PPCC Training Manual 9 (1).doc

Alternative dispute resolution adr mechanisms are

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Alternative Dispute Resolution (ADR) mechanisms are recommended to be introduced into the contract in order to facilitate the disengagement of disputes without recourse to litigation which would otherwise be the next option for one or both of the contracting parties. ADR usually involves a combination of an "Adjudicator" or a "Dispute Review Board", mediation/conciliation and arbitration. 10.9.2 Litigation In Court If relations between the parties to a contract deteriorate to the point where either of them deems it necessary to take legal action, recourse to court is a potential, and often adequate, alternative. In a dispute where both contracting parties are from the same country, executing authorities will recognize and enforce a court decision. However, when it comes to international commercial dispute, the advantages of the courts proceedings over arbitration are less evident. Litigation in court has two inherent shortcomings, namely the proceedings may be time consuming and are usually conducted in public which can potentially cause negative repercussion on the parties. 68
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10.10 Contract Termination 10.10.1 Termination for default It is desirable for the contact to include a termination clause in order to provide for an orderly and equitable procedure for termination. Termination of a contact may be regarded as a remedy of last resort. Before a contract is terminated, it would be of the interest to both parties to resort to other measures or remedies. The right to terminate a contract may originate from either the general principles of contract law or the express terms of the contract. Contracts may, for example be terminated for default if one of the parties to the contract causes a fundamental breach of the contract. Fundamental breaches of the contract can include: The contractor fails to deliver any or all of the deliverables within the period(s) specified in the contract, or within any extension thereof granted by the Contracting Entity; or The contractor fails to perform any other obligations (s) under the contract: The contractor fails to conform to the quality standards specified by the contract; Termination for default is also justified in a situation of an anticipated breach of contract whereby a party to the contract clearly indicates that it cannot or will not perform on the contract. A written notice should be given of the termination. The notice must state that the contract is being terminated, the effective date of termination, the extent of the termination and the reasons for the termination. Termination for default subjects the contractor to liability as stipulated in the contract (e.g. confiscation of performance security and/ or imposition of liquidated damages) Furthermore, it gives a negative connotation to the contractor's ability to perform future contracts.
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