Construction Law

Contractual arbitration provisions are often included in construction contracts to establish dispute resolution procedures. Unfortunately, the “standard” arbitration provision and the applicable rules are often misunderstood, or even ignored, in contract drafting. For those without extensive experience in construction arbitration, a brief explanation of some of the applicable concepts could be useful.

Start with the understanding that no one can force someone else into an arbitration without AGREEMENT. Parties to a dispute can agree to arbitrate at any time, even after a case has been filed in court. But if there is no agreement among the parties, litigation in court is the default position in the event of a dispute. Litigation provides a fairly defined set of rules governing procedure, discovery, trial, appeal, etc. It also supplies a free judge, potentially a jury, and  an enforcement mechanism to compel witness testimony. Given all those benefits, why would anyone ever agree to resolve construction disputes in arbitration? Consider the following:

1. Decision Makers well versed in Construction. Construction arbitrators understand construction and the law that is involved. I might not understand divorce or dog bite law, but I DO understand most aspects of law related to construction. A standard state or federal court judge may NOT understand construction, and you’d then have to face the necessity of spending a lot of your case time, even trial presentation time, educating your judge and/or jury about construction. Arbitration in construction disputes generally gives you a more experienced fact finder, which makes your case more understandable.
2. Flexibility. Judges have a tendency to be inflexible. Arbitrators, by contract, are traditionally more flexible in setting up procedures to manage the case efficiently. For instance, while there are basic rules govenrning discovery in arbitration, discovery procedures are typically set by agreement between the arbitrator and counsel. Discovery is often much more streamlined than in traditional litigation. Because discovery is often one of the largest costs in any dispute, managing discovery for efficiency can often be a huge driver for cost savings.
3. Finality. When a dispute goes to a final hearing, you want just that… finality. No one makes their business more successful by engaging in appeals, and sometimes multiple appeals. Present your case, get a fair and impartial decision, and move on with business. Appeals cost too much in both time and money, and experience has shown that they are seldom successful anyway.  In arbitration, the arbitrator’s decision is generally final. While there are LIMITED bases for appeal, they are VERY limited, and when the case is decided, it’s generally OVER.
4. Time. Arbitrations are typically much faster than traditional trials. Of course, this is often impacted by the parties and how thy want to conduct things, but in general, the time from filing to decision is MUCH quicker in an arbitration than in court.
5. The parties can set their own parameters for the arbitration, even in the contractual arbitration agreement, and agree UP FRONT how any disputes will be resolved. They can set limits on discovery, time frames for the proceedings, qualifications of arbitrators, provisions for costs and attorneys fees, and a myriad of other issues.

Bowles Rice's Construction team can provide invaluable advice and insight into what makes a good, workable, efficient dispute resolution provision, and can help you make sure that your contractual dispute resolution provisions are consistent through the entire project structure so that all disputes can be resolved as efficiently as possible.