Note: Virtual QS Ltd doesn't currently offer contractual services; however, we do aim to provide a full service in the near future. In the meantime, we hope the information below can be of use.
Standard forms of contract are widely used in the construction industry, and there are different forms to suit most requirements. The form required can vary
based on many factors, mainly the choice of procurement.
Using a standard form will provide a clear framework for each party to work to, with outlined processes. They can prevent conflict between parties but can
also result in conflict when they are not followed.
According to a 2010 survey by the Royal Institute of Chartered Surveyors (RICS) the percentage of construction projects using a form of JCT was 88%,
ICE 0.4%, and NEC 7.4% with remaining percentage being made up of a variety of less well known forms.
NEC has traditionally been used in Engineering projects but is increasingly being used in the wider construction industry. It is deemed by some to be more of
a proactive contract which means issues are brought to the surface early instead of late in the contract.
Almost all forms of construction contracts will come with different options such as lump sum, re-measure, and cost plus to name a few. Lump sum will put
all the risk on the contractor and will sometimes demand a premium whereas re-measure will leave the risk with the client. Which option to choose will
depend on the nature of the project and personal preference.
Having a contract in place should help prevent most disputes, however if and when they occur there are certain procedures to take. Before going down any adjudicative routes it is always best for both parties to try mediation whereby an independent third party tries to find common ground between the two parties. One major benefit of mediation is the ability to maintain a working relationship after. If this is no longer possible typically the following three options are used:
The aim of adjudication is to produce a binding decision (unless later resolved through the below options). The independent adjudicator, who is usually named in the contract, will have to provide a decision within 28 days. This option is therefore relatively speedy. The decision is binding and can be enforced through the courts. This option is widely used in the construction industry. The following two options are alternatives to each other and which one is used will be dependant on what was agreed in the contract.
Arbitration involves parties agreeing to refer their dispute to a third party and is carried out by an arbitrator, or panel of arbitrators and is preferred by some over litigation due to its private nature; information is not publically disclosed. The arbitrator is empowered to grant a range of remedies similar to those in court. The decision is final and binding. Perceived disadvantages are the cost and the limited appeal rights.
Litigation is regarded by many as the highest quality decision making. There is the ability to include multiple parties in the case which avoids multiple hearings. Through litigation Judges can make interim judgements while pending the final decision.
Although heavy reading, the below links provide an insight into dispute resolution in our main client countries.