Tuesday, June 21, 2005

Construction Claim & Dispute Resolution-5

CHAPTER 5: DISPUTES & ARBITRATION

DISPUTES

Largely as consequences of the inefficiencies inherent in the engineering and construction project processes, it is not uncommon for disputes to arise in the course of the operations and administration of the contract.

Disputes and claims can be traced back to failure by one of the parties to the contract to do his work efficiently, to express clearly, or to understand the full implication of the instructions issued to, or received by him.

In the event of a dispute arising, every effort should be made to reach a fair settlement by negotiation. If however, this proves impossible, the dispute would be referred to arbitration in accordance with the contract provision.

Many standard contract forms are found to be defective, as they do not provide grounds for which an extension of time can be granted for certain delaying events such as acts of hindrance or prevention by the owner which causes delay to completion. Some Standard Form of Contracts also do not cover many common delaying events, such as failure of owner to supply materials to the contractor, failure to give agreed access and failure to give possession of the site on the due date.

In this event, the owner who occasioned the delay would not be able to enforce the liquidated damages clause if there is no power to extent time in relation to the breach. The occurrence of such events would have the effect of putting the time for completion ‘at large’ (i.e. the contractor’s obligation is then to complete “within” a reasonable time”), and at such will render the LAD clause as unenforceable.

The certificate of non-completion is a mandatory condition precedent to the owner’s right to deduct liquidated damages. The contractor is not liable for liquidated damages until the S.O. or Architect had issued the certificate of non-completion. Without the said certificate, any deduction by the owner will amount to a repudiation of the contract, which may risk a determination of the contract by the contractor.

Arbitration

Arbitration involves a civil dispute in which the parties have agreed -- sometimes long before there was any dispute, and sometimes after the dispute arose -- to submit the controversy to an impartial third party (one or more arbitrators) instead of a judge or jury in court.

Unless the rules of the arbitration proceeding provide otherwise, in most cases the decision (called an "award") of the arbitrator is binding on the parties and "final."

Traditionally, many construction contracts contained arbitration clauses. Arbitration is the referral of an issue or dispute or difference between the parties to an arbitrator. Arbitration has the advantage of privacy, and the rules are rather less formal than those of a court. It is sometimes necessary for the arbitrator’s award to be submitted to a court of law and "confirmed" for entry as a court judgment. That makes it enforceable as any other order of the court. Non-lawyers sometimes informally –but erroneously -- call the confirmation process an “appeal”.

The party to the contract wishing to refer the matter to arbitration must first ask the other party, in writing, to concur in the appointment of an arbitrator. Arbitration on all matters shall not be commenced until after the practical completion of the works or the determination of the contract, unless both party consent otherwise.

The arbitration shall be deemed to commence on the date that the claimant served written notice on the respondent that dispute or differences had arisen between the parties and the request to refer the matter to an arbitrator to be mutually agreed between them.

The arbitrator upon accepting appointment has a first duty to check that his appointment is valid and he has jurisdiction to act. The party requesting the appointment of an arbitrator will be required to provide security towards costs of the award and is a pre-requisite before an arbitrator is appointed. Upon appointment of an arbitrator, the respondent will be required to provide a security towards costs.

The duties of an arbitrator are basically to conduct the hearing of the reference and to deliver his award. Arbitrators have always been bound to act honestly and in good faith. In addition, misconduct by the arbitrator may be a ground for challenge of the award and any person entrusted with this decision-making task have to be personally liable for any action in bad faith.

END.

1 comment:

Alex said...

Hi,

Just want to clarify on your statement,"The certificate of non-completion is a mandatory condition precedent to the owner's right to deduct liquidated damages."

Say, if the owner's is at fault for breaching the contaract, is he still entitle to the above?

Regards.