and welcome back to the series of lectures where we are talking about principles of construction
management and in this lecture we will address and talk about issues relating to dispute
resolution and construction projects and i must acknowledge once again the discussions
that i had with professor k c iyer of the department of civil engineering at i i t delhi
now we already know what a dispute is a dispute implies assertion of a right which can be
called a claim by one party and repudiation thereof by another i have emphasized that
a claim and a counter claim without repudiation does not really constitute a dispute so what
we are going to talk about today is how these disputes can be resolved as for as the construction
project is concerned and what are some of the simple ground rules that operate in the
minds of an arbitrator or a court when they are trying to address or resolve these disputes
now we also seen some of the causes that leads to disputes and arbitration incorrect ground
data faulty and ambiguous provisions in contracts faulty administration of contracts deviations
in work suspensions over payments contractors being a poor meal defaults unreasonable attitude
levy of compensation for delay in payments and observations arising out of technical
examinations which is very closely related to quality control and acceptance or rejection
of material or products in the construction project now dispute avoidance is obviously
the best form of dispute redressal if we have a situation where disputes simply do not arise
there is no reason to have an elaborate mechanisms for dispute resolution so its like saying
that avoiding the accident is the best form of safety
now coming back to this discussion on disputes avoiding a dispute is the best way of handling
it now how do we bring about or what are the kind of things that come to our mind when
we talk of dispute avoidance fair allocation of contract risk now this though is a long
way as for as dispute avoidance is concerned in cases when the risk is unduly transferred
towards the contractor the chance of the dispute is very high proper and unambiguous drafting
of relevant clauses this is something is very important and helps the contractor understand
the rules of the game much better
so if the contract clauses specially those which are related to the dispute prone clauses
if that drafting is proper and ambiguous clear the chances of disputes is very small team
building providing for a neutral party and using binding alternate dispute resolution
mechanisms which are also called a d r mechanisms such as creating a standing dispute review
board these are steps that can help a long way in avoiding or not letting at dispute
grow a disagreement which may arise at site will not grow into a full blown dispute if
it is addressed initial stages through an alternative mechanism alternative mechanisms
could include what is called mediation and conciliation
this is an informal process where the parties are assisted by one or more neutral parties
in their efforts towards settlement of a disputes mediators do not judge or arbitrate the disputes
we must understand that mediation is not the same process as arbitration arbitration has
certain very important legal overtones and therefore mediators do not judge or arbitrate
the dispute we must recognize the fine line between mediation conciliation which are not
legally binding which have a much lower standing as for as the legal implications the legal
sanctities concerned compared to arbitration arbitration is a quasi legal process and only
arbitrators who have a clear understanding of the rules of evidence of the implications
of an award and so on
they can carry out the process of arbitration which is one step short of a full blown legal
proceedings mediation conciliation are non legal informal processes which have more designed
for dispute avoidance than dispute resolution mediators advise the parties to assist in
bringing about a mutually acceptable solution and given the very nature of this process
the mediators do not have the power to impose an outcome on disputing parties continuing
further on this mediation and conciliation the parties participate that is the stake
holders who are having the dispute or a disagreement they participate in this process of their
own free will
so participation in the mediation process is purely voluntary neutral third parties
assist the parties towards a settlement non binding unless an agreement is reached and
of course then it becomes a legal document once as a result of mediation reconciliation
a document is signed which decides or which leads down how a particular thing is to be
handled which is in addition to or supplements or clarifies the kind of original provisions
in the contract then the modified document is of course legally binding till such time
as this agreement is reached and signed the whole process mediation conciliation is non
binding private confidential and conducted without prejudice to any legal proceedings
what does it mean without prejudice to any legal proceedings simply means that even though
mediation conciliation is going on if a party decides to back out and seek legal recourse
that option is always open that is not the case when it comes to an arbitration or a
legal proceeding there it is much more difficult to just work out and seek alternative remedies
now lets try to see what are the details of this mediation processes as for as pre mediation
is concerned it involves agreeing to mediate and preparation initial enquiry and engagement
with the parties preliminary communications and preparations then there is direct and
indirect mediation which would involve that the mediators meet the parties the parties
make their presentations there could be information gathering there could be a facilitation of
the negotiation process and finally terminating mediation and recording of agreements and
in the post mediation stage there has to be a compliance of the outcome as for as the
benefits of the mediation is concerned its a faster and cheaper disposal of disputes
its a more satisfactory outcome as for as the dispute resolution is concerned minimizes
more disputes opens channels for communication builds confidence in each other and preserves
and enhances relationships between parties and empowers them because they then believe
in their abilities to be able to handle disputes on their own
now having discussed a little bit about mediation conciliation lets talk about the more serious
process as for as dispute resolution is concerned and that is arbitration now what are this
issues that are evolved when it comes to selecting an arbitrator the person has to be of high
integrity and complete impartiality believes in applying principles of natural justice
and of practical approach technical person with domain knowledge obviously you are going
for arbitration because the person should understand legal procedure and be able to
understand the implications of any failures or inability of either party to comply with
proper requirements relating to evidence
so the arbitrator basically has to be a technical person with domain knowledge but having some
understanding of the legal procedure in terms of natural justice in terms of evidence in
terms of being completely impartial and neutral now as for as the duties of an arbitrator
are concerned on appointment the arbitrator should check whether he is qualified or not
because there may be a situation where the arbitrator might feel that for this particular
dispute involving these particular technical items may be he is not the best person and
thats something which the arbitrator has to get for himself or herself
understanding the issues under disputes either through a meeting or by sending notices to
parties and asking for statements or submissions by the parties thats how the arbitrator has
to go about understanding the issues at hand necessary disclosures to parties about his
knowledge of the case or having dealt with the case should not receive any evidence in
the absence of other party
now we are coming to the situations or we coming to a the area where it is essentially
a legal process the arbitrator has to make sure that the evidence received by him is
not in the absence of the other party please remember that if two parties a and b have
gone into an arbitration they have the right to know exactly what is going on as for as
that arbitrate proceeding are concerned the arbitrator cannot seek evidence or cannot
receive evidence in the absence of one party or the other should not examine a witness
in the absence of any of the parties so the arbitrator cannot play a private detective
the witnesses have to be examined in the presence of the parties under dispute should not make
private enquiries thats what i said he cannot play a private detective the arbitrator cannot
go about trying to do some fact finding on his own no matter what the intention is
so the intentions being whatever it is the arbitrator has to make sure that whatever
informations gathers is only in the presence of these two parties and not acquired on his
own the arbitrator cannot delegate the authority the arbitrate cannot say that the such and
such person organization will act on his behalf and carry out certain investigations the arbitrator
has to make sure that all acts are carried out by him on his own should not exceed the
scope of reference the arbitrator has to be very clear as to what terms of reference or
the scope of reference for that particular work is the arbitration or the award should
neither go beyond that scope nor for short of that scope and thats something which the
arbitrator has to be very very careful about the terms of reference has to be clearly understood
by him also the parties which has come to him for the dispute they cannot raise issues
beyond the terms of reference
so in a manner of speaking the terms of reference define the limits of the field where the arbitration
has to take place should adhere to the time schedule laid down so these are some of the
duties for an arbitrator when it comes to carrying out an arbitration in the dispute
in a construction project is concerned now as for as the conduct of hearing is concerned
its more or less like a legal procedure and the first thing is administer oath to parties
and witnesses appearing then as for as proceedings are concerned claimant makes the opening statement
and then calls and examines his witnesses who may be cross examined by the respondent
so its a usual judicial process the claimant makes the statement an opening statement presents
the witnesses examines them and of course respondent has the right to cross examine
the witness presented by the claimant if a witness is cross examined the claimant may
re examine him or her on any matter raised in the cross examination these are again slightly
technical issues that once the claimant has examined the witness the respondent has the
right to cross examine
now on issues that have a reason on account of or during the cross examination the claimant
has the right to re examine the witness the claimant cannot examine the witness once again
except for issues which are raised during the cross examination so these are the kind
of things which the arbitrator has to keep in mind and immediately blow the whistle like
a referee does in a football match so arbitrator has to rule that whether or not a re examination
is in order or whether a question being asked during the re examination is to be admitted
because it may or may not be something which is arising out of the cross examination of
the witness by the respondent
so these are the kind of things that arbitrator has to be clear in his mind from his legal
background conveying with the conduct of hearing then its the respondent turn to open his case
and obviously then the respondent calls and examines his witnesses who may be cross examined
by the claimant and as was the case earlier if a witness is cross examined the respondent
may re examine him on any matter raised during the cross examination the respondent addresses
the arbitrator summing up his whole case and finally the claimant submits a reply so this
basically summarizes the process of the conduct of the hearings as far as arbitration is concerned
as far as making the awards is concerned then we come to this stage of making an award and
subsequent proceedings where there is a time limit is involved and the essentials of a
valid award would include should be in the direction of arbitration agreement can be
reasoned or unreasoned the award does not necessarily have to specify completely reasons
for a particular award the arbitrator has the freedom to just make the award without
clearly explaining all the details that have gone in his mind making that particular award
that would become an unreasoned award should be in writing and signed it cannot be an oral
award it cannot be something which is just dictated and typed without the arbitrator
signing it so it has to be in writing and signed it must be certain and directed to
all the matters referred
so what is we are talking about here is that must be certain it should clearly specify
what exactly has to be done and directed to all matters referred so once again we are
referring to the terms of reference or the scope of reference all the terms of reference
have to be clearly and unambiguously addressed and resolved without exceeding the brief neither
falling short of it must be consistent and final and should contain all directions necessary
for its performance the arbitrator has award can also not be such that it does not state
how it has to be completed so the arbitrator has a award has to also have directions of
performance as for as the post arbitration proceedings are concerned the authority of
an arbitrator ceases as soon as the final award is made no action of the parties by
way of consent or otherwise would give the arbitrator an authority to make an second
award on the same dispute so the award having made once is irrevocable
as for as a particular arbitration is concerned it really ceases once that award has been
made as a small corollary to this as for as the nineteen ninety six act is concerned and
arbitrator can send what is called a notice of award and if any party finds some flaw
or corrections the arbitrator can review and modify the award and modify the award but
that does not mean and that does not give the license to the arbitrator to review their
award completely generally the time limit given for this is twenty eight days from the
date of awards so basically what is laid down is that after the award has been made even
under except for very exceptional circumstances its not prudent that the award be reviewed
as for as that arbitrator is concerned
now advantages as far as arbitrage is concerned is its a formal quasi judicial process decisions
can be imposed and are legally binding its a quick and a cheaper settlement best suited
for technical disputes because the dispute is being heard and resolved by a person who
is having domain knowledge expert legal and technical advice can be obtained by the arbitrator
the site of work can be visited interim relief can be granted no publicity is involved and
time and place of hearing can be fixed for mutual convenience so there are lots of these
advantages which are mentioned here which are not available as for as the full judicial
process is concerned and thats where the advantages of arbitration come in handy and the award
of course can be appealed in a court of law so at the end of it party is not truly convinced
that justice has been done and still feels aggrieved still go to the court of law
so the arbitration process provides a very important safety valve to be able to resolve
a matter or close a dispute outside the court even though its an out of court settlement
it has a certain amount of legal scientity having been carried out by an impartial arbitrator
having heard who has gone into all the technical aspects of the dispute and made an award so
with this we complete our discussion as for as dispute resolution is concerned and the
rest of the discussion today will be focused on some of the guiding principles which are
observed by an arbitrators and courts when resolving disputes in construction related
contracts
lets talk of some rules for interpretation of provisions of a contract as for as words
and phrases are concerned only the natural and ordinary meaning is taken and its not
expected that the court or the arbitrator will try to do any what is been called as
verbal calisthenics to provide or to assign any a special meaning to a word or a phrase
as for as the technical terms are concerned technical meanings as and when its important
will be used local customs and usage will be respected reasonable and favorable meaning
will be assigned to the terms that are used in the contract when it comes to written words
versus printed words the written words take procedures
what is being said here is that sometimes it happens that the contract is printed and
at the last moment there is a typo graphical errors and it is not possible to re do the
whole exercise at that time somebody writes the words on the contract and then its the
written word that is take into prevail now the contract has to be read as a whole thats
a very important principle when it comes to interpreting contracts and doing contract
management the contract has to be read as a whole
fundamentally a contract must be construed as a whole to gather the intention of the
parties so its very important that the courts or the arbitrators they try to understand
what the intend of the parties was at the time when they entered in to that contract
interpretation may be looked upon as a two stage process in the first stage determine
which documents form a part of the contract and in the next stage it must give effect
as for as practicable to each of the contract provisions so as to bring them in harmony
with each other and reconcile inconsistencies
so the idea basically is that if there are different parts of a contract if there are
different documents that are part of the contract and there are inconsistencies then the effort
is to direct energy to reconcile the differences in different parts in order that the original
intension of the parties is respected and take into account the order of precedence
indicated in the event of any discrepancy or inconsistency you would recall that when
we are talking of c p w d guidelines we had clearly mentioned an order in which different
documents or different parts of a contract are to be assigned what is the hierarchy of
the documents that will prevail when it comes to interpretation should there be any discrepancy
and if you look at that hierarchy closely you will realize that the topmost is the document
which pertains most specifically to that particular project and finally at bottom of the hierarchy
the documents which are more generic in nature created by agencies which are not involved
in the project directly and so on
as for as words and figures are concerned the event of any discrepancy between words
and figures appearing the contract document the words will prevail as for as deleted words
versus alteration is concerned deletions made before the contract is signed are not be considered
and alterations made after signing the contract are binding the contract is therefore to be
read as amended for the purpose of interpretation general versus specific provisions in the
contract if an agreement contains both and general and special provisions relating to
the same thing a special provision will prevail and antecedents facts or correspondence
now what are antecedents facts antecedents facts or correspondence before the conclusion
of the contract are not to be considered to ascertain the meaning as the court or arbitrator
will not look into what the parties did at the stage of negotiation whats being said
here is that the parties often negotiate certain things before they come to the signing of
the contract now those negotiations are not part of the contract these is this is what
is called antecedents facts or correspondence and of course there will be a record as to
what the kind of correspondence that happened before the contract was signed
but that correspondence is not considered part of the contract the documents forming
the part of the contract shall only be looked into while construing the contracts except
in case of real doubt about the contract meaning when the court or the arbitrator may look
into the correspondence prior to the signing of the contract only to the extent that their
intention is to determine the original intent of the parties
as for as clerical error of course are concerned in case of obvious clerical error in a contract
obviously the corrected meaning should be used and that leave an interpretation is available
to the court or the arbitrator as for as implied terms are concerned we talked about implied
in the express contracts now we are talking about the implied term implied terms are those
terms which although not mentioned by the parties were present in the minds of the parties
at the time of conclusion of the contract and which the court or the arbitrator implies
from the circumstances or dealing with the parties to fill in the gap in a contract
now courts usually proceed with considerable caution to implied terms particularly in construction
contracts when comprehensive standard contract forms are used courts will not imply a term
into a contract which conflicts with the express term so basically what is being said is that
the courts or the arbitrators should look at and do look only at the expressed terms
which are used implied terms which are not used and not expressly stated this part of
the contract are usually not accounted for in arriving at a decision as far as inconsistency
and repugnant clauses are concerned if different parts of a contract in respect of particular
items at inconsistent effect is to be given to that part which is calculated to carry
into effect real intention of the parties and the part which defeat that intention is
to be rejected
so basically the bottom line is that the court and the arbitration must keep in mind the
original intend and whatever establishes the original intent must be effected when provisions
in two classes in respect to a particular item are totally repugnant to each other that
is they are irreconcilable the clause that impedes the real intention of the parties
should be rejected thats what i stated earlier when i said that it is the original intent
of the parties which has to be always the top guiding principle as far as interpretation
of the contract is concerned
alternate methods to perform a promise of course there could be situations where there
are alternative methods of performing a task we remember that a contract basically involves
a clearly defined task the fact that one party agrees to perform that task and the other
party agrees to make a certain amount of payment in return for that performance now if the
method of performing the task is not specified then the option lies on the party who is to
perform the promise in question the person who is not performing the task cannot laid
down
how the task should be performed because at the end of it its the party whose performing
the task on whom the final choice of the method should rest except for the fact that that
method should be not unsafe its not possible very often there is a provision in the contract
which will say that even though the client leaves the option of deciding the methods
on the contractor the contractor must submit an s o p or exact detailed procedure of how
the steps will be or what the steps will be when performing a particular task the client
then carries out and evaluation of that s o p from points of view of safety and that
is where this clause becomes very very relevant even though the choice of deciding the method
is left to the party which is actually performing the task the party not performing the task
reserve the right to review the procedure keeping the interests of safety in mind
so these are some of the contradicting situations and considerations that operate as for as
the contractor are concerned as for as clients are concerned which could lead to disputes
and we are talking about how these disputes are to be resolved so there is a provision
here we are talking about where it says that the choice of the method of performing the
task is left to the person who is performing the task but that does not mean that the person
has the right to indulge in an unsafe procedure then there is a very interesting provision
here benefit of doubts against the drafter of the contract even though in principle when
a contract signed it can be argued both the parties who are signing the contract or all
the parties were signing the contract have read that document completely have understood
it completely and are committing themselves to abide by the provisions of that particular
contract but when there is a inconsistency in the meanings of the provisions of the contract
in a manner that one interpretation gives favour to one party and loss to the other
and the other interpretation has the opposite result
the interpretation shall be made in favour of the party who has not drafted but only
accepted the contract so what we are saying here is that even though the two parties have
equally read the contract but in case of a difficulty it is recognized that both the
parties have not played an equal role as for as drafting the contract is concerned so once
the contract has been drafted that the benefit of doubt if that has to be granted will be
granted to the party which is not drafted the contract and has only accepted it it is
argued in this case that the drafter has the full or more knowledge over the party who
accepts the contract
so with this we come to an end of our discussion today which related primarily to informal
methods of dispute resolution we talked about mediation and conciliation then we talked
about what an arbitrator has to do and how he works the proceedings of arbitration and
then we looked at some very interesting provisions on how the interpretations are made by courts
and arbitrators as for as dispute resolutions and contracts concerned and this slide here
will give you some ideas how to go about doing some further reading should you want to understand
the subject a little better and i look forward to seeing you once again in a subsequent discussion
thank you