Litigation, or going to court, is often seen as the logical option when there is a dispute between businesses. However, in the construction industry specifically, litigation can significantly impact businesses’ day-to-day operations.
The deeper and longer the case goes in court, the more resources businesses have to allocate to cover the time and money spent to deal with the litigation instead of projects that generate revenue for their business.
Litigation does serve a purpose in many cases and exists for a reason. It is a legal mechanism to protect what owners and their employees have built. However, it is not always the best option and certainly not the most economical.
Arbitration
Arbitration is a form of alternative dispute resolution (outside the courtroom) that allows the parties to solve their disputes through a neutral third party, an arbitrator, that both parties select and agree on. Businesses can only arbitrate their disputes if they agree upon this in writing, which is why many companies include arbitration clauses in their contracts.
What are the benefits of arbitration?
Arbitration has many benefits, including the fact that it is outside the court system, which is meant to be adversarial, and the parties can choose and agree on the arbitrator for their case.
In addition, arbitration:
- Is much more cost-effective than going to trial
- It is efficient and much less time-consuming
- It is final. Decisions by arbitrators are binding and often not appealable.
Arbitration is also confidential and private, which allows the parties to openly discuss their issues without worrying about public records.
Downsides of arbitration
Like anything, however, arbitration has its downside. Because it is final, the party who does not prevail does not have other recourse. In addition, because the rules of arbitration are different than those used in a court of law, a decision by an arbitrator may be unpredictable.
An arbitrator does not have to go by the typical rules of evidence, which means that evidence that one party wants to keep out of the case, and would be able to do so in court, can be fair game in arbitration.
Construction disputes are complicated, but there are several options to manage these disputes, and arbitration is a powerful tool that can solve conflict and allow the parties to get on with their lives and get back to business.