When Things Turn Sour Part 4
Finding resolution through litigation
When it comes to construction contracts, disputes are almost inevitable. However, if tensions are left to fester, conflict can escalate all the way to the courtroom. It should be noted that litigation as a means of resolving disputes is expensive, time-consuming and generally unsatisfactory. This is because contract disputes are often technical rather than legal in nature and the courts are ill-equipped to deal with them. The Joint Building Contracts Committee (JBCC) favours other speedier and more cost-effective methods of resolving conflict – namely arbitration, mediation and expert determination (see parts 1 to 3 of this series). However, if a conflict over a building contract reaches the point where no other remedy will suffice, the matter can be taken to the courts.
How does litigation work?
The JBCC makes provision for mediation before a dispute is referred to arbitration, and as a concession to government and other public clients, permits litigation as an alternative to arbitration. In order to initiate the dispute resolution process, any difference between the employer (or any of his agents) and the contractor should be referred to the principal agent for a decision to be given in writing within 10 calendar days. The decision is final and binding unless rejected in writing by either party within a further 10 calendar days. If the principal agent's decision is rejected, or if the principal agent fails to make a decision within the prescribed 10 working days, the difference may be declared a dispute.
In state contracts, if a dispute is referred to litigation, the action must be instituted within one year of the declaration of the dispute, failing which the claimant's right to pursue legal action shall lapse.
It is important to note that instituting legal proceedings does not relieve either party from the proper performance of his contractual obligations. For example, an instruction to break down and re-do condemned work must be carried out even if the quality of the workmanship is under dispute.
How to avoid litigation
The project manager should ensure that a structured dispute resolution procedure is incorporated into the contract, thereby affording the parties every opportunity to resolve the dispute before resorting to the courts. This could be a layered approach starting, for example, with discussions between senior managers of the opposing parties. If this effort fails, the next step could be compulsory mediation, followed by arbitration or expert determination.
Good record-keeping is vital to the success or defence of claims as cases are frequently won or lost on the strength of documentary evidence. Often disputes arise over limited or non-existent project briefs, poor documentation, inadequate budgets, unrealistic programmes, onerous or biased contract terms, poor contract administration and unrealistic expectations. Disputes can be avoided by getting these fundamental issues right at the outset. A comprehensive pre-design phase Project Definition Plan is a good way to manage risk through the course of the project – from design through to construction and occupation.
References
Finsen, Eyvind The Building Contract: A Commentary on the JBCC Agreements (2005), Juta & Co. Ltd, Cape Town
Hyslop, Don ‘The Key to Avoiding Disputes’ June 2010 RICS Construction Journal, Page 5
