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Construction Disputes and their Settlement


Development of Disputes
Natural phenomenon!

Interpretation of contract clauses

Difference in opinion regarding the execution of the work Unforeseen problems

Types of Construction Disputes

Claim: Demand for something considered ones due
Claims of Contractor against Owner/Client Claims of Owner/Client against Contractor Sub-contractors claims

Claims of Contractor against Owner/Client

Claims to recover damages caused by breach of

conditions by the owner

Claims to recover loss or damage caused by an unjust termination of the contract by the owner Claims to recover damages upon rescinding of the contract due to frustration

Claim Generating Circumstances

1. Delay in the supply of drawings and clarifications 2. Defects in the specifications furnished 3. Delay/manufacturing defects in materials/equipment supplied by the owner 4. Changes in law, regulations or codes subsequent to the award of the contract 5. Changed or differing site conditions 6. Delay due to other contractors work 7. Acceleration in work demanded by the owner 8. Defects in the contract agreement 9. Inordinate delay in the release of payments 10.Unjustified termination of the contractor by the 5 owner

11. Substantial delay in handing over the site 12. Owners failure in his implied duties 13. Unreasonable rejection of acceptable work 14. Delay in clearances 15. Suspension of work by the owner for his own convenience 16. Rescheduling/prolonging work for financial and other reasons 17. Work arising during maintenance period, which is not covered by the contractors obligations 18. Owners delay in decision over amendments/change orders 19. Quantity variations, for which provision is not made in the contract

20. Failure by sub-contractors nominated by the

owner 21. Stipulations of near-impossibilities for compliance or incorporation into the contract work 22. Natural calamities

23. Force Majeure

Claims of Owner/Client against Contractor

Claims for defective work done by the contractor

Claims for delay caused by the contractor

Counter-claim as a defense Claim against professionals Claims following termination and breach Claims for expenditure incurred in completing the

work left incomplete or abandoned by the

contractor Claims for liquidated damages

Owners Claim Procedure

Engineers Comments Consultants Comments Claims Committees Recommendation Top Managements Approval Claim Initiation by the Client/Owner Excusable Delays

Modes of Settlement of Disputes

By direct negotiations between the client and the

Settlement by arbitration Through civil courts


Direct Negotiations
Easiest and least expensive

Majority of the disputes are settled through

negotiations Arbitration is sought after, only if direct negotiations fail


Settlement Through Courts

Last resort

Attempted only if direct negotiation and

arbitration fails Time consuming, to the tune of several years Expensive


Settlement Through Arbitration

a dispute by an impartial referee selected by the parties concerned. Arbitrator is a person chosen by the concerned parties to pronounce judgment on the dispute.

Arbitration is the hearing and determination of

Sole Arbitrator Joint Arbitrators


Advantages of Arbitration over Litigation

1. Cost 2. Speed 3. Convenience 4. Technical knowledge

5. Informality
6. Proceedings in private premises

7. Finality of award


Indian Arbitration Act 1940

Provides for arbitration in the following three cases:

Arbitration without intervention of a court

Arbitration with intervention of a court Arbitration in lawsuits


The Act:
does not dictate the form of arbitration to be adopted

does not prescribe the procedure for arbitration

does not interfere with the award given by the

does not require the arbitrator to state reasons in support of his ruling


Arbitration Clause
1. All disputes will be settled through arbitration in accordance with the Indian Arbitration Act, 1940 2. The parties may appoint a single arbitrator or each party may nominate an arbitrator and the

two nominated arbitrators may mutually select an

umpire 3. The parties will mutually agree regarding the sharing of arbitration fees and expenses

The arbitration proceedings will be conducted by

the arbitrator(s) in accordance with laid down procedures, at mutually convenient places and dates

If difference in opinion arises between the two

arbitrators, the decision of the umpire will be

final 6 The arbitration award will be final and binding

upon both parties


o Joy, PK, Handbook of Construction Management, MacMillan India o Patil, BS, Civil Engineering Contracts and

Estimates, Universities Press

o Gahlot, PS and BM Dhir, Construction Planning and

Management, New Age International

o Gupta, BL and A Gupta, Construction Management

and Machinery, Standard Publishers