Multiple Arbitrations in Construction Contracts – A Perspective
India’s construction industry Construction has accounted for over 40% of development investment over the last 50 years. The construction sector in India employs about 30 million people and generates assets worth more than $200 billion. It contributes more than 5% of the nation’s GDP and 78% of gross capital formation. The building industry is envisioned as playing a significant role in economic growth, in addition to generating structures that improve productivity and quality of life.
The construction sector is riddled with complexities and technicalities; thus, disputes coming out of any such activities related to the construction industry would necessitate employees who have particular experience in such area and are proficient at grasping such complications.
What are Construction Contracts?
A construction contract is a mutual or legally binding agreement between two parties based on policies and conditions recorded in document form. The two parties involved are one or more property owners and one or more contractors. This contract specifies the scope of work for the contractor, including their right to subcontract any of the work, how and what they will charge for the work, and any related blueprints or work orders.
A strong construction contract should specify the project’s scope in as much detail as possible, leaving little to no space for misunderstanding on either side. Individual documents that define the many parts of the project, such as who will be accountable for doing certain duties, the projected project duration, payment terms and cost requirements, and other critical details, are frequently included with this type of contractor. It is normally carried out between the general contractor in charge of the project and the owner of the project or building under construction.
Many construction contracts adhere to a specific format to guarantee that all necessary information and details are included. Certain clauses that safeguard the general contractor and/or the project owner may also be included.
Contract disputes in the construction industry
Multiple parties are involved in construction contracts, which also deal with complicated challenges and technicalities. Naturally, such contracts lead to disputes of many types. Construction contract disputes can start right after a contract is formed, over the question of whether the contract is even a valid one.
Additionally, disagreements could occur over how to interpret crucial clauses in the contract or some incoherent clauses in the deal’s supporting documents. Certain problems result from bid-rigging, which is punishable by law, or the contract may give rise to disagreements about bank guarantees, including whether they are conditional or unconditional.
Conflicts in the construction industry can result from a mix of environmental and behavioural reasons. Since projects are typically lengthy processes with significant unpredictability and complexity, it is impossible to settle every issue and account for every eventuality right away. As a result, situations frequently occur that the contract does not expressly cover. Construction disputes are mostly fueled by three things: uncertainty, contractual issues, and behaviour.
Arbitrations in Construction Contracts
It’s an unfortunate fact that many construction projects end in disputes, driving the parties into some form of dispute resolution.
Arbitration is a process that uses an arbitrator to solve a dispute, and the arbitrator’s decision is final. The arbitrator can use any law and any court, which has led to decisions being permanent even if the arbitrator does not follow substantive law. In other words, the arbitrator can make a binding decision without following the standard applicable laws and it is impossible to challenge the decision.
Arbitrations tend to be a more efficient and economic means of dispute resolution. This is achieved by the less formal nature of arbitration and the ability of the parties and the arbitrator to craft a process for conducting an arbitration that is the most efficient for their particular needs, without regard to the formal rules of evidence or civil procedure. However, many parties frequently turn arbitration into what attorneys call “arbigation” in which just as much discovery is conducted in arbitration as would be the case in litigation. Combined with the cost of the arbitrators, this can make arbitration as expensive, if not more expensive, than litigation.
For good reason, arbitration has grown to be the most popular way to settle construction-related disputes. Within the overall objective of achieving economy and efficiency, arbitral institutions and their rules typically give parties and tribunals the flexibility needed to meet the character of these conflicts. To reflect the requirements of a specific dispute or the jurisdiction in which it is located, such rules may also be supplemented or amended by agreement. In conclusion, arbitration benefits the construction sector, and it follows that in the years to come, construction conflicts will continue to make up a sizable share of the caseloads of all major arbitral institutions.