Last updated on Jan 26, 2024

How can you use a neutral third party to resolve construction disputes?

Construction disputes can arise from various sources, such as delays, defects, changes, payments, or contracts. When these disputes cannot be resolved by the parties themselves, they may escalate to costly and time-consuming litigation. However, there is an alternative way to settle construction disputes: using a neutral third party. In this article, you will learn what a neutral third party is, how they can help you resolve construction disputes, and what are the benefits and challenges of this approach.

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1 What is a neutral third party?

A neutral third party is a person or an organization that has no direct interest or involvement in the construction dispute, and that can facilitate or decide the outcome of the dispute. There are different types of neutral third parties, such as mediators, arbitrators, adjudicators, or experts. Depending on the type of dispute and the agreement of the parties, the neutral third party can either assist the parties to reach a voluntary settlement (mediation), or impose a binding decision (arbitration, adjudication, expert determination).

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Robert MacLaren

Construction Lawyer
A neutral evaluator can provide an independent assessment of an issue, claim or dispute before the parties incur the substantial costs of preparing for and engaging in costly formal dispute resolution processes such as litigation or arbitration. Citing ABA Journal.
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2 How can you use a neutral third party?

To use a neutral third party, you need to have a clause in your construction contract that specifies the process and the rules for resolving disputes through a neutral third party. Alternatively, you can agree with the other party to use a neutral third party after the dispute has arisen, by signing a submission agreement. You also need to select a suitable neutral third party, either by mutual agreement or by using a nomination service from a reputable institution. Then, you need to follow the procedure and the timeline set by the neutral third party, and provide the necessary information and evidence to support your case.

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3 What are the benefits of using a neutral third party?

Engaging a neutral third party for resolving construction disputes can offer several advantages, such as saving time and money, preserving relationships, and having more control and choice. The process is usually simpler, more flexible, and less formal than going to court, and you can avoid the legal fees associated with litigation. Additionally, using a neutral third party can help you maintain or restore a positive relationship with the other party since the process is more collaborative, respectful, and confidential. You can also choose a neutral third party who has expertise and experience in the construction industry and the specific issues of the dispute. This gives you more control and choice over the process and the outcome of the dispute, as you can decide whether to settle or not, how to present your case, and who to appoint as the neutral third party.

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Linda Graf

Senior Legal Counsel på Fondia Legal Services
A neutral third party can contribute with a wider scope of solutions, other aspects not necessarily connected with the core questions of the dispute and involve other matters of relevance for the parties from a business perspective. In that way the litigation process can be beneficial instead of only resulting in cost and time driven consequences.
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4 What are the challenges of using a neutral third party?

Using a neutral third party to resolve construction disputes can present some challenges. Obtaining cooperation and consent from both parties may be difficult, and the outcome may not be consistent or final. Additionally, the quality and fairness of the dispute resolution may be compromised due to inadequate discovery, disclosure, or cross-examination of the evidence. Moreover, the neutral third party might not be impartial, independent, or competent due to conflicts of interest, biases, or lack of qualifications.

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Robert MacLaren

Construction Lawyer
The question is related to the scope of the evaluation agreed upon in defining the evaluator’s charter. ABA Journal. It also is a function of the diligence applied to the assignment. Citing ABA Journal.
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5 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Robert MacLaren

Construction Lawyer
Stakeholders looking for a neutral evaluator may consider whether the evaluator should be an attorney or a construction industry practitioner. Good arguments can be made for both – perhaps the evaluator is an evaluation team comprised of a legal and an industry member. Citing ABA Journal.
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How can you use a neutral third party to resolve construction disputes?

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1 What is a neutral third party?

2 How can you use a neutral third party?

3 What are the benefits of using a neutral third party?

4 What are the challenges of using a neutral third party?

5 Here’s what else to consider

Construction

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How can you use a neutral third party to resolve construction disputes?

1

2

3

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5

1 What is a neutral third party?

2 How can you use a neutral third party?

3 What are the benefits of using a neutral third party?

4 What are the challenges of using a neutral third party?

5 Here’s what else to consider

Construction

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