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Monthly Archives: April 2016

The Beginning: Arbitration

Do you have your own contract form? If you do, you have the advantage, in that most of the time, the entity you are hiring, or the one hiring you, won’t have a standard contract, and yours will be used.

Take a look at the section of your contract that controls dispute resolution. Does it require arbitration? If it doesn’t, and you’ve never had experience with arbitration, you might be hesitant to change your contract to require arbitration. Here are a few reasons to consider making a change.

Fairness. If you are sued out of state, or in a distant county in your home state, by a local claimant, you may be at a disadvantage.

Expertise. The judge and jury that will decide a construction lawsuit lack the experience and knowledge to understand many aspects of a construction project. They may intend to be fair but they are vulnerable to manipulation and their own biases.

Discretion. An arbitrator will usually follow the law but is not bound to the same procedural rules of a court, and may decide a case based on fairness, not just on strict legality.

Arbitration allows the parties to use a private judge (or a panel of judges) with experience and expertise in the industry to resolve disputes. Arbitration usually eliminates local advantage. So why isn’t arbitration always selected?

Cost. The parties have to pay the arbitrator and the administrator, like the local American Arbitration

Association office. These fees can be substantial.

Time. An arbitration can take as long as a case in court.

Multi-party cases. Many disputes in construction involve more than two parties. There can be problems making parties join in, unless they signed the agreement requiring arbitration.

No appeals. An arbitrator’s award can’t be appealed in most cases. An award based on fairness may deprive you of the full strength of contract provisions, such as requirements for written change orders.

Arbitration has both fans and critics, but one thing is clear: contracts now require it more than ever.


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