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The Construction Industry Has The Unenviable Reputation Of Being Adversarial And Dispute Prone

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I INTRODUCTION

The construction industry has the unenviable reputation of being adversarial and dispute prone. This is attributable to the scope, scale, duration and complexity of projects, which can lead to differences of opinion on complex technical, factual and legal issues. If not resolved quickly, these differences of opinion can lead to expensive and drawn out disputes. The competitive nature of the industry, low profit margins and commercial pressures when progress payments are late, unfair risk allocation, perceived bias of the superintendent and lack of procedural fairness in contract administration, creates a climate that is conducive to adversarial conduct especially when this combination of technical, factual and legal …show more content…

Most parties negotiate to win but usually end up either with the minimum acceptable result or with the other party feeling abused and longing for revenge. Even with cooperative negotiators there is a natural reluctance to put everything ‘on the table’. Whether cards are played close to the chest, giving little and slowly or more openly, most deals leave crumbs or chunks on the table that could have been used up in making a richer deal. The annoying thing is that nobody knew that a richer deal was within reach and possible.

II UNDERTAKING DEAL MEDIATION PRIOR TO A PROJECT INCREASES THE LIKELIHOOD OF THE SUCCESSFUL COMPLETION OF A PROJECT

Dealmakers may sit down and try to project difficulties and how best to tackle them to pave the way to getting the richest deal possible.
A. Clause in contract
Many construction contracts require dealmakers to negotiate. Some clauses contain an obligation to negotiate in 'good faith '. Ideally parties should add clauses regarding:

a. Force majeure and latent conditions
b. Price
c. Materials to be used
d. What to do in unforeseen circumstances
e. ADR.

However, the law concerning the requirements of 'good faith ' is not settled. Aition Australia v Transfield provides some indication of the requirements. A duty of good faith in negotiation does not require that agreement be reached between the parties and requires a party to subject itself to mediation with an open mind, with a willingness to consider options for resolution.

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