Adjudication in Construction Contracts: The Complete Guide
At Helix Law, we help clients avoid litigation, get paid or finish their projects.
Our expert team of construction lawyers can help you deal with construction contract disputes and support you through negotiation, settlement, adjudication proceedings and trial.
But, what is adjudication in construction? Adjudication and its processes are important to understand before you start or respond to a referral. This guide was put together to help you understand what construction adjudication is and your rights in relation to adjudication.
What Is Adjudication?
Broadly, the term “adjudication” refers to the process of resolving a legal dispute, hearing evidence and deciding rights, and coming to a formal decision in court. However, it takes a slightly different meaning when used specifically in cases relating to construction law.
What Is Adjudication in Construction?
Adjudication in construction is a faster and less formal route of dispute resolution than resorting to relatively slow and expensive court proceedings. The speed of adjudication allows construction work to continue and supports cash flow. However, over the years the adjudication procedure has become more complex, with parties sometimes needing to serve detailed submissions, expert reports, and witness statements. The Construction Act encourages adjudication as a means of resolving disputes quickly and without the need for lawyers when disputes arise. This is still possible without the need for lawyers. Whether you would benefit from specialist legal advice in an adjudication needs to be assessed on a case by case basis.
A party to a construction contract can exercise their statutory or contractual right to refer a dispute to an adjudicator by issuing a notice of adjudication/notice of intention to refer a dispute to an adjudicator at any time. If the contract does not provide for adjudication and one party is a residential occupier then statutory adjudication does not apply. Once an adjudicator is appointed the referring party serves a referral notice on the other party. The responding party then usually has seven days to reply to the referral notice. What further directions the adjudicator gives vary from referral to referral and often there is no need for a meeting or hearing as the adjudicator can resolve the dispute on paper. Construction adjudicators are normally construction professionals, engineers, architects, surveyors, or other professionals within the building industry. The person who adjudicates can either be set by the contract, chosen and agreed upon by the parties in dispute and/or is nominated by RICS (Royal Institution of Chartered Surveyors) or a similar independent body.
The adjudicator’s decision is binding until the dispute is finally determined by litigation or arbitration. The responding parties must pay or act upon it before challenging it. After paying, the responding party may issue a court claim after the decision is paid.
If you think a term of your construction contract has been broken by another party, contact Helix Law today.
What Is Adjudication Suitable For?
Adjudication in construction can be used to resolve cases relating to:
- Defects in building work
- Interim payments
- Extensions of time for completing the work
- Disruption or delay in the construction process
- Final accounts
Although these are more complex cases, sometimes it can be used to settle:
- Breaches of construction contract
- Professional negligence
- Termination of contract
The Adjudication Process
The construction adjudication process can be broken down into the following steps:
1) Act Quickly
If you decide to adjudicate, define your construction dispute in writing and serve it to the opposing party. You can only refer one dispute on one contract at a time. This is called the notice of intention to refer a dispute to adjudication or notice of adjudication. It sets the parameters of the adjudication and it is important to get it right – it sets the boundaries of the power/jurisdiction granted to the adjudicator. Make sure you have received legal counsel from specialist solicitors before serving a notice of intention/ notice of adjudication.
Your notice should set out:
- A description of the dispute and the persons involved
- Identify the construction contract that the dispute arises under
- Identify the adjudication clause in the contract or the statutory right to adjudicate
- Details concerning when and where the dispute occurred
- The remedy requested
- The names and addresses of all parties to the disputed contract, and addresses of where the document is to be served
If you receive a notice of adjudication or notice on intention, within seven days you will also receive a referral notice setting out the full details of the dispute the referring party wants the adjudicator to decide. As soon as your reply to the adjudication in any way you are at risk of waiving any valid objections you may have to the jurisdiction of the adjudicator unless you reserve your position on jurisdiction as clearly as you can. The more general the objection the less effective it may be. The referral notice submissions can be lengthy and complex, and you often have just seven days to issue your response.
It is important to get legal advice from a specialist lawyer or building claims consultant. Do this as soon as possible upon receiving a referral notice, as the time to construct a response to the referral notice is limited. Your lawyer will be able to tell you whether an adjudicator will have jurisdiction over the issue and whether to reserve your position on jurisdiction. They can also answer any questions in general about the adjudication process. It is often better to use a solicitor, rather than a construction claims consultant, as the solicitor will be able to access the picture beyond adjudication and will be able to carry on with enforcement and litigation if required later on and will be more aware of not compromising those claims in adjudication.
It is difficult to get extensions to an adjudication timetable, so contacting a lawyer quickly after receiving a notice of adjudication is essential.
Helix Law tries to answer emails and queries within an hour during working hours. Contact us now to find out how we can help with adjudication claims.
2) Decide Whether the Right to Adjudication Exists
If a referring party exercises their statutory or contractual right to refer a dispute to an adjudicator by issuing a notice of adjudication/notice of intention, appointing an adjudicator and then issuing a referral notice you must be careful to assess whether the right to adjudicate exists. If it does not and you don’t want an adjudicator to decide the dispute then be careful not to take any steps in the adjudication without first reserving your position in relation to jurisdiction. Before engaging in the process in any way you should reserve your position in relation to jurisdiction or you may grant jurisdiction where it did not exist by taking steps without reservation.
Contact a specialist lawyer to help you decide if you should act to challenge an adjudicator’s jurisdiction if you are unsure. The more specific your reservation is, the more likely it is to be effective. Put your challenge to the adjudicator’s jurisdiction straight away.
If the appointment is accepted by the adjudicator, they will give a binding decision within 28 days of the referral notice unless the referring party accepts an extension to the time limit. The decision is binding unless and until it is overturned by litigation or arbitration. Until it is, the parties must comply with it unless they can challenge the adjudicator’s decision.
4) How to Challenge an Adjudicator's Decision on Enforcement
Once the adjudicator has made their decision, it is unlikely that the court will not uphold and enforce it – even if it’s wrong. The philosophy of adjudication is that it’s a quick and easy resolution. This means you must act upon it before challenging it. Essentially, you must pay up and argue later.
If you think the adjudicator got it wrong, you can commence court proceedings or arbitration (depending on what your contract says) to get a final and binding decision on the issue in dispute. This will trump the adjudicator’s decision but may take up to two years to obtain.
There are two ways to challenge an adjudicator’s decision, and arguing that an error of law has been made isn’t one of them. The two ways are:
- To argue that a breach of natural justice has occurred; and
- To argue that the adjudicator does not have jurisdiction.
If a challenge cannot be made, the decision must be paid or performed before beginning arbitration or court proceedings in an attempt to claim back the money. It is only in rare conditions that parties might be able to commence and win a court procedure before they must pay. Alternatively, there may be a chance to stay the enforcement of an adjudicator’s decision.
If you don’t pay the decision, you may end up paying significant sums for the referring party’s legal costs. If you refuse to pay, the opposing party can apply to have it enforced. They can add a claim for the costs of doing so, which can amount to £10,000-£35,000.
5) Get Expert Advice from the Start
If a challenge is to be maintained against the decision’s ability to be enforced, then it must be raised early in the process. You must also be careful to not waive it by deed or by word.
This means that from the moment the notice of adjudication is received, everything you do could determine your rights within the process. Sometimes, the referring party does not actually have the right to commence adjudication under the legislation or contract. If you participate then, you could actually validate an adjudication that was initially invalid.
This is why it’s imperative to secure expert legal advice from Helix Law’s specialist solicitors. If you make a wrong move, you could end up needlessly losing a case.
Helix Law can fully explain the process and guide you through proceedings. Contact us today for an initial consultation.
Who Can Partake In The Adjudication Process?
The adjudication process usually involves three parties:
- The referring party
- The responding party
- The construction adjudicator
The referring and responding parties are those that have a dispute concerning a construction contract.
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Frequently Asked Questions
Adjudication involves the quick resolution of disputes between parties where an adjudicator hears the outline of both sides of the argument and makes a fast decision within 28 days. Often the dispute is decided on paper only. This method allows projects to advance in a much more timely fashion. Adjudication decisions are only temporarily binding and can be displaced by litigation or arbitration. In practice the parties very often accept the adjudicator’s decision and don’t seek to litigate it.
Contact Helix Law's expert construction lawyers today to learn whether you have a case that can be referred to adjudication, or for advice on responding to an adjudication notice.