While a sound understanding by both parties of their contractual responsibilities and professional relationship management should reduce the potential for disagreements and disputes to arise over the life of the contract, these can still occur.

As a general rule, a disagreement becomes a dispute when it is not possible for the parties to resolve it without resort to a formal resolution mechanism. Generally, what a dispute is and when it is deemed to have occurred is defined in the contract, often in a dispute resolution clause.

Many disagreements and disputes arise when the parties cannot agree on issues related to the interpretation of contract provisions, the definition of deliverables, meeting performance standards and/or the effect of unexpected events. These disagreements may be of a minor nature and can be readily resolved. It is important that any possibility of dispute or an actual dispute be recognised at an early stage and addressed as quickly as possible. Avoiding the escalation of disagreements can impact on the contract deliverables and reduce the costs to both parties.

However, where a dispute arises, the contract manager's role is to protect the Australian Government's interests in all cases.

The forms of dispute resolution can include negotiation, arbitration, mediation, or litigation. These are discussed under separate headings below.