Contractor Dispute Resolution in terms of the Building Contract

Building disputes happen fairly often and, in many cases, when not settled, end up before an arbitrator due to the provisions of the type of building contract entered into. Sometimes, even before a court of law. The main reason behind this seems to be two-fold.

Firstly, due to the fact that most construction work involves various unforeseen events, with the result that the contract and time-frame of the building project needs to be altered, and the alterations, or variations (as the term is used in the industry) is not always recorded to writing. Secondly, the ambiguity of the contract used, which does not clearly set out the procedures for variation of an agreement and the recording of a dispute or referral of the dispute to arbitration.

In a 2013 decision by the Supreme Court of Appeal the court dismissed an order by the Eastern Cape High Court in Grahamstown, which in essence, held that an arbitrator’s appointment was premature. The court held that at the beginning of any arbitration, a party may challenge the jurisdiction of the arbitrator. It is not the law that arbitrators, if their jurisdiction is challenged or questioned, are bound immediately to refuse to act until their jurisdiction has been determined by some court which has power to determine it finally.

Before proceeding to look at the background in the above judgment, by digressing slightly, but as a matter of interest, it is noteworthy that Nugent AJ, mentioned that it has now become common internationally, and in some countries, even by legislation, for disputes to be resolved provisionally by adjudication. Whereas, in South African law, unless specifically provided for in the terms of the building contract, adjudication is not a legal requirement. The advantage is that adjudication provides for a speedy mechanism for settling disputes under construction contracts on a provisional interim basis. This is perhaps something the legislature may consider, which could possibly cause matters to be dealt with more effectively.

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