Real Time Analytics

Verbal contracts can be adjudicated

The provisions of the Housing Grants, Construction and Regeneration Act 1996, which came into force on 1 May 1998, enabled disputes to be determined by an adjudicator for all construction contracts executed in writing. This Act has now been modified by the Local Democracy, Economic Development, and Construction Act 2009, enabling adjudication to be used for verbal contracts entered into after 1 October 2011 in England (1 November 2011 in Scotland).

I argued in my article published by Construction Manager that mediation can offer a better solution than adjudication for all but the most straight forward “payment withheld” disputes for the following reasons:

  • Adjudication remains an adversarial method of dispute resolution, but mediation is a voluntary, non-adversarial process where the mediator helps the parties to find an acceptable solution, helping to preserve the existing business relationship.
  • Imaginative settlements are possible which may go beyond the payment of money from one side to another.
  • The parties remain in control of the process throughout. In adjudication both parties place their faith in the adjudicator to arrive at a decision which favours them but inevitably one party will be dissatisfied.
  • Mediation provides a formal binding agreement on the day, but a dissatisfied party to an adjudication decision can still take the matter to arbitration or litigation.
  • Mediation can be undertaken with the minimum of paperwork at the earliest opportunity for the parties to meet. Adjudication takes at least 35 days from the Notice of Referral and requires copious amounts of preparation and paperwork to be compiled by both sides for consideration by the adjudicator.
  • Mediations are conducted in person, which can assist the business relationship between the parties, whilst the parties remain in isolation during adjudication.
  • Mediation is entirely confidential.
  • Mediation is substantially less costly than adjudication, with a typical adjudicator’s time-based fee of between £5,000 and £20,000 (depending upon complexity). Additionally the parties must pay their own costs for preparing their documentary submission to the adjudicator.

For those reasons I believe the advantages of mediation over adjudication far outweigh any disadvantages.