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Using Alternative Dispute Resolution in construction projects

When it comes to construction projects, they rarely run according to plan, which can cause frustration for the contracting parties and result in conflict and negative feelings.

If there is a breach of contract, the parties have several options for managing conflict when it arises. Contracts usually state how the parties decide to address disputes. Many construction agreements include Alternative Dispute Resolution (ADR) clauses to anticipate possible disagreements or breaches, and it is highly effective as a tool to solve issues outside of the courtroom. Not all ADR clauses are legally valid when challenged, so it is important to keep that in mind when drafting an ADR clause.

Benefits of using ADR

There are many benefits that come with using ADR as a way of resolving conflicts, such as:

  • Privacy: what happens in mediation and arbitration remains private, unlike court proceedings
  • Cost: ADR is much more cost-effective than litigation and can save everyone money
  • Speed: mediation and arbitration can solve problems much faster than traditional litigation

Alternatives to litigation have become increasingly popular in the construction industry because it offers a cost-effective and less expensive way of managing disputes and because disputes are prevalent in construction projects. ADR can be an excellent tool for solving problems between contracting parties.

The American Arbitration Association, in conjunction with the National Construction Dispute Resolution Committee (NCDRC,) has developed several documents outlining rules and procedures for mediation and arbitration within the construction industry. These rules and procedures can be very helpful in setting boundaries and creating structure in the ADR process, hopefully resulting in a more accessible, less adversarial, and more cost-effective way of managing conflict.