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Using traditional methods to resolve construction disputes is an invariably long & costly process. What’s more, legal costs may end up being disproportionate to the sum of the award received. Therefore, it is hardly a surprise that construction companies are now increasingly looking for ADR methods.

Smart contracts are computer algorithms that are used to verify & execute a digital contract, and which allow transactions to be carried out without the involvement of any 3rd parties. Basically, smart contracts can help resolve a plethora of issues associated with concluding contracts in the construction industry

Using Smart Contracts to Resolve Construction Disputes

Typically, disputes in the construction industry arise due to a lack of understanding of the contract, and are aggravated by a number of administrative errors. Impartiality of smart contracts is, therefore, their main advantage, which is complemented by a low probability of errors & high transparency.

After fulfilling the conditions laid down in them, smart contracts initiate a number of actions requiring no human intervention. Increased automation of the process and, accordingly, efficiency, together with increased transparency, reduce the likelihood of disputes & their scale.

To collect information necessary for the functioning of a smart contract, a blockchain is used. Basically, this is a kind of a journal that reduces the likelihood of disputes due to its  immutability. In case of disagreement, the parties can turn to the blockchain to see the exact records of contractual events & objectively evaluate them.

The use of smart contracts in the construction industry enables to avoid many problems that arise due to misinterpretation of contracts. The only thing parties need to do is make sure that the drafting of smart contracts for construction purposes is carried out properly. Drafting a construction contract is not an easy task and requires dealing with a wide range of legal & economic issues. Therefore, using a smart contract can help parties greatly reduce the likelihood of errors in observing the terms of a contract & increase chances of reaching a mutually acceptable solution.

Why Blockchain Technology?

A blockchain is a chain of blocks built in a certain way in which information is encrypted. Each individual block contains a link to the previous block, the date of a transaction & other data associated with it.

Since a retrospective change of data in one block requires changing data in all other blocks, the blockchain is suitable for creating distributed ledgers of various kinds, storing valuable information related to smart contracts, and combining them.

Prospects for Changes

In people’s minds, courts are usually associated with something tedious, complicated & replete with formal procedures. Changes in the judicial system, triggered by the development of modern technology, can, therefore, ensure emergence of inexpensive, effective and universal methods for resolving financial & construction disputes, including at the international level.

ADR Methods

The development of modern technology has a positive effect on the emergence of new ADR  methods. Usually they manifest themselves in the form of online platforms funded by private individuals who view blockchain as a technology capable of improving the world. It is quite likely that smart contracts can become even better in the future & be used for resolving disputes with the help of artificial intelligence.


The use of smart contracts in resolving business disputes and other areas of people's lives is already a reality. When planning or forming business relationships, entrepreneurs can and should take into account the capabilities of modern technologies for resolving potential conflicts in the future.

If you have any questions regarding the topic of the article or need a consultation on the settlement of disputes, IQ Decision UK will always be happy to help you.  

Our legal experts will provide you with legal advice on mediation services in the UK and other countries. They can also provide legal assistance with drafting a smart contract & resolving a construction dispute.