Does your contract have an arbitration clause? What does that mean?
There has been a growing trend in the construction industry towards settling litigation and disputes in arbitration.
Arbitration differs dramatically from normal litigation. Some important points about arbitration are as follows:
- In arbitration you generally present your case to a single individual that makes the decision. Sometimes there are three “panelists” that sit as arbitrators, but the norm is to only have one arbitrator. In litigation, you present your case to either a judge or a jury.
- Arbitration does not usually utilize the rules of procedure or the rules of evidence. As a result, arbitration usually allows evidence into the “courtroom” that normally is not considered by the judge or jury.
- The final hearing in Arbitration usually occurs much quicker than the final trial in litigation. It is not unusual for the final arbitration hearing to occur within four to six months. The typical trial in district or county court does not usually occur prior to 12 to 18 months, and sometimes much longer.
- Arbitration can be more costly. There is a misunderstanding in the business community that Arbitration results in lower litigation costs. Our experience is just the opposite. The reality is that the amount of work a lawyer must do to prepare a case for trial in arbitration is not materially different than what must be done for litigation. Additionally, you still must pay the arbitrator. It is not uncommon for the actual cost of the arbitrator (not including the attorney’s fees) to exceed $10,000.
- Arbitration can only be entered into if it is agreed to (in writing) by all parties. Therefore, you must have either agreed before the dispute arose (i.e. a clause in the contract) or have agreed after the dispute arose to go to arbitration. Otherwise, you cannot be forced to take your dispute to arbitration.