Construction Contracts and Mediation: Perfect Partners

The construction industry has always been a complex and sometimes combative one: It's unavoidable when so much money is involved. Over the last few decades, attempts to control risk have bloated contracts between owners or investors and contractors as each side attempts to insulate themselves from problems. Investors figure they're paying all this money, problems should be the contractor's concern. Contractors, on the other hand, know that you can't predict the future and the unexpected should be a shared responsibility. The end result is that it's not uncommon for contracts to be hundreds of pages long and take a year to negotiate.

When things invariably do go wrong, most of these modern contracts have binding arbitration clauses in place to keep the dispute out of the courts. While this is often a better option than litigation, investors and contractors alike are finding that arbitration isn't always the best fit - and are turning to mediation as an alternative.

Mediation > Arbitration

Arbitration can be less costly and faster than litigation - but it isn't guaranteed to be. Arbitration, for example, can still require a lengthy and expensive discovery process, and complicated arbitrations can drag on for months or even years. And one major drawback of arbitration is that there is no appeal - once an arbitrator has rendered a decision, that's it - and that rightly frightens both sides.

But even more importantly, arbitration can be just as combative as litigation. You still have two sides attacking each other and trying to score points with the arbitrator - it can ruin relationships. Since very often, both sides have to go back to working together to finish a large-scale project, this can be disastrous.

Benefits of Mediation

That's one reason mediation is growing in popularity to settle contract disputes in the construction industry: Mediation is a friendlier process. Because the mediator is there as a guide only, it allows both sides to take a step back, take a deep breath, and work together to find a solution.

Mediation also does not require discovery - and is completely private and confidential, so both sides can comfortably be honest with data and information without fear that it will be used against them. And if mediation doesn't work? There's still the option of litigation or arbitration depending on the contract language.

Construction contracts will continue to become more complex as time goes on - and mediation will likely be more and more common as a way of resolving disputes about them.

If you're involved in a dispute, consult with Bert Binder of Affordable Dispute Resolution. Mr. Binder has handled different types of cases as a litigator and mediator and has helped people reach fair & affordable resolutions over matters involving business, employment, labor, real estate and probate disputes. Visit or call 201-790-3553.

This article was published on 01 Oct 2014 and has been viewed 869 times
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