How are disputes commonly resolved in construction contracts?

In construction contracts, disputes are often resolved through methods such as negotiation, mediation, or arbitration because these approaches provide more flexible, efficient, and cost-effective alternatives to traditional litigation. Negotiation allows the parties involved to discuss their issues directly and attempt to reach an amicable agreement, while mediation involves a neutral third party who facilitates discussions between the disputing parties to help them find common ground. Arbitration, on the other hand, results in a binding decision made by an arbitrator based on the evidence presented.

These methods are favored because they tend to preserve business relationships, reduce backlog in the court system, and allow for more privacy compared to court proceedings. In contrast, relying solely on final judgment in court can be time-consuming and expensive, often resulting in unfavorable outcomes for one party. Direct confrontation and communication, while useful in some contexts, may not provide the structure or impartiality needed to resolve complex disputes effectively. Depending solely on the project owner's decision can lead to biased resolutions, compromising fairness in the dispute outcome. By utilizing negotiation, mediation, or arbitration, parties in a construction contract can work through their issues in a manner that is generally seen as more collaborative and less adversarial.