In the construction world, the contract is critical. A solid contract outlines the responsibilities and expectations of each party and the consequences if one party fails to meet those obligations. A contract may also include steps for resolving any disputes between the two parties, and often, one of those steps is arbitration. Arbitration is a form of alternative dispute resolution that many choose as a way to avoid taking the matter to court.
Because a litigated dispute can be costly, time-consuming and draining to a business, many construction companies include a clause in their contracts requiring arbitration to resolve disputes. While arbitration has certain similarities to a trial, it also has a number of advantages over litigation, such as the following:
- It is less formal than a trial.
- It may be less expensive if one’s company can keep the costs down.
- Matters resolve more quickly because there is no discovery phase or time-consuming motions.
- The outcome and details remain private.
- Both parties have a say in who the arbitrator or panel will be.
Through arbitration, a panel or single arbitrator hears both sides of the case. However, the rules of evidence are not the same as in litigation. For example, hearsay that a court would exclude may be acceptable in arbitration. For this reason, any construction company who is facing arbitration to settle a contract dispute would be wise to have the legal counsel of an attorney who has experience with the nuances of this complex form of dispute resolution.