Arbitration clauses may be one of the more readily overlooked provisions in a conventional construction contract. Many contractors and lawyers alike often consider arbitration language as mere boilerplate deserving scant attention, especially when parties are eager to sign the deal and move forward with the project. But before agreeing to a standard arbitration provision, it’s important to consider the basic question of whether you want to commit to arbitration as your sole remedy in the first place.
As a fundamental matter, when you agree to a conventionally worded arbitration clause, you generally are agreeing to that particular method of dispute resolution to the absolute exclusion of pursuing a lawsuit in court. Especially during the usually tranquil period of entering into a new contractual relationship, many parties think it’s a good idea to rule out the traditional legal remedy of civil litigation, in favor of the faster and less costly arbitration process should a dispute arise. But when something does go awry and one or both parties reach a point where they fervently believe they have been wronged, sometimes the broader range of both discovery tools (to build your case) and damage remedies (to boost your potential recovery) look attractive. That option will be closed to you under a conventional agreement to arbitrate. Parties who go to court anyway seeking to undo such an agreement usually will be disappointed. Most judges, in the face of one party insisting the arbitration clause be enforced, will hold the other party to its choice under the contract.
In keeping with this clear judicial preference enforcing parties’ agreements to stay out of an already overloaded court system and instead bring their troubles to private arbitration, trial judges routinely enforce the decisions of arbitrators and arbitration panels. So except in rare cases, you are stuck with the arbitration decision with no right to appeal.
Of course, if your main concern entering a contract is to avoid getting sued as opposed to keeping open your ability to sue, then a clause establishing arbitration as all parties’ sole remedy can be the right approach. Otherwise, consider keeping your options open by maintaining helpful language governing how, where, and under what rules arbitration will be conducted if the parties elect to arbitrate—and making clear that it is a non-exclusive remedy.
–Benjamin B. Tymann is an attorney with Greenberg Traurig LLP