Engineering and Construction Law

and Contracts
Chapter 18 Contract Dispute Resolution
Techniques
Dr. Rafiq Muhammad Choudhry
BSc(Civil-Honor), MSc(CEM), PhD(CEM), Post-Doctorate (CEM)
PE, M.PEC, M.IEP, M.ASCE, Email: choudhry03@gmail.com

Professor of Construction Engineering & Management (CE&M)

Department of Civil and Environmental Engineering (CEE)
College of Engineering (CoE)
King Faisal University (KFU)
Al-Ahsa, KSA

CHAPTER EIGHTEEN - CONTRACT DISPUTE

RESOLUTION TECHNIQUES
The traditional dispute resolution process with
alternative dispute resolution techniques added to it
is shown below

Dr. Rafiq Muhammad Choudhry

Professor of Construction Engineering and Management

CHAPTER EIGHTEEN - CONTRACT DISPUTE

RESOLUTION TECHNIQUES

Contract Claims

Occur at any stage in the execution of

construction contracts

Typical causes of claims

Differing site conditions

Delays
Design errors or changes
Interpretation differences
Acceleration or suspension of work
Construction failures
Additional work
Deleted work

If differences are not settled one of the parties files a

change order or a claim

Dr. Rafiq Muhammad Choudhry

Professor of Construction Engineering and Management

CHAPTER EIGHTEEN - CONTRACT DISPUTE

RESOLUTION TECHNIQUES

Information and Communication

Technology (ICT) and the Electronic
Marketplace

Complicates dispute resolution process due to

the technologies not having been addressed yet
by the legal system and contractual practices
Three legal ICT issues:
1) admissibility of emails in court
proceedings
2) electronic signatures in global and
national commerce act
3) the Elegal European commission research

Dr. Rafiq Muhammad Choudhry

Professor of Construction Engineering and Management

CHAPTER EIGHTEEN - CONTRACT DISPUTE

RESOLUTION TECHNIQUES

Building Information Modeling

Provides capability of creating three

dimensional models and four dimensional
schedules
Allows for quantity take offs to be completed by
the program
Allows for Integrated Project Delivery using
collaborative agreements such as
ConcensusDOCS

Dr. Rafiq Muhammad Choudhry

Professor of Construction Engineering and Management

CHAPTER EIGHTEEN - CONTRACT DISPUTE

RESOLUTION TECHNIQUES

Contract Negotiations

Requires both parties to compromise to settle a

claim
In construction, 90% to 95% of construction claims
are settled through negotiations
Negotiators try to persuade opposing parties to
relinquish one or several claims if awarded another
large claim
Requires bargaining with opposing party
Saves time and money if claims are settled using
negotiations

Dr. Rafiq Muhammad Choudhry

Professor of Construction Engineering and Management

CHAPTER EIGHTEEN - CONTRACT DISPUTE

RESOLUTION TECHNIQUES

Negotiators - Traits Required

Preparation and planning skill

Knowledge of subject matter
Ability to understand the true interests of the
firm
Ability to think clearly and rapidly under
pressure
Ability to express thoughts verbally
Good listening skills

Dr. Rafiq Muhammad Choudhry

Professor of Construction Engineering and Management

CHAPTER EIGHTEEN - CONTRACT DISPUTE

RESOLUTION TECHNIQUES

Negotiators - Traits Required:

Patience
Ability to persuade others
Ability to understand others
Ability to control emotions
Ability to maintain flexibility

Dr. Rafiq Muhammad Choudhry

Professor of Construction Engineering and Management

CHAPTER EIGHTEEN - CONTRACT DISPUTE

RESOLUTION TECHNIQUES

Contract Mediation

Inserts a neutral third party into the negotiating

process to help reach a settlement
Used to help control losses and damages
Preserve relationships, clarify issues, and secure
agreements
Used to augment negotiations

Dr. Rafiq Muhammad Choudhry

Professor of Construction Engineering and Management

CHAPTER EIGHTEEN - CONTRACT DISPUTE

RESOLUTION TECHNIQUES

Arbitration

Either binding or nonbinding

If nonbinding either party could sue if not
satisfied with the results of arbitration
Federal arbitration act applies in contracts for
interstate commerce
American Arbitration Association provides
Guidelines on Construction Industry Arbitration
Rules and Mediation Procedures (see Appendix
J)

Dr. Rafiq Muhammad Choudhry

Professor of Construction Engineering and Management

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CHAPTER EIGHTEEN - CONTRACT DISPUTE

RESOLUTION TECHNIQUES

Arbitration

Neutral third party or several people are hired to

evaluate evidence, listen to arguments of both
parties, and provide a decision and settlement
award
Arbitrators are from the American arbitration
association or state or local arbitration
associations
Arbitrator may not have any type of affiliation
with the owner or the contractor
Parties to arbitration provide arbitrator with
construction contract, drawings, and other
documents

Dr. Rafiq Muhammad Choudhry

Professor of Construction Engineering and Management

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CHAPTER EIGHTEEN - CONTRACT DISPUTE

RESOLUTION TECHNIQUES

Advantages of Arbitration:

Less time than litigation

Less expensive than litigation
Lawyers not required
Private proceedings - helps preserve
reputations
Location, time, and arbitrators all selected by
disputing parties not the court system
Rules of evidence do not apply
Do not follow precedent law

Dr. Rafiq Muhammad Choudhry

Professor of Construction Engineering and Management

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CHAPTER EIGHTEEN - CONTRACT DISPUTE

RESOLUTION TECHNIQUES

Advantages of Arbitration:

At the conclusion of the arbitration proceedings

the decision has to be made in 30 days
No punitive damages
If award is not paid the party files a petition with
the courts
If no response to the petition within ten days it
becomes a judgment
Sureties are not bound by arbitration awards
Have to file a separate lawsuit against the surety

Dr. Rafiq Muhammad Choudhry

Professor of Construction Engineering and Management

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CHAPTER EIGHTEEN - CONTRACT DISPUTE

RESOLUTION TECHNIQUES

Litigation

One party sues another in the court system

Reasons not to use litigation

The results of lawsuits become part of the public record,

which could be viewed by anyone, and this could be
damaging to the reputation of a firm or produce unwanted
publicity in newspapers, on television, or on the internet.
The cost of litigation could be prohibitive since there are
filing fees, court costs, and legal fees.
Lawsuits could take years before they reach the court
docket.
Lawsuits are tried in courtrooms where it is difficult to
demonstrate engineering or construction concepts.

Dr. Rafiq Muhammad Choudhry

Professor of Construction Engineering and Management

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CHAPTER EIGHTEEN - CONTRACT DISPUTE

RESOLUTION TECHNIQUES
Litigation

Reasons not to use litigation:

Court proceedings require that cases follow rules of

evidence
Cases are argued based on precedent law and this
requires the investigation of previous legal cases in order
to locate similar cases that could be used to argue the
merits of the current case and this requires that cases
focus on legal not technical issues.
The decisions rendered by the court could be appealed if
one of the parties is able to prove that the trial was not
conducted properly.
Disputants risk settlements that might include damages in
addition to actual losses.

Dr. Rafiq Muhammad Choudhry

Professor of Construction Engineering and Management

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CHAPTER EIGHTEEN - CONTRACT DISPUTE

RESOLUTION TECHNIQUES

Dispute Review Boards

Board members are hired at the beginning of

projects
Could be resident at construction job sites
Hold weekly meetings to settle claims
Construction Dispute Review Manual explains
DRB process
Used on government public works projects

Dr. Rafiq Muhammad Choudhry

Professor of Construction Engineering and Management

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CHAPTER EIGHTEEN - CONTRACT DISPUTE

RESOLUTION TECHNIQUES

Alternative Dispute Resolution Techniques:

Mediation/arbitration - mediator switches role to

be arbitrator if no agreement is reached during
mediation

Early neutral evaluation - mediator provides an

evaluation on the merits of the case to each party

Minitrials - actual proceedings presented to

company executives with authority to authorize
settlements

Dr. Rafiq Muhammad Choudhry

Professor of Construction Engineering and Management

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CHAPTER EIGHTEEN - CONTRACT DISPUTE

RESOLUTION TECHNIQUES

Alternative Dispute Resolution Techniques:

Rent a judge If both parties are not satisfied
with arbitrator. The parties hire a former judge, a
lawyer, or a private expert in the field to hear
the case and render either a binding or a
nonbinding decision, the process called Rent-aJudge.

Dr. Rafiq Muhammad Choudhry

Professor of Construction Engineering and Management

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CHAPTER EIGHTEEN - CONTRACT DISPUTE

RESOLUTION TECHNIQUES

Alternative Dispute Resolution Techniques:

Court annexed arbitration Dispute
resolution procedure that is available within the
court system. Both sides present case to
arbitrators who are lawyers appointed by the
court. The decision is not binding, and the case
could still be heard in court. If both parties have
not waived the appeal process.

Dr. Rafiq Muhammad Choudhry

Professor of Construction Engineering and Management

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CHAPTER EIGHTEEN - CONTRACT DISPUTE

RESOLUTION TECHNIQUES

Alternative Dispute Resolution Techniques:

Summary jury trial are used while disputants
are waiting for their case to be tried in the court
system; they are considered to be Mock trails.
Trial presented to a jury before the real trial and
the results are presented to the judge who
presides over negotiations in his or her
chambers. Both parties know how the case might
be settled by a jury and this knowledge is used by
the judge to influence the disputants to settle the
case during negotiations.

Dr. Rafiq Muhammad Choudhry

Professor of Construction Engineering and Management

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Read Chapter 20 Claims and Disputes Book by Fisk & Reynolds

Dr. Rafiq Muhammad Choudhry

Professor of Construction Engineering and Management

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Thank You

Dr. Rafiq Muhammad Choudhry

Professor of Construction Engineering and Management

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