CONTRACTING TO EVADE DISPUTES
In theory, co-operative contracting is encouraged in the industry, however it is not surprising that in practice such provisions are not always adhered to. The common cause when a problem is encountered during a construction project is communication breakdown. Not only does the lack of communication delay the resolution of disputes it negatively effects the trust and mutual confidence that was once in existence between the parties at the time of contracting.
To counter the occurrence of a dispute, it is not uncommon to find provisions that impose duties the parties to act in good faith. It is noted that the inclusion of such duty has been embraced by countries such as the UK and the USA, however there is much debate on the enforceability of the same in Australia.
Further, disputes in this space arise from unforeseen conditions such that prompts the inclusion of provision for collaborative risk management i.e. the parties jointly engaging in a process of identifying (early detection, assessing and eliminating the risks). This enables the parties to have more control over the outcome if an issue that may have material impact on the project arises.
EFFECTIVE DISPUTE RESOLUTION CLAUSE
During negotiations, emphasis should be placed on what can go wrong in a contract (risk management) so as to deal with it adequately if it arises and provide for quick resolution.
The inclusion of effective dispute resolution clauses which encourage early intervention promotes performance of the contract to completion.
Some standard form contracts provide for mediation and failing resolution, the parties may opt to approach the Court. Such provision does not facilitate an effective resolution of the dispute, rather may result in the parties be locked in to a time consuming and costly litigation, placing the fate of the project and their entitlements in the hands of the Court.
An interim decision-making process may be inserted into the construction contract to restore order to ongoing performance on an interim basis ahead of a formal resolution by arbitration.
When engaging in large construction projects, there are generally multiple stakeholders who have an interest in the performance of the contract, including; the principal (the owner of the project), financiers and future purchasers, a project manager, engineers, architects, surveyors and builders, and subcontractors.
Many different stakeholders will come to the table with different objectives, training and values, thus there needs to be adequate communication and consideration of legitimate expectation of others to ensure a project is properly delivered.
Despite all the safeguards and proactive measures that may exist within the general contract, parties’ each have their own duties to fulfil in order to perform properly, however ensuring that parties comply with the above will mitigate risk and assist in the overall performance and management of the contract to the benefit of the parties’.
Those leading projects and influencing the contracts which bind projects together need to maximise the prospects of the co-operation and efficiency by building performance monitoring and management into all of the projects contracts.