Construction Basics for Owners: Dispute Resolution

{"version":"0.3.0","atoms":[],"cards":[],"markups":[["b"],["i"],["strong"]],"sections":[[1,"p",[[0,[],0,"May 20, 2022"]]],[1,"p",[[0,[],0,"Most\nconstruction projects do not generate a dispute that has to be resolved by a\nformal dispute resolution process, but occasionally it does happen. This\narticle will discuss different types of dispute resolution proceedings that are\ncommonly used to resolve construction project disputes. "]]],[1,"p",[[0,[],0,"Your owner-contractor\nor owner-architect agreements might include provisions that state the type of\ndispute resolution procedures that will be used if the parties cannot\ninformally resolve an issue. Many AIA Contract Documents provide that the\nparties must use mediation as a first attempt at a resolution. If mediation is\nnot successful, the parties may select a form of binding dispute resolution,\nincluding arbitration, litigation in a court of law, or some other method preferred\nby the parties. However, the more streamlined agreements that are geared toward\nresidential or small commercial construction may not contain these types of\nprovisions. "]]],[1,"p",[[0,[0],1,"Mediation"]]],[1,"p",[[0,[],0,"Mediation is\na process in which the parties work with a neutral third party, the mediator,\nto try to agree on a settlement of the issue. Mediation is not binding unless\nthe parties agree to a settlement. If they cannot come to an agreement, the\nparties can then move on to a binding dispute resolution proceeding. Mediation tends\nto be speedier and less costly than other dispute resolution methods. It is\nmore informal and does not typically require as much discovery, such as\ndepositions and document submittals, that other methods require. The parties\ndon\u2019t submit motions and other types of pleadings that might be filed in\narbitration or litigation. "]]],[1,"p",[[0,[],0,"Even if a\nlawsuit is filed in a court, many courts routinely require the parties to\nengage in mediation to try to resolve the matter before proceeding with the\nlitigation on the court\u2019s docket. "]]],[1,"p",[[0,[0],1,"Arbitration\n"]]],[1,"p",[[0,[],0,"Arbitration\nis similar to mediation, in that a third-party neutral arbitrator will hear the\ncase. For a complex case, there might be a panel of arbitrators. However,\narbitration in a construction case is usually binding, which means the parties must\naccept the arbitrator\u2019s decision. An arbitrator\u2019s role is more like that of a\njudge than that of a mediator. "]]],[1,"p",[[0,[],0,"An\narbitration will have rules governing the process. These are somewhat similar\nto the kinds of rules that courts have that govern the litigation process.\nArbitration will involve document submittals and testimony. It may or may not\nbe faster than litigation in a court. However, one benefit of arbitration for a\nconstruction dispute is that the parties may select arbitrators who are\nexperienced and knowledgeable about construction, and thus may be better to\nevaluate the claim than a judge or jury who do not have construction expertise.\n"]]],[1,"p",[[0,[],0,"One thing to\nnote, if the claim involves residential construction, is that in a few\njurisdictions the courts do not favor an arbitration clause in a residential\nconstruction contract. This is because the courts are concerned that, if a\nhomeowner agrees to an arbitration clause, they may not fully understand that\nthe arbitration is binding and that they lose their right to litigate in court.\n"]]],[1,"p",[[0,[0],1,"Litigation"]]],[1,"p",[[0,[],0,"If you wish\nto file a claim in court, the jurisdiction for a construction claim is\ntypically the one in which the project is located. So, for example, you could\nbe having a house built in Maryland using a contractor from Virginia. In that\ncase, the lawsuit would usually be filed in Maryland. "]]],[1,"p",[[0,[],0,"If your\ndispute involves a small amount of money, you may be eligible to file a claim\nin small claims court. If that is the case, this would likely be the simplest\nand least costly way to resolve the issue. You do not need an attorney to go to\nsmall claims court and there is no routine discovery. "]]],[1,"p",[[0,[],0,"For cases\nwhere the claim exceeds the jurisdiction of the small claims court, you can\nfile in the civil court. In that case, it would be wise to be represented by an\nattorney as the procedure will be more complicated and it is important to have\nan attorney who can advocate for you. There are many attorneys who practice\nconstruction law who are well versed in the types of issues that may arise. As\nwe have discussed throughout this series of articles, construction is unique in\nmany ways, so it is important to work with an attorney who understands this\narea. "]]],[1,"p",[[0,[0],1,"Conclusion"]]],[1,"p",[[0,[],0,"Let\u2019s hope\nthat your project goes smoothly and that you don\u2019t need to worry about any of\nthis! Even so, the basic knowledge of these dispute resolution methods applies\nto other areas in which you may find yourself in a dispute, so it is useful\ninformation to know. "]]],[1,"p",[[0,[],0,"Our next\narticle will discuss insurance and bonds. What types of insurance should your\narchitect and contractor carry? What insurance should you have? And, what does\nit mean for a contractor to be bonded? Find the answers in the nest article in\nthis series. "]]],[1,"p",[[0,[1],1,"Susan Van\nBell, Esq. was Senior Director of Content for AIA Contract Documents for over\nten years. She is currently a consultant. "]]],[1,"p",[[0,[2,1],2,"AIA Contract Documents has provided this\narticle for general informational purposes only. The information provided is\nnot legal opinion or legal advice and does not create an attorney-client\nrelationship of any kind. This article is also not intended to provide guidance\nas to how project parties should interpret their specific contracts or resolve\ncontract disputes, as those decisions will need to be made in consultation with\nlegal counsel, insurance counsel, and other professionals, and based upon a\nmultitude of factors. "]]]]}