In construction, successfully fulfilling all contractual obligations is often way easier said than done. Before disputes over errors and omissions turn into costly and time consuming court battles, try arbitration. In addition to saving time and money, arbitration can lead to better outcomes than litigation.
Time Is Money
Arbitration, with its narrower discovery process than litigation, is not a magic wand, but typically has the benefits of moving faster, preserving confidentiality, and perhaps even generating more tailored solutions to the issues at hand than are possible in a courtroom. The time savings alone that can result from arbitration are generally substantial–and can have a positive ripple effect on the ultimate outcomes:
It is much easier to schedule construction arbitration than litigation, which is dependent on the court’s docket, the availability of judges (and sometimes juries) and requires many months of discovery to get to a trial. On the other hand, arbitration parties have the flexibility to schedule the hearing as they choose, and indeed, can also select an arbitrator who has soonest availability. Arbitration agreements also often require certain milestones in the dispute process within specified time frames, which litigation does not. They generally require a written decision within a certain time frame after the hearing, thereby providing a prompt result. Just try taking that concept to court. The truncated schedule of arbitration can also allow a project to continue while it’s pending, which reduces project delays….Litigation on the other hand requires extensive discovery….Because time is money, achieving a quick resolution leads to cost savings while keeping construction work on track, and saves litigation expenses.
Confidentiality, Flexibility and Resolution
In addition to the likelihood of saving time and money when opting for arbitration instead of litigation, contractors also gain the opportunity to keep their matters confidential, work into creative problem solving and, ultimately achieve a solid and final
Arbitration is a private process….Proprietary and sensitive project information is preserved….The confidential nature of the proceedings prevents reputational damage, thereby preserving relationships among project participants….
Because arbitration is a contract-based proceeding, the parties are free to tailor anything and everything about it. From the locale to the rules, selection of arbitrators, procedures and timelines, the parties can choose how they want to work together toward a resolution. Indeed, the process can even be modified to conform to the complexity of the dispute – leading to greater efficiency and satisfaction with the outcomes.
Arbitration awards are generally final….and are enforceable by courts in all 50 states. In general, a reviewing court will uphold the award as long as the arbitrator acts within their authority….Parties to arbitration can generally be confident that the process will result in a…conclusion…
An Ounce of Prevention?
Of course it’s always a good idea to proactively prevent disputes, and legal experts remind us to ward off errors and omissions related to contractual obligations by taking “time upfront to thoroughly understand both the project and the contract,” emphasizing that it is especially important to agree on an appropriate process for change orders—and then stick to it, despite scheduling pressures once the job begins.
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