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Disputes in the Construction Industry
How the tools can help you - Adjudication

Published in the FSB Business Network magazine in October 2014

When a construction dispute arises it usually means that the customer doesn't want to pay the proper value for the work that has been completed or worse still believes, often misguidedly, that payments should be returned because of contra charges and counterclaims.

There is a way that contractors and subcontractors can resolve such disputes quickly and cost effectively, the tool available is adjudication.

In 1998, the Government introduced the Housing Grants Construction and Regeneration Act 1996 and then to make it more effective it was amended in 2011 by the Local Democracy, Economic Development and Construction Act 2009 [collectively 'the Construction Act'].

The Construction Act provides for construction disputes to be resolved by adjudications which are very often completed in 28 days from commencement. Used wisely the Construction Act can be a significant tool in getting paid for the work that was completed because the Adjudicator issues a decision ordering payment by the contractor's clients so there is no need to go 'cap in hand' when faced with unreasonable clients and bogus contra charges.

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Case Study: In a recent case, a subcontractor undertook a £200,000 package of work for a main contractor.

For reasons that suited both the contractor and the subcontractor, the parties agreed 75% of the way through the works to bring their agreement to an end and for the contractor to complete the works using others who were on the site at the time.

At the time of the agreement to separate, the subcontractor had been paid nothing but had applied for and expected to be paid £145,000. Within days of the agreement the contractor wrote to the subcontractor saying that there was no such agreement and it issued a document alleging that it would cost £160,000 to complete the last £50,000 of work and that consequently the subcontractor was due nothing and that the £145,000 would never be paid.

Faced with such conduct, negotiation is unlikely to be the answer, in this case the subcontractor took the contractor to adjudication.

The Adjudicator decided that he 'preferred' the evidence of the subcontractor and agreed that there was an agreement. The Adjudicator also decided that the contractor should pay the £145,000 plus interest and all of the Adjudicator's fees and expenses.

This is one of many such success stories. Adjudication is the principle avenue for resolving construction disputes.

Armed with the Construction Act, what is now needed is for contractors and subcontractors alike to understand what the provisions are and apply them wisely so that cash flows better and more reliably through the industry.

Call now to discuss solutions for you - 0845 604 8322

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