(Written by Peter Merrill – Originally published in the July 2014 Housing Journal)
Alternate Dispute Resolution – An Alternative to the Courts
For many years, we all have been accustomed to believing that we had to “go to court” when we had a dispute over a construction contract item, if we had trouble collecting our monies due, or if our clients had a problem with the standards of construction we use while building or remodeling a house or commercial building. However, that is far from true today. Both you and your client have another option called “alternate dispute resolution” (ADR). Although there are many forms of ADR, by far the most popular, inexpensive, and simple form that offers a final and binding decision is arbitration.
In binding arbitration, the parties agree to abide by the decision of the arbitrator, and the arbitrator’s decision is final and binding and not generally subject to appeal. The arbitration process usually allows the parties to select an individual with a specialized expertise in the subject matter of the dispute to review the evidence, listen to the parties and witnesses or other specialists, and render a decision. In residential construction arbitrations, there is usually one arbitrator. In more complex cases, there are three arbitrators. One of the main advantages that arbitration offers over civil litigation is that in civil litigation, a judge is randomly assigned to hear a particular case and may not have the necessary substantive or technical expertise to fully appreciate the intricacies of the arguments or have a comprehensive knowledge of the construction matters in dispute.
Also keep in mind that if you go to court and you do not like the judge or jury’s verdict, you can appeal that decision and you or the other party can continue to appeal the next court’s decision all the way to the Supreme Court. It can be very costly and may take years to settle. An Arbitration Award is final and binding and very limited as to appeals as all appeals are based on the arbitration procedure and not the merits of the Arbitration Award. Most courts are now working on scheduling cases several months in the future. A typical arbitration hearing is held about 60-90 days from the initiation of the arbitration process.
If you build green, are a green rater or verifier, or if you are an architect or home designer who specified green products, you should definitely put dispute resolution language in your contract that will limit your liability for the green-related performance of the house. Having the proper dispute resolution language in your contract is like having an insurance policy against expensive litigation, and it is easy to add it to your contract. There is no cost to have ADR specified in your construction contract. Take the time to put a proper arbitration clause in your contract. If you end up in a dispute with a client, you will be glad that you can turn to arbitration as opposed to having to go to court.
I know there are many of you who take a great deal of pride in your work, never seem to have any disputes with your clients, and take care of their concerns right away. However, I also know of contractors who have been forced out of business and/or into bankruptcy because of just one major lawsuit they had with a totally off-the-wall client who had money to burn on litigation in order to get their way. Civil litigation will not only cost you a lot of money, it will cost you a great deal of time away from your business and emotional strain to yourself, your employees, and your family. The choice is yours.
In a short article like this one, it is also impossible to fully explain all the benefits of arbitration as compared to civil litigation. If you would like more information, please log on to my website www.cdrsllc.com where you will find a great deal of additional information on ADR processes. You will also find a section on “Suggested Contract Language” that offers you a variety of clauses that you could add to your construction contract to make certain you and your clients will not have to resort to a lengthy and costly civil litigation process if you run into any disputes on your construction project.
CDRS is the largest exclusive provider of construction ADR in the U.S. with ADR specialists located in all 50 states, Washington DC and in several foreign countries. In addition to providing ADR services to the general construction industry, CDRS provides arbitration services to several home warranty companies such as 2-10 HBW, Residential Warranty Company, Bonded Builders, and to many home inspection companies.