Settling Construction Disputes
Disputes arising out of construction contracts are all too common. There are many potential dispute resolution processes open to the parties, dependent on what is provided for in the contract. Adjudication is available as of right if the contract is a ‘construction contract’ for the purposes of the Housing Grants, Regeneration and Construction Act 1996 as amended. In addition, the contract may provide for other means of dispute resolution such as escalation, where initially the matter is pushed up the management line of the respective organisations, expert determination, conciliation, mediation, arbitration or court proceedings.
Some high profile matters will go all the way until the relevant legal process is exhausted; but the stakes, and the costs, are high for the parties and, in practice, the vast majority of disputes are settled. The terms of the settlement then need to be recorded and that may give rise to some tricky drafting issues and even to further disagreement. Assuming the construction contract is ongoing, further disputes may arise down the line. Is the settlement only in respect of one identifiable claim that has already arisen or is it intended to cover other claims that may arise out of that issue or even unconnected to it? We are familiar with the ‘full and final’ settlement concept but is the settlement agreement limited to claims that are known about as at the date of the settlement or should that also encompass claims that should have been known about at that time, even if they were not known about? It may be that it expressly covers potential claims, known or unknown arising out of the subject matter of the dispute or it may go as far as preventing any future claims whatsoever.
Parties who have settled a dispute may be pretty disappointed if they find themselves in a further dispute about the terms of the settlement agreement itself. The courts will interpret the settlement agreement in the same way as any other contract entered into by parties at arm’s length so it is essential that the drafting of the settlement agreement is clear and precise. And just like any other contract, it is sensible to include dispute resolution provisions within it.