QUESTION 4 (15 Marks) List five (5) differences between a Variable Construction Guarantee vs Retention as provided for in the JBCC Minor Works Agreement. In particular, point out the percentage values at the different stages of the contract. (10) Variable Construction Guarantee Payment Reduction Offers an immediate higher security. The Employer is therefore immediately covered. 1 Security has to slowly build up from nil and there is a period of risk for the Employer. 1 Immediate value not exceeding 6% of the contract sum. 1 Immediate value limited to 8% of each Payment Certificate, up to 4% of the contract sum. 1 Reduces to 4% at Practical Completion up to the date of Final Completion. 1 Reduces to 2% at Practical Completion up to the date of Final Payment Certificate. 1 Reduces to 2% at Final Completion up to the date of the Final Payment Certificate. 1 Reduces to 0% on the date of the Final Payment Certificate. 1 A Construction Guarantee is issued by a reputable financial institution. 1 Payment Reduction relies on the value of work delivered by the contractor. 1 QUESTION 5 (20 Marks) In tabulated format, under the four (4) respective headings, briefly list five (5) primary differences between Mediation, Adjudication, Arbitration and Litigation. (4 x 5) Any five differences should warrant full marks. Mediation Adjudication Arbitration Litigation The parties freely and voluntarily agree to appoint a mediator to assist the parties to seek a negotiated resolution to the dispute. The parties freely and voluntarily agree to submit any dispute that may occur to the impartial judgement of a third party of their choice. An adjudicator may be appointed when a dispute arises The parties freely and voluntarily agree to submit any dispute that may occur to the impartial judgement of a third party. This is done at the point of concluding the contract. The agreement should state the name of the arbitrator, or how the arbitrator is to be appointed. The parties do not freely and voluntarily submit any dispute to a court of law, but are summoned to appear. The mediator never expresses an opinion. Any settlement is The courts cannot enforce the award of the adjudicator The arbitrators judgement is final The judges judgement is subject to appeal
negotiated by the parties themselves. Parties may be assisted by legal or other assistants. Parties may be assisted by experts Parties may be represented by Legal Advisors and/or Counsel Parties should have legal representation Mediation has the potential to preserve goodwill as both parties often make concessions and agree to accept less. The adjudicator does not have to be an officer of the law The arbitrator does not have to be an officer of the law A registered / qualified judge has to hear the case A mediator is usually a person that is respected in the field and that the parties feel will assist without bias. An adjudicator is usually an expert in the field and is required to perform his duty with proper skill, diligence and care An arbitrator is usually an expert in the field The judge may not always be knowledgeable in building agreement disputes An adjudicator does not have any judicial immunity and thus is liable to the parties for any lack of skill, diligence or care in carrying out his duties. An arbitrator has judicial immunity A Judge has judicial immunity Mediation is a private matter. It is customary for the parties to sign a confidentiality clause. Adjudication is a private matter Arbitration is a private matter and is therefore seldom subjected to the press. Litigation is a public matter Because the parties reach agreement, the agreement is usually respected by both. Adjudication is often used as a first resort. Arbitration is recognised as a legitimate alternative means of resolving disputes Litigation is seen as the last resort in dispute resolution Mediation has recently been introduced into the statues of South Africa. It is not governed by any legislation It is governed by the Arbitration Act 42 of 1965 Litigation is governed by a number of acts The idea of going for mediation is to save time and resources. It should be concluded in a short period of time. The JBCC Rules on adjudication requires that the adjudicator must conclude within 20 working days. Arbitration may be concluded in a shorter time than litigation. Litigation could potentially become a very long and drawn out and expensive process
The procedure of mediation is determined by the the mediator in consultation with the parties. There is no set procedure however the JBCC publishes Adjudication Rules which may be used. There are procedural rules that govern the conducting of arbitration. There are procedural rules that govern litigation The costs of the mediator are borne equally between the two parties. The costs are borne equally by the parties, unless otherwise decided by the Adjudicator in his/her decision The cost of arbitration is generally borne by the unsuccessful party Costs are borne by the unsuccessful party