Construction arbitration is usually included in contracts as a clause. This means that when different business entities, like owners, developers, contractors and subcontractors, sign a contract, they agree to resolve their disputes through arbitration. By including an arbitration clause, the parties agree to avoid going to court and instead use a private process to resolve their issues.
Benefits of arbitration
Arbitration offers several benefits, making it an attractive option for resolving construction disputes.
- Efficiency: Because it avoids court, it’s a streamlined process that often resolves disputes more quickly.
- Cost-effective: While not always cheaper, arbitration can be less expensive than litigation due to reduced legal fees and quicker resolution.
- Expert arbitrators: Arbitrators are often experts in construction law and industry practices. This expertise helps them understand the complexities of construction disputes better than a general court might.
- Confidentiality: Arbitration proceedings are private, so the details of the dispute and its resolution are not public. This detail can be important for maintaining business reputations.
- Flexibility: The arbitration process is more flexible than court procedures. The parties can choose their arbitrator and have more control over the scheduling and rules of the process.
These benefits make a preferred choice for many in the industry.
Common examples of construction disputes
Construction projects are complex and can face a variety of disputes. Here are some common examples:
- Payment disputes: Disagreements over payments are common. Contractors may claim they weren’t paid for completed work. At the same time, owners might argue that the contractor did not execute the work to the agreed standards.
- Delay claims: Delays in construction projects can lead to disputes. Contractors might seek compensation for delays caused by the owner, while owners might claim damages for delays caused by the contractor.
- Defective work: Disputes can arise over the quality of work. Owners may claim that the work is faulty or not up to standard. At the same time, contractors might argue that they followed the agreed specifications.
- Change orders: Changes to the original project plan can lead to disputes. Contractors may seek additional payment for changes, while owners might dispute their necessity or cost.
While construction disputes can arise from various issues, arbitration provides a structured way to resolve these disputes.
The arbitration process step by step
The arbitration process will follow a process outlined in the contract, but the format generally involves the following:
- Initiation: The process begins when one party files a demand for arbitration. The other party must respond, and both parties select an arbitrator or a panel of arbitrators.
- Selection of arbitrator: The parties choose a neutral third-party arbitrator with expertise in construction law.
- Hearing: Both parties present their evidence and arguments during the arbitration hearing. The arbitrator reviews the evidence, listens to witnesses and makes a decision.
- Award: The arbitrator issues a binding decision, known as an arbitral award, which is enforceable by law.
An attorney will often represent the client throughout this process, advocating on the client’s behalf.
A legally binding solution
Construction arbitration in both New Jersey and New York follows a similar process. It avoids the court system but is legally binding, making it a reliable way to resolve disputes. It’s advisable to hire a lawyer to navigate the arbitration process effectively.
