In construction, the vast majority or contract forms between owners, general contractors, and subcontractors contained arbitration clauses until very recently. Now that the AIA A101 and A201 no longer have arbitration as the default dispute resolution forum, more construction contracts refer parties to the courts for dispute resolution and litigation of claims. However, many general contractors still have arbitration as the default dispute resolution clause in their form subcontracts. This situation begs the question, “Is arbitration still right formy contracts.”
This question does not have an easy or black and white answer. For some, arbitration is favored because of the complexities of the courts and time and expense usually associated with court litigation. Others have come to realize that arbitration, while it can certainly be a lot quicker than court, is not much cheaper.
Here are 10 ideas to consider when negotiating a contract for your next project:
1. In smaller counties where courts are less able to schedule quick hearings, arbitration may be a preferred alternative because it can get the parties to a hearing more quickly.
2. In counties like Travis, Bexar, Harris, or Dallas, where scheduling is far easier, a bench trial may provide the better option as a relatively speedy resolution may be possible there.
3. Consider a contractual waiver of a jury trial to enable a bench trial and take the crapshoot away from a jury if that is a concern to you.
4. Arbitrators have a reputation of splitting the baby. That may or may not be true with a particular arbitrator, but its a consideration to be weighed.
5. Generally speaking, arbitration is not cheaper.
6. Arbitration is not appealable. In rare cases, an award can be modified or overturned, but vacating an arbitration award is difficult and generally requires the discovery that an arbitratr failed to make proper disclosures and was biased in some way.
7. Arbitrators are not bound to follow the exact letter of the law and they have leeway in making and crafting their awards.
8. The rules of evidence do not apply in arbitration so getting evidence that might draw objections in court is easier.
9. Witnesses can generally offer hearsay testimony and recite conversations with others as evidence in arbitrations. Therefore, the presentation of the case is more casual, can require fewer witnesses, and can include evidence that may be excluded in court.
10. Arbitrators generally have a solid background in construction law and do not require as much education as a judge or jury.
There are other considerations to bear in mind when deciding if an arbitration clause is right for you, but these 10 items are a good starting point in making that determination.