When adjudication is incorporated into contracts, often construction contracts, as a means of dispute resolution it is usually included with other mechanisms such as mediation, arbitration and possibly even an approach to a court so that a party dissatisfied with an adjudicator’s award can attempt to rectify what is considered wrong with it in a different forum – much like but not identical to what we understand as an appeal process.

The important difference is that even though adjudication is usually a first-tier method of resolving disputes between parties, the effect of adjudication awards is that they are binding and are generally implemented immediately as a contractual obligation even if a party is unhappy with the award, considers it to be incorrect and intends to or even has invoked the next tier mechanism in the contract to set the award aside.

The idea of performing finally on the strength of what may at best be an interim finding for the successful party can be disconcerting.

Discomfiture aside, our courts in cases like:

have in deciding the issue of the enforceability of adjudication awards emphasised the principle of ‘pay now, argue later’.

Are there any matters that could be raised to persuade a court otherwise?

Short of fraud or some other serious misconduct on the part of an adjudicator, if an adjudicator is merely wrong that would not be a good ground for a decision of an adjudicator not to be followed.

In Freeman NO and Another v Eskom Holdings Limited the respondent in resisting a claim for payment under an adjudication award argued that the adjudicator’s award was delivered out of the agreed time period for the delivery of the award. The adjudicator’s contract had lapsed by the time the award was made and a decision in terms of a lapsed contract was invalid, a nullity and therefore, so the argument went, there was no obligation on the respondent to act in terms of the award.

The argument has enjoyed some success in other jurisdictions. In Freeman’s case the court held that in the absence of an express contractual term that a late decision by the adjudicator is invalid, the late decision would be enforceable until it is revised by an arbitration tribunal.

What can you do?

Don’t agree to this position in a contract if you do not wish to be bound by a decision of the adjudicator.

  • First know the terms of your contract, and the risks involved in agreeing to follow the adjudicator’s decision on an interim basis.
  • If there is a concern about the implementing of the decision then rather propose an arbitration with possibly an appeal arbitration tribunal.
  • If you have agreed to an adjudicator and are dissatisfied with a decision which is delivered out of the agreed time for delivery of the award it would be best to challenge the late delivery immediately and not wait until delivery of the award and then try and challenge it as a nullity.

In construction contracts, the FIDIC forms do not contain any provision which empowers the adjudicator unilaterally to extend the time for giving its decision. The FIDIC forms do not state expressly whether a decision given out of time would be binding and enforceable. Such a decision may not be binding and enforceable, unless the parties have agreed between themselves to be bound by the decision.