hearing
Award

L11: Week 12

CM for HND

19

L11: Week 12

CM for HND

20