Arbitration is one of the ways that construction companies resolve disputes without going to court. In many ways, it is similar to adjudication. However, it has a distinct difference that makes it useful in specific situations. Many companies choose it for its cost-effective conflict resolution system so that they can avoid costly and difficult lawsuits. In this article, we’ll discuss the benefits of construction arbitration. If you want to resolve your dispute in a cost-effective and timely manner, it’s time to speak with a Houston construction arbitration attorney.
Related: Dispelling the Myths of Arbitration
What is Arbitration?
Arbitration is a way to resolve disputes with the assistance of a third-party. Essentially, the third party serves as the judge in the case and listens to both points of view. The arbitrator makes the final decision as to how to handle the dispute. In most cases, the decision of the arbitrator is legally binding and final.
The result of arbitration differs from court trials in that the final decision is not binary. It is not a decision of which side prevails over the other but instead acts as a decision to do what is best for both parties. The arbitrator has some leeway determining what the best outcome is based on the evidence. You may not leave the arbitration with everything that you wanted, but there may be a solid compromise in place so that both parties benefit and lose to varying degrees.
Related: What To Expect During Arbitration
Arbitration vs. Adjudication
Arbitration and adjudication follow a similar process. However, the key difference is in the person that is judging the dispute. In adjudication, the adjudicator is a third-party selected by the two parties in the case. In an arbitration, the arbitrator is entirely independent of the two parties. This makes the decision more independent of the needs and influence of the parties involved in the case.
Arbitration and adjudication are often used to resolve construction disputes. Which one you use depends on a few factors. The most important factor is the relationship between the parties involved. If the two parties can agree on a person to judge the case, adjudication may be a better option. It offers more flexibility to resolve the case and appeal a decision if there is a possible problem in the case on legal grounds. Arbitration is not as flexible, and the decision is final.
Arbitration is a better option in cases where the decision needs to be final, as in cases where the decision can hold up work on the project. It is also a more preferable option if the two parties are closely related. Having an impartial third-party will make it easier to get an unbiased decision.
Why Choose Arbitration
Arbitration is an effective means of resolving a dispute. It hands the decision to a person who is not influenced by the two parties, making the decision more impartial. This can be a major benefit if the two parties cannot agree on an adjudicator or have a particularly contentious relationship. The arbitrator will not be swayed by either side in a personal way and will be able to offer a ruling that is based solely on the evidence.
A Faster Process
Arbitration is a much faster process than taking legal action. Building cases, filing lawsuits, and waiting to go to court takes a lot of time. Arbitration can be handled much faster and with much less hassle. It is also a much more cost-effective process than a lawsuit. The costs for arbitration are mostly limited to the fees for the arbitrator, a location, and Houston construction dispute lawyers if needed. There are no court fees or other fees to worry about. Filing a lawsuit often involves a filing fee and many other court-related fees to process. On top of that, there are the costs associated with stopping work on the project, missing work to go to court, and many other areas where the fees can begin to pile up.
This makes arbitration feasible for a wide range of disputes and projects. Subcontractors often don’t have the resources to file lawsuits against their contractors, putting them in a vulnerable position. The low cost of arbitration makes it easier for subcontractors to work toward a better resolution to a dispute.
Arbitration Proceedings are Confidential
One of the benefits of not going to trial is that the results are not entered in the public record. Arbitration proceedings are handled confidentially, and everyone involved usually signs a non-disclosure agreement. For contractors and subcontractors, this can be a benefit as it protects their professional reputations. Companies may be hesitant to work with subcontractors that call for arbitration, and the same can be said of subcontractors working with contractors that arbitrate disputes often. Instead, the details are protected so that few people will be able to know what really happened.
Work Continues During an Arbitration
Unlike a lawsuit or other types of legal action, work on a project does not have to stop during an arbitration. There is not a binding concept that prevents work in other areas of a project from happening. Many contractors use this feature to continue moving the project forward to avoid delays and the possible penalties that those delays can create.
Regardless of which side of the dispute you are on, continuing work is a good thing. You will be able to continue to do work that you can be paid for without a dispute. Plus, keeping the project from stalling ultimately saves a lot of money in equipment, supply, and employee costs that can reduce a project’s profitability. This is one of the reasons why arbitration preserves the relationships between the two parties. It will not interfere with the overall project and prevent other subcontractors or the contractor from losing money.
A Houston contractor lawyer can help you add clauses to your contract to allow arbitration to handle disputes. This way, you can avoid many of the potential problems that a dispute lawsuit can create. If you have questions about the kinds of software and documentation you may need, contact a Houston contractor attorney from Cotney Construction Law.
Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.