Analysis of Construction Contract Dispute Resolution in Australia

This report provides a comprehensive analysis of construction contract dispute resolution in Australia. It begins by examining the factors contributing to disputes, including the adversarial nature of the industry and the role of contract provisions. The report then explores various dispute resolution techniques, such as negotiation, mediation, conciliation, adjudication, arbitration, and litigation, detailing their processes, advantages, and disadvantages. It highlights the significance of dispute avoidance procedures and the evolving role of good faith in construction contracts, referencing relevant case law and legal principles. The report emphasizes the importance of understanding these techniques for effective conflict management and successful project outcomes, concluding with the advantages of arbitration. This analysis is essential for students studying contract law and construction management, and it offers valuable insights for professionals in the field.

Running head: CONSTRUCTION CONTRACT
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Name of the student
Name of the university
Author note

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The effect and interpretation of contractual conditions can differ significantly rest on the
legislation that regulates them. The holistic method to deal with the disputes that evolving from
the construction contract in Australia is an attempt to examine and identify their life cycle and
genesis. It assesses the determinants that are accountable for the high occurrence of disagreement
on the significant construction undertakings. The factors involve the adversarial practice of the
construction industry, the high grade of severity that surrounds the project, the inevitably of the
dispute between the role of construction agreement and the contracting parties in facilitating such
disputes. Therefore Dispute avoidance procedures are contemporary innovations that are
enhancing applied on the significant construction undertakings to assist the contractual parties to
interact, collaborate and coordinate as well as evading the escalation of fight into disputes.
According to the English court of law the construction contract does not identify any distinct
obligation of good faith. Vinelott J. said that, though the court of law will imply an obligation
upon contractual parties to conduct whatever was necessary for the purpose of the agreement
being carried out, the necessitates of acting in good faith have not be inserted in English law. the
formulation of Alternative Dispute Resolution, the innovation of rules of civil procedure, the
formulation of Technology and Construction Court and particularly the initiation of the
adjudication method as well as the hybrid multistage procedure of dispute resolution has
transformed the view of construction dispute settlement1. Therefore to pact with guaranteeing
1 Thompson, Clare. "Avoiding claims of breach of good faith." (2015) Brief 42.4 28.

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that dispute avoidance and resolution provisions are efficient, it is required to regard the series of
the techniques of dispute resolution that are obtainable in the construction industry involving the
following. The several techniques of dispute resolution are negotiation, mediation, and
conciliation, adjudication, arbitration, litigation.
The term "negotiate" implies to deliver with orders for the purpose of attaining agreement
or compromise. Negotiation is regarded as an interaction to influence the preeminent method of
dispute resolution in the construction industry. Nevertheless negotiation should not be regarded
as merely the process of dispute resolution. It is the expansive form that may be regarded as the
procedure by which peoples interact to arrange their trade affairs and also private lives by
creating arrangements and reconciling the zones of disagreement2. It is the fundamental method
which facilitates simple party grounded problem resolution techniques. Nevertheless the crucial
characteristic of the procedure is that dominion of the impact remains with the contractual
parties. Thus arbitration and litigation need the parties to submit their disagreement to the third
party who will execute a legally binding decision. Thus negotiation is the procedure of working
out the arrangement by the way of direct interaction. There are two common threads. Firstly the
manner of intervention of a third party3. The fundamental character of the third party is to
provide the decision making of other individuals. The procedure establishes on negotiation and
the mediators primarily review and sustain the situation with the contractual parties. Secondly,
third parties must be autonomous of parties involved in the dispute. The essence of the method of
2 Dixon, William M. "Termination for convenience or not?." (2017) Australian Business Law Review 45.3
(45 ABLR 229) 229-242.
3 Barreto, Paula Mena, et al. "Good faith in franchising." (2015) Int'l J. Franchising L. 13 17.

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mediation is to be neutral. The trust and confidence which develops during the procedure permit
the mediator to conduct "a bridging role" between the contractual parties4.
Mediation is essentially an informal procedure by which the parties are aided by one or
more impartial third parties in their attempt towards resolution. Therefore mediator does not
arbitrate or judge the dispute. They consult and advise neutrally with the parties to support them
in bringing mutually agree settlement to the issue. It is the procedure by which the settlement is
carried out with the support of a third party. The process of adjudication as the method of
alternative dispute resolution indicates the process by which the adjudicating authority decides
the case or how the referee must decide the problem that is placed before him. Thus more
particularly the adjudication may be designated as the procedure where the impartial third party
gives a decision that is binding on the contractual parties in disagreement until or unless revised
in litigation or arbitration.
The constricted interpretation may indicate the commercial application of adjudicators to
decide the issues arising between the parties in the construction contract. The application of
adjudicator is observed in several standard forms of agreement that are used in the construction
business5. The adjudication in the construction industry shows several features. Firstly the
adjudicator is an impartial individual who is not engaged in day to day administration of the
contract. Secondly the adjudicator enjoys his authority by the arrangement between the
contractual parties. Therefore in another manner the contractual parties have accepted by
4 Abdullah, Nik Abdul Hafiz Nik. Application of Good Faith as Necessary Limits in Exercising the
Termination for Convenience Clause. Diss. (Universiti Teknologi Malaysia, 2015).
5 Lees, Amanda. "The enforceability of negotiation and mediation clauses in Hong Kong and
Singapore." (2015) Asian Disp. Rev. 17 16.

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agreement that the decision of the adjudicator shall decide the issue among them. Thirdly the
decision of the adjudicator is binding on the parties and thus unlike the method of mediation the
procedure does not need the cooperation of the parties6. Fourthly the decision of the adjudicator
is generally expressed to be binding until the conclusion of the contract when either party may
pursue a revision of the said decision most commonly by arbitration. Therefore arbitration is
considered to be extremely prosperous and will endure to be broadly applied within the context
of the construction industry of Australia.
Arbitration is a procedure subject to the legislative controls whereby the formal
disagreement is identified by private tribunals that are chosen by the parties. An arbitrator is the
private extraordinary judge that lie between the distinct parties and elected by the mutual assent
to identify the controversies that existed between them and also the arbitrator are called as they
have arbitrary authority as because if they consider the submission that is put forward by either
party and keep within the definite limits, their sentences are final for which there exists no appeal
against that decision. Furthermore arbitration is essentially a procedure that is obtainable as the
substitute for litigation. There are several advantages of arbitration as it involves economy,
flexibility, freedom of choice of arbitrator, privacy, and finality7. The five main objectives of
arbitration are as follows. Firstly to guarantee that the arbitration is cost-effective, fair and rapid.
Secondly, to advance the independence of parties. Thirdly, to guarantee that the supportive
power of tribunal is obtainable at the proper times. Fourthly, to guarantee that the languages
6 Hughes, Will, Ronan Champion, and John Murdoch. Construction contracts: law and management.
(Routledge, 2015).
7 Zeller, Bruno, and Camilla Baasch Andersen. "Good Faith-The Gordian Knot of International
Commerce." (2015) Pace Int'l L. Rev. 28 x 1.

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applied is user friendly as well as accessible. Fifthly to monitor the modern legislation wherever
possible. Thus arbitration initiates when one party sends other party notification stating that
dispute has evolved between then and the same was referred to the arbitration8. The procedures
without a hearing except that the arbitrator will make an award that is rest on documentary
evidence only. The party aids their statement with the series of relevant documents together with
the copy of documents on which they relied.
Litigation is the method by which the court facilitates the setting of the conventional
structure of resolution of disputes. The court of law often considered themselves the most visible
characteristic of the English legal structure and their main responsibility is the adjudication of
disagreement. One of the potential complication of global undertakings us that the agreements
entered into are regulated by laws which may be unacquainted to one or other of the distinct
parties. To imply the condition of good faith the doctrine from the case of BP Refinery (Western
Port) PTY Ltd v. Hasting Shire Council should be followed. Firstly the condition as laid in the
construction agreement should be efficacy and reasonable. Secondly the condition should be
required to provide business efficacy to the agreement so that no condition will be implied if the
arrangement is efficient without it9. Thirdly the condition must be obvious that "it goes without
saying". Fourthly the condition should have the ability of clearing expressions. Fifthly the
contractual terms should not contradict any expressed condition of the arrangement. Therefore
8 Perry, Christina. "Good Faith in English and US Contract Law: Divergent Theories, Practical
Similarities." (2016) Bus. L. Int'l 17 27.
9 Buberis, Peter. "Good Faith." Australian Franchising Code of Conduct. (Emerald Publishing Limited,
2020).

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the necessitates to conduct in good faith are often viewed as constituting to more than an
arrangement to approve which is unbinding.
Therefore reference is often made to House of Lords in the case of Walford and others v.
Miles and Another. The case is regarded in the perspective of lockout arrangement whether the
duty to negotiate in good faith could be implied. This was decided by the House of Lords not
only that a duty to negotiate an arrangement was unenforceable however also that a duty to
negotiate such an arrangement in good faith was identically unenforceable10. Although the
element of good faith will not be implied by the court of law it is being considered and observed
by the courts in the enhancing number of agreements. For instance in the case of Petromec Inc.
and others v. Petrobas and others, the appellate court had to consider the following condition of
contract. According to LJ Mance the convention opposition to the enforcement of the obligation
to settle in good faith are firstly that the obligation is the arrangement to approve and too
uncertain to implement. Secondly that it is complicated however not impossible to say as to
whether if the negotiation has come to an end the conclusion is bought about in bad or good
faith. Thirdly that as it can never be known if the negotiation in good faith would have generated
an arrangement at all or what the conditions of any contract would have been, it would have been
attained it is improbable to ascertain any loss that was caused by the violation of the duty. There
were two causes for this11. Firstly, necessitates was expressly approved by the contractual parties
as the portion of the agreement that is drawn up lawyers. Secondly the court identified that it
10 Bridge, Michael. "Good faith, the common law, and the CISG." (2017) Uniform Law Review 22.1 98-
115.
11 van Dunné, Jan. "On a clear day, you can see the continent–the shrouded acceptance of good faith as a
general rule of contract law on the British Isles." (2015) Construction Law Journal 31.1: 3-25.

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would be able to assess the expense referred to and so would be able to create whether there was
a deficit of good faith as the portion of anyone.
In the case of ABB Ag v. Hochtief Airport GmbH and Another, Mr. Justice Tomlinson
had to regard to question the decision of the arbitrator in pursuance arbitration act based on
severe irregularity. The condition shall be considered to satisfy its fulfillment was bought in
contrary to necessitate of acting in good faith by the contracting parties who have profited by the
fulfillment. Therefore what matters to the appellate court was whether APP had the option
reasonably to discourse whether Hochtief either did conduct or could be said by ABB to conduct
in contrary to good faith in its activity. Thus it was clear that ABB did not have reasonable
opportunity. The court considered the case and disallow the same. Thus the case failed.
Nevertheless the adjudicating authority had no complication regarding the good faith argument
that was made during the hearing of argument.
There are enhancing number of construction agreement which now impose the obligation
of acting in good faith. For instance the conception of good faith does sit quite easily with
several novel arrangements in the process of procurement such as alliance or partnering
associations and for longer-term association that is rest on the agreement to conduct in good
faith. Within those distribution structures, long term supply contracts grounded upon
employment, franchises relationship as well as term contract that is a requirement to evolve a
method for supporting and recognizing expectation for elasticity, cooperation in addition to that
to aid the growth of long term association. The contractor, employer, project manager, the
supervisor shall conduct as stated in the agreement and a spirit of cooperation and trust. This
comes close to the requirement to conduct in good faith. It must be noted that the parties in the

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construction agreement require to conduct in good faith in pursuance to the sections of the
contract.
In the context of amended standard form contract the guidance noted that the forms
required to draft carefully balancing the right as well as obligations of both the parties that are
the contractor and employer or other participants as the case may be12. Thus on that basis the
users are cautioned not to upset the balance by made amendment to the standard form. Thus it
can be said that the cause necessitating the parties to act in good faith should be inserted in the
construction contract as it help with the procedure of dispute resolution or avoidance.
12 Krauss, Oliver. "The enforceability of escalation clauses providing for negotiations in good faith under
English law." (2015) McGill J. Disp. Resol. 2 142.

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Bibliography
Thompson, Clare. "Avoiding claims of breach of good faith." (2015) Brief 42.4 28.
Dixon, William M. "Termination for convenience or not?." (2017) Australian Business Law
Review 45.3 (45 ABLR 229) 229-242.
Barreto, Paula Mena, et al. "Good faith in franchising." (2015) Int'l J. Franchising L. 13 17.
Abdullah, Nik Abdul Hafiz Nik. Application of Good Faith as Necessary Limits in Exercising
the Termination for Convenience Clause. Diss. (Universiti Teknologi Malaysia, 2015).
Lees, Amanda. "The enforceability of negotiation and mediation clauses in Hong Kong and
Singapore." (2015) Asian Disp. Rev. 17 16.
Hughes, Will, Ronan Champion, and John Murdoch. Construction contracts: law and
management. (Routledge, 2015).
Zeller, Bruno, and Camilla Baasch Andersen. "Good Faith-The Gordian Knot of International
Commerce." (2015) Pace Int'l L. Rev. 28 x 1.
Perry, Christina. "Good Faith in English and US Contract Law: Divergent Theories, Practical
Similarities." (2016) Bus. L. Int'l 17 27.
Buberis, Peter. "Good Faith." Australian Franchising Code of Conduct. (Emerald Publishing
Limited, 2020).
Bridge, Michael. "Good faith, the common law, and the CISG." (2017) Uniform Law
Review 22.1 98-115.

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van Dunné, Jan. "On a clear day, you can see the continent–the shrouded acceptance of good
faith as a general rule of contract law on the British Isles." (2015) Construction Law
Journal 31.1: 3-25.
Krauss, Oliver. "The enforceability of escalation clauses providing for negotiations in good faith
under English law." (2015) McGill J. Disp. Resol. 2 142.