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By Allan H. Goodman

If a dispute arises during construction of your project, do not proceed immediately to court! Your contract may require you to use alternative dispute resolution (ADR) techniques such as negotiation, mediation or arbitration to resolve your disputes. You should therefore be familiar with these techniques.

Negotiation is the most informal method of dispute resolution. The only participants in the negotiation process are the parties to the contract and their designated negotiators. The goal of a negotiator is to resolve the dispute on the best terms for the party that he or she represents. When parties attempt to resolve a dispute by negotiation, it is not certain that the process will result in a resolution. The parties and their negotiators must deal face to face with each other in a manner that promotes the parties’ interests, yet preserves the parties’ relationship. In a successful negotiation, the parties and their negotiators reach a resolution of the dispute based on the parties’ interests.

Mediation is often referred to as “assisted negotiation.” In this process, the parties select a neutral person, the mediator, to help them arrive at a settlement of the dispute. A mediator is not a negotiator, as the mediator does not represent the interest of either party. The mediator is a facilitator, who helps the parties explore the strengths and weaknesses of their cases and assists them to frame and transmit settlement offers. The mediator spends a majority of the time meeting privately with each party. The mediator does not have authority to bind the parties, but can only help the parties resolve their dispute by agreement. In a successful mediation, the parties will reach a settlement of their dispute with the aid of the mediator.

As you can see, negotiation and mediation are both non-binding processes that will resolve the dispute only if the parties agree to a settlement. A settlement may be based upon compromises, promises of performance, and agreements to continue to do business in the future. By using these processes, the parties retain control of the resolution.

In contrast to negotiation and mediation, arbitration is binding. The parties select a neutral person, the arbitrator, who acts as a private judge. The arbitrator conducts a hearing, similar to a trial in court, and issues a decision, known as an “award,” that binds the parties. Unlike a mediator, the arbitrator cannot meet privately with the parties, but must come to a decision based upon his or her understanding of the evidence submitted at the hearing and the law. Though arbitration is similar to litigation in court, it is private, the parties can choose an arbitrator that has particular expertise in the subject matter of the dispute, and the scheduling of the arbitration proceeding is not dependent on delays usually associated with a court’s docket.

What if your contract does not require you to use ADR techniques or specifies a technique that the parties do not want to use?  The parties may still use any ADR technique to resolve their dispute, as long as they agree. It is important that you know that litigation in court is not your only option.

About the Author:  Allan H. Goodman is an experienced mediator and arbitrator of construction disputes, a Judge on the U.S. General Services Administration Board of Contract Appeals, and the author of Basic Skill for the New Mediator and Basic Skills for the New Arbitrator. He is also an instructor for Redvector.com, where he offers online courses on construction mediation and arbitration. For a detailed description of his books and courses, visit www.solomonpublications.com and www.redvector.com.

ConstructionRisk.com Report, Vol. 7, No. 3 (Jun 2005)

Copyright 2005, ConstructionRIsk.com, LLC