Claims and dispute management

Definitions of claims
 In the day to day progress of the works misunderstandings
may occur between the parties to a contract.
 These misunderstandings may be a result of interpretation
of contract documents, request for compensations for
damages sustained or request for time extension as a result
of delays caused by one party etc.
 These requests for compensation are called claims
 In general claims in construction industry are defined as
demands for compensation in terms of money, time
extension or a combination of these that a party rightly or
wrongly believes that he is entitled to
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Claim could be disputable or non-disputable

 Disputable claim arises when a claim of one

party is not accepted by the other contracting
party or when the decision of a neutral party is
not being accepted by any or all the contracting
parties.
 Non-disputable claims are claims acceptable by
the contracting parties
 Claim Administration Procedures
 Clause 53 FIDIC:
 The contractor give his intention to claim within 28 days after

the event giving rise to the claim has first arisen

 The contractor shall keep temporary records on the claim issue

 The engineer examines such contemporary records

 The contractor shall submit detailed particulars of the amount

claimed and the grounds upon which the claim is based

 The engineer makes determination based on the available

records and evidences and arguments produced

 If the parties to contract agree to this decision, then the claim is

resolved
 If the parties to the contract do not agree to the decision, then

the claim will be disputed claim

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Types of claims
 Contractual claims
 Extra-contractual claims
 Ex-Gartia claims

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 Contractual Claims

 Claims made under the expressed provisions of

contract fall under this category
 This type of claim forms the largest part of
claims and the terms of contract define the
situations in which they may be made and how
they may be handled
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 Extra-Contractual Claims

 Claims which have no basis in the contract documents.

These could have their basis in common law or statue
law.
 These could include a claim for damage for:
 breach of contract
 breach of warranty
 breach of an implied term

 They could be under the law of contract or tort. 7

 Ex-Gartia Claims

 Claims where there is no contractual provision to

rely on, nor any breach or tort by the client.
 An Ex-gartia claim might be made to recover cost
incurred by the contractor, the expenditure of which
gave benefit to the employer, but for which there are
no grounds for recovery under the contract.

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Major causes of claims

 Variations
 Defect in contract document
 Unforeseen condition
 Failure in contract administration
 Claims may be for:

 An extension in time for completion of the

works, or
 Extra payment, or

 An extension in time and extra payment,

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 The majority of claims involve delay of some form.
 Time is particularly important since a contractor is
bound by the contract to construct the works in a
specified time, and is liable to pay liquidated
damages for late completion,
 Acceptance by the Engineer of the validity of a
claim for extension of time means that the contract
completion date is extended.

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 Event-claim-dispute range
Event occurs

Discussion/
Claim arises Consultation
Contractor gives notice
of intention for claim

Engineer determines
the sum due to contractor
Contractor
disagrees
Dispute exists
Either party gives Contractor agrees
notice of dispute Claim resolved
Dispute resolution
procedure
Dispute resolved 12
Settlement of Dispute Procedure
 Clause 67 FIDIC
 Submission of details by contractor,
 Review of the dispute by the engineer,
 The Engineer gives decision,
 Amicable settlement, or
 ADR resolution system will be Implemented,
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Construction Disputes Resolution Systems

 There are several methods of resolving disputes in

the construction industry. Mainly they are
categorized as:
 Preventive,

 Non-judgmental (amicable),
 Judgmental,
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Construction Disputes Resolution Systems
(Cont…)

Preventive
 This method is a mechanism of avoiding disputes
rather than allowing issues to grow until they
become real dispute,
 Partnering:
Partnering It is a process which aims to create a
good principal-contractor relationship from the
outset, which aims on encouraging contracting
parties to have operative team based approach
 Dispute Review Board (DRB) involves a panel of
expert neutral persons being setup at the
beginning,
 DRB members made an independent
assessment and visits the site regularly during
construction & they keep on advising the
parties and solve the dispute among them.
Construction Disputes Resolution Systems
(Cont…)

 The non-judgmental
 The non-judgmental methods bring the disputants to a
round table and mutually resolve their dispute
 Negotiation is a common dispute resolution process in
which parties themselves, or their representatives, try to
solve the dispute without involving any neutral third party.
 As negotiation is consensual, it requires willingness by both
parties to attempt resolution by this method.
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Construction Disputes Resolution Systems
(Cont…)
 Mediation is a dispute resolution mechanism in which a neutral
third party meets with the disputants and facilitates negotiation to
the parties to come to their own solution.
 The mediator controls the processes, but he/she does not impose
any resolution or opinion on the merits of the case,
 Promoting a win/win situation, leaving the disputants themselves
to control the outcome,
 Mediation can occur by contractual agreement or after a dispute
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arises,
Construction Disputes Resolution Systems
(Cont…)

 Conciliation is a process similar to mediation except that the

mediator can express an opinion on the merits of the case, and
is required to recommend a solution if the parties fail to agree,
 Mini-trial Neutral third party brings together senior decision
makers from each disputant to hear presentations by junior
representatives or their respective legal representatives and
help them to negotiate on resolution at private, The
representative should have full settlement authority,
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Construction Disputes Resolution Systems
(Cont…)
 Judgmental
 Adjudication is a process in which the decision of a third party
neutral, named in the contract, is binding upon the parties with respect
to any matter in dispute until the contract is complete. Adjudication
decision could be challenged through arbitration or litigation,
 Arbitration is a process where a third party who is independent of
parties, but may be selected by them, makes an award determining the
dispute,The award is binding and can be enforced at courts,

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Construction Disputes Resolution Systems
(Cont…)

 Litigation is a dispute resolution method whereby the

disputant initiates legal action against the other party by
going to court,
 It has a win/lose outcome,
 It is usually initiated when the disputants cannot agree to
other forms of dispute resolution,

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Resolve Claims and Disputes Amicably

THANK YOU!
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