In the best of all possible worlds, commercial contracts would always run smoothly, and no disputes would arise between builders, contractors or home buyers about payment, quality of work or timeliness. Dream on.

Commercial contract disputes are an inevitable part of doing business. A reasonable business goal therefore is to resolve them with a minimum of friction, certainly before they begin to cause the delays and cost overruns that are the stuff of building nightmares.

The first step, of course, is to read and understand your contract. Once it is clear that there is a genuine dispute and not a simple misunderstanding, your choices are to try to talk it out, engage the assistance of a mediator or arbitrator and then, as a last resort, sue. Involving your solicitor throughout this process and not only after things have begun to terribly wrong, can save you money and keep the project on schedule.

Negotiate

Pick up the phone and make a call as soon as you have a concern. Make sure that you take notes of the substance of the conversation. At the very least, follow the conversation up with a letter or email to the other party that summarizes the salient points of any agreement reached as well as any remaining open issues. Openly copy your attorney (even if your attorney was the person who actually drafted the letter). Use registered mail if you are sending the correspondence by post.

If the subject of the dispute is something that is visible, take pictures. Make sure the photos have a time and date stamp. Hopefully, you will not need them because this step will resolve the problem.

Mediate/Arbitrate

This is a time to be really sure you understand your agreement. Many commercial contracts will specify how disputes are to be resolved, usually in several steps of escalating formality.

Mediation, in general, is the less formal of the two options. It may be binding or nonbinding. A mediator will generally not suggest or impose an agreement on the parties but, essentially, acts as a “coach” to help them resolve their own differences.

NSW Fair Trading can assist with dispute resolution if the building work is within the relevant statutory warranty period. For contracts entered into after 1 February 2012 the statutory warranty period for major defects is 6 years, and 2 years for all other defects.

Arbitration is much more like a court proceeding involving sworn testimony, evidence and cross examination of witnesses. You should certainly be advised by your attorney at this stage. The arbitrator will make a legally binding decision.

Where not constrained by the terms of the contract, either party may lodge an online application for dispute resolution. Both must, however, agree to the attempt.

File a Lawsuit

A lawsuit should be the last resort for parties engaged in a commercial contract dispute. Either party may initiate proceedings, and a court of appropriate jurisdiction will hear it. It is essential to make sure that the likely recovery will justify the cost of the legal action.

Some Other Things to Keep in Mind

While working through the legal options for resolving a dispute, a builder, contractor or homeowner should keep several other things in mind.

Homeowners should contact their insurers to safeguard their position under the Home Building Compensation Fund insurance policy. if you become aware of defective or incomplete work, you should notify your insurer immediately about the nature and circumstances of your loss.

If your dispute is about the quality of the work, you can refer to the Guide to Standards and Tolerances. The Guide may be helpful to either party as an objective source of information about what standard of work is acceptable.

A Fair Trading building inspector may also help you resolve a dispute. The inspector will meet the parties at the site to inspect the work under dispute and discuss the issues reported in the complaint.

If there are matters that should be rectified, the inspector may issue a Rectification Order. On the other hand, the inspector may conclude that the builder is not responsible for the alleged defects.

The attorneys at Owen Hodge Lawyers would be happy to help you resolve your commercial contract dispute. Please call us at 1800 770 780 to schedule a consultation.