Arbitration vs Litigation in Construction Disputes

Whether you are an owner, general contractor, subcontractor, or supplier, chances are at some point you have been a party to a contract with an arbitration clause. These clauses are anything but boiler-plate and standard, and should be carefully reviewed. Also, many in the industry are discovering that arbitration is not all it was hoped to be. It can take longer and cost more than litigation in some cases. Whether to arbitrate or litigate is a decision that should be made with the advice of experienced legal counsel, weighing the facts and issues particular to an individual dispute.

This is not a situation where one choice is clearly and always better or preferable to the other, particularly where other dispute resolution procedures (such as mediation or collaboration) may be warranted – such as when disputes arise which could delay the project and immediate resolution is desired and necessary. Also, the specific verbage of your clause should be carefully drafted by your lawyer. It may be advantageous to draft an election to arbitration (i.e. arbitration at the request of one or both parties to the contract), rather than require it in all instances.

Once a dispute arises, this clause will dictate the options available to resolve the dispute if the parties can not work it out themselves. Serious thought should be given to contract terms that will govern when crisis arises.

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