By Celeste M. Hammond and Virginia M. Harding
Warning: Matters discussed in this article may surprise some owners. For decades many owners (and contractors) have viewed binding arbitration clauses in construction contracts as sparing them a trip to the courthouse to resolve construction disputes. This reluctance to litigate was often grounded in unsatisfactory prior experiences with the judicial system. The perceived costs, delays, risks and uncertainties of the court system resulted in a documented decrease in litigation and an increasing use of arbitration to resolve disputes.
Owners may be surprised to learn: That binding arbitration clauses in construction contracts may not spare them from having to go to court to resolve disputes with their contractors; that arbitration clauses in construction contracts do not take away the contractor’s rights to file mechanics liens, which are foreclosed in judicial proceedings; that the right to have a dispute resolved by arbitration can be inadvertently waived; and that since 2007 the American Institute of Architects (AIA) construction documents have included a provision which makes litigation rather than arbitration the default mechanism for resolving disputes.