Adjudication and Construction Contracts: Contractual Dos and Don’ts
Adjudications are seeing more use as a quick and efficient dispute resolution tool for Ontario-based construction projects. The fundamental components of adjudication are established in the Construction Act, but savvy industry participants should be aware of the impact construction contracts can (and cannot) have on adjudications.1
At a high level, it is important to remember that an adjudicator will not consider disputes in a vacuum. Adjudicators must interpret and apply the construction contract to resolve most adjudications. This means that any rights and obligations created in the construction contract will have a considerable impact on the outcome of most adjudications.
More specifically, parties can modify certain procedures to help alleviate some of the administrative burdens of meeting the tight deadlines that come with adjudication. Parties can include terms in their construction contracts agreeing to service of key documents to specific email addresses (i.e. proper invoices, notices of non-payment, notices of adjudication, etc). Many contracts also include clauses requiring a party that delivers a notice of adjudication to consent to reasonable extensions of time asked for by the responding party. Some contracts include clauses establishing the process to be used (like page limits or the opportunity for oral submissions) for specific types or dollar values of adjudications.2
Although many of these clauses seem like common sense, it is important to enshrine these “common sense” agreements in the contract while the relationship between parties is productive—before any disputes or adjudications have started. Unfortunately, many adjudications are accompanied by a deterioration in the relationship between the parties, which inevitably makes it more difficult to negotiate “common sense” agreements.
There are limits on the modifications parties can make to the adjudication process. Parties cannot contract out of adjudication. It is a statutory dispute resolution tool available to all parties working on Ontario-based construction contracts that are subject to the Construction Act. Parties also cannot pre-select an adjudicator to refer disputes to or generally make any changes that would conflict with the Construction Act’s requirements for adjudication.3
Whether you are in an adjudication, thinking about starting one, or worrying about how to best prepare your contracts to deal with adjudications, the Construct Legal team is here to help.
This article is not legal advice. It is for information only.
1 Section 13.16(1) of the Construction Act permits parties to a construction contract to make certain amendments to the adjudication process.
2 Note that a clause agreeing to a specific process is subject to an adjudicator’s overarching authority to determine the appropriate process for each adjudication.
3 Section 13.16(2) of the Construction Act.