Disputes are an increasingly common part of the construction process. However, resolving them does not always have to mean months of litigation or arbitration. Unlike a lot of other commercial disputes, most parties to a UK construction contract have the right to refer a dispute to adjudication due to the Housing Grants, Construction and Regeneration Act 1996 (as amended), often referred to as the Construction Act.
In this article, we explain when and how adjudication applies, what kinds of disputes can be adjudicated, and the practical steps parties should take in anticipation of this mode of dispute resolution.
What Is Adjudication?
Adjudication is a statutory dispute resolution process designed to provide quick, enforceable decisions on construction disputes. Typically, an adjudicator is expected to reach their decision within 28 days of starting the process, but the timetable can (and often is) extended.
It is designed to keep projects moving and ensure that cash flows are protected, particularly for contractors and subcontractors lower down the supply chain.
When Does the Right to Adjudicate Arise?
You may be entitled to adjudicate by way of an express contractual clause in your contract.
If there is no express contractual clause, any party to a “construction contract”, as defined by the Construction Act, has the statutory right to adjudicate “at any time”. This right applies whether the dispute arises during the project or after completion.
To benefit from statutory adjudication rights, the following must apply:
- There is a construction contract
- The contract is not excluded by the Construction Act (e.g. certain residential occupier agreements)
- There is a dispute that has “crystallised”
- The dispute falls within the scope of the contract and the Construction Act
What Counts as a Construction Contract?
Most agreements for carrying out, managing, or providing labour or services for construction operations qualify as a construction contract, including:
- Subcontract agreements
- Supply and install contracts
- Design and build agreements
- Framework or term contracts
Certain contracts are excluded, and these typically include those with owner-occupiers of dwellings, unless provided for in writing.
What Kinds of Disputes Can Be Adjudicated?
Nearly any dispute that arises under a construction contract can be referred to adjudication. Some common examples of construction disputes include:
- Non-payment of interim or final applications
- Disputes over valuation
- Variations
- Delay and extension of time claims
- Loss and expense claims
- Defects and remedial works
- Wrongful termination or breach of contract
- Final account disagreements
- Retention
- Interpretation of contract terms.
What Does “Crystallised” Mean?
A dispute is said to have “crystallised” when:
- One party raises a claim or makes a demand, and
- The other party disputes the claim or fails to respond within a reasonable time.
There is no requirement to wait for any specific period before adjudicating. A dispute can crystallise in a matter of days or weeks depending on the facts. Once a dispute has crystallised, it can be referred to adjudication immediately without any further delay.
Why Choose Adjudication?
Adjudication offers several key benefits, especially for contractors and subcontractors:
Swift
Adjudication decisions are typically issued within 28-42 days, making it swifter than most other forms of dispute resolution.
Cost-effective
Adjudications are cheaper than litigation or arbitration, in part due to its timeframes.
Enforceable
Adjudication decisions are binding but not final and decisions can be enforced in the Technology and Construction Court.
‘Argue Later’
Adjudications have been very effective in maintaining cash flows and are very useful for disputes in relation to payments. Adjudications are also very helpful in avoiding delays where interim disputes can be decided swiftly without significantly affecting the works on a project.
When might adjudication not be suitable?
Provided that there is a statutory or contractual right to adjudicate, then adjudication is highly likely to be suitable.
A significant consideration in adjudication is that each party is responsible for its own costs so there can be issues of proportionality.
An adjudication can only deal with one dispute at a time, although each dispute may have several issues within it. It is also possible to have multiple adjudications.
The strict and rigid timeframes can be challenging, and as the referring party, it is important to be prepared before starting the clock. Adjudications are not advisable if you are not ready to proceed within adjudication timeframes.
Although in most cases the parties resolve their differences according to the adjudication decision, you might want a final and binding decision without risk of re-litigation, especially for complex disputes.
How can CCC help?
CCC has decades of experience in the construction industry, including in adjudications and has participated in more than 1,000 adjudications since its inception. We actively provide assistance to our clients with:
- Assessing claims and their merits
- Providing guidance on the best possible modes of dispute resolution
- Ensuring you are prepared in case of an adjudication
- Assist and represent you in an adjudication or other dispute resolution processes
For more information on adjudication and the process involved you may want to read our article What is an “Adjudication” in construction and how to prepare for it: A Practical Guide.
Contact us for a free initial consultation.
