Adjudication Details

Adjudication is a process of dispute resolution in which a qualified person chosen by both parties creates a decision to solve the dispute. A single question, issue, or statement regarding the dispute is shared with the disputing parties and the adjudicator. An adjudicator is someone chosen by both parties to carry the task of resolving the dispute. The person should have some degree of knowledge regarding the field of work related to the dispute and should be trusted by both parties.

Unlike legal lawsuits, the adjudication process is much simpler and quicker. Both parties will send a notice of an intention regarding the dispute, along with evidence(s) to fortify their arguments to the adjudicator. A formal hearing rarely occurs in the adjudication process. Once all notices and evidence have been sent to the adjudicator, the adjudicator will begin reviewing all the data to come up with a solution.

The whole adjudication process and the final decision are private. If either party is not satisfied with the adjudicator’s final decision, they could appeal the case to a higher level. Arbitration is generally preferable since it is still cheaper and quicker than a full-on lawsuit.

Example of Adjudication

Let’s say there’s a contractor called Kyle who hired an experienced construction worker named Adam. Due to unforeseen reasons, the construction progress was behind schedule. To catch up with the schedule, Kyle ordered all his subordinates, including Adam, to do overtime work and promised to pay them afterward. Adam and other construction workers did the overtime work as per Kyle’s order and finished the work on time.

However, once the contract was finished, Adam did not receive overtime pay for his extra work. Because Kyle and Adam had other jobs to attend to and didn’t want to waste much money on the dispute, they both agreed to settle the matter using adjudication. In this case, they chose Peter, a construction supervisor for another company, as their adjudicator. They knew Peter to be transparent, diligent, and sociable.

After 28 days of carefully examining all the submitted data, Peter finally came to a conclusion. Kyle’s argument was voided by the CCTV recording evidence submitted by Adam, showing Kyle having a conversation with Adam regarding his overtime pay promise. According to Peter, Kyle has to pay Adam’s overtime hours in full. The final decision is effective immediately, and the limit for Kyle’s payment is one week.

Adjudication vs. Arbitration

The main difference between adjudication and arbitration is their formality. With arbitration, the parties must appoint an arbitrator nominated by a law institution, instead of a qualified person chosen by both parties, like in adjudication.

Arbitration also requires both parties to send formal notices, like a court proceeding. The process involves a formal hearing attended by the disputing parties and the arbitrator (the equivalent of an adjudicator). The adjudication process generally requires no hearing, and all judging processes happen in private.

As a result, arbitration requires more time to finish compared to adjudication. Arbitration is also more expensive compared to adjudication since both parties have to pay a law institution to appoint an arbitrator and conduct a formal hearing. However, unlike adjudication, the final decision of the arbitration process is legally binding.

History of Adjudication

In 1834, an American woman named Myra Clark Gaines filed a lawsuit against the city of New Orleans regarding her inherited property. Because America was still in its infancy, the lawsuit went for 50 years before Myra died because of a natural illness. To this day, legal lawsuits take an enormous time and effort to process and finish. Everyone has to review every rule related to the case, review the evidence and its authenticity, and perform hearing after hearing until a final decision can be reached.

However, we know that not everyone has that amount of time and effort to spare. In 1998, England enacted the Housing Grants, Construction and Regeneration Act (HGCR) to boost its industrial construction speed, but because of the sheer scale of the process, miscounts regarding construction material often occurred and led to multiple disputes. These disputes need to be resolved quickly and cheaply, but the current lawsuit system was neither quick nor cheap. So, the English judicial system invented a new type of dispute resolution called adjudication to enable both parties to resolve their arguments quickly and cheaply.

Because of the new adjudication rule mentioned in HGCR, the construction phase could continue smoothly. Today, conflicts appearing mid-contract can be quickly and cheaply solved by using adjudication. As a result, contractors can stay focused on building and keeping up with the schedule instead of worrying about potential lawsuits.