Adjudication is a way of resolving disputes as they arise in the course of a contract. An independent, impartial adjudicator determines the dispute between the parties. This is a relatively fast, less expensive process when compared with arbitration or litigation and can be very useful where the parties wish to keep the contract alive.

The adjudicator's decision is binding unless and until the parties determine the dispute otherwise by arbitration, court proceedings or agreement amongst themselves. This means it is possible for a party who is unhappy with the adjudicator's decision to take the dispute to court afterwards (or to arbitration if the contract provides for arbitration).

However, in most cases the adjudicator's decision is accepted by both parties without the need for further litigation. Research indicates that 80% of construction industry disputes go no further than adjudication. This can result in valuable savings of time and legal costs, often with the added benefits of preserving better commercial relations between the disputing parties.

The contract between the parties may expressly provide for a right to adjudication, or the parties may agree between themselves to go to adjudication. Alternatively either party may rely on Part II of the Housing Grants, Construction and Regeneration Act 1996 (the "Construction Act"), which provides a statutory right to adjudication.

In theory this right only applies to disputes arising in the course of construction contracts. However the courts have recently interpreted Part II of the Construction Act to give a very wide meaning to the term 'construction'. Subject to certain exceptions set out in the Construction Act, construction contracts include:

· contracts for construction, alteration, repair, maintenance, extension and demolition of structures and works forming part of the land, whether or not they are permanent
· contracts for installation and maintenance of mechanical, electrical and heating works
· contracts for cleaning in the course of construction, alteration, repair, extension, painting and decorating and preparatory works
· contracts for advice on building, engineering, decoration and landscaping
· contracts for services of designers, engineers, surveyors and architects

Recent cases show that disputes over matters as diverse as boilers, air conditioning and facilities can all come within the meaning of construction, but will not include construction contracts in relation to a dwelling which is occupied or intended to be occupied as a residence by one of the parties.

Either party can refer a dispute to adjudication at any time before, during or after construction, provided they give written notice of intention to refer to the other party. The referral to the adjudicator should explain the nature and factual background of the dispute, as well as providing details of the contract and documentary evidence to support the referring party's case. A copy of each document sent to the adjudicator must also be sent to the other side. You should also explain what decision you would like the adjudicator to reach, e.g. to define the meaning of a technical term or to order that one party should pay a certain amount plus interest to the other party. The dispute has to be clearly defined so as to ensure that the adjudications only deals with what was referred to him/her.

Under the Construction Act, an adjudicator must be selected and a referral made within a week of the notice of intention to refer. The adjudicator must then make a decision within 28 days. This means there is a maximum waiting time of five weeks for the outcome of the adjudication, unless both parties agree an extension.

If one party does not comply with the adjudicator's decision, the other party can obtain a court hearing to ensure compliance within days of the decision being made.

Both parties should bear in mind that unless the contract provides otherwise, the most normal procedure is for each party to pay their own costs whether they win or lose. The adjudicator does not usually have the power to force one party to pay the other party's costs, but he/she will normally decide that the party who loses will have to pay his/her costs.

The commercial dispute resolution team at Charles Russell can assist at any stage in a contract with advice as to whether adjudication may be appropriate. Where the contract does not specify an adjudicator, either party may refer the dispute to an Adjudicator Nominating Body. The team at Charles Russell is happy to advise on the use of adjudicators, panels of adjudicators and Adjudicator Nominating Bodies. Charles Russell is also a founder member of the Centre for Effective Dispute Resolution (CEDR), a recognised Adjudicator Nominating Body.