There are important provisions in your construction contract that are geared towards dispute resolution. These are provisions you want to understand – not when a dispute arises, but BEFORE the dispute ever occurs.
Many times, dispute resolution provisions are cast aside or not appreciated until a dispute rears its ugly head. This can put you in a reactive stance versus a proactive stance, which you want to be in, because you want to proactively make sure all rights are preserved relative to the dispute. You want to proactively make strategic decisions based on the dispute resolution provisions and process in your contract.
Before your contract even gets signed, you may want to negotiate aspects of the dispute resolution process for many reasons. The process could be one-sided. It could be onerous. It could be complex. It could be unfavorable or costly with respect to how you want to progress a dispute. If you appreciate the dispute resolution process from the get-go, you will be in a more effective position to navigate the process while ensuring you are preserving your rights moving forward
Here are considerations when negotiating and entering a construction contract when it comes to dispute resolution that should not be overlooked:
(i) How does the contract address the submission and resolution of claims for additional money and/or time?
(ii) Is their an initial decision maker or dispute resolution board serving as the person/board that resolves claims, and who is this person/board?
(iii) Is there a time period to submit claims; if so, what is that time period and is it reasonable?
(iv) What happens if a claim is denied and/or the initial decision maker/board denies the claim?
(v) Does the contract require mediation as a condition precedent to litigation or arbitration?
(vi) Does the contract require anything prior to mediation as an initial step in the dispute resolution process, such as a meeting with principals to occur within a set time period?
(vii) Does the contract require litigation or binding arbitration (and if arbitration, is there a body to administer the arbitration such as the American Arbitration Association)?
(viii) If litigation, does the contract specify an exclusive venue to file the dispute?
(ix) If litigation, does the contract include a waiver of jury trial?
(x) If binding arbitration, does the contract specify the number of arbitrators and/or the expected qualifications of the arbitrator(s)?
(xi) If binding arbitration, does the contract specify whether the arbitrator(s) can decide the arbitrability of any dispute?
(xii) Does the contract include a prevailing party attorney’s fees provision?
(xiii) Does the contract include a provision that would promote a stay of a dispute pending the outcome of another dispute or claim with another party?
(xiv) Is there a choice of law provision in the contract to reflect the law that governs the contract (and the dispute)?
(xv) Does the contract include a joinder provision that would allow you to be joined in disputes with others, regardless of the venue or the forum for the dispute?
There is no one-size-fits-all model when it comes to dispute resolution and a dispute resolution process. The goal is to understand the process and negotiate those aspects of the process that are not in your interests and/or, at a minimum, factor that process into your strategic decisions moving forward in case you encounter a dispute.
Please make sure to work with experienced construction counsel if you need assistance with your construction contract, whether it is understanding the dispute resolution process, negotiating the dispute resolution process, or simply working on an equitable contract for your project or business.
Please contact David Adelstein at firstname.lastname@example.org or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.