In the construction industry, disputes are nearly inevitable. Whether you’re arguing about payment, scope of work, or other contracting issues, disputes can prove to be both costly and inefficient. Instead of pursuing the traditional litigation track, we recommend looking into some alternative dispute resolution (ADR) options that may be available to you to resolve any issues or conflicts.
Here are a few key examples:
Arbitration is a procedure in which both parties agree to allow a third party, the “arbitrator,” resolve a dispute. The arbitrator need not be an attorney but may just be a highly trained professional in the construction industry. The arbitrator will hear both parties and then make a decision, referred to as an “award,” based on the relevant law. The award is binding and legally enforceable. The one negative to arbitration is that there is very little chance of appeal.
Mediation is a procedure in which a third party, the “mediator,” helps both parties come to a mutually acceptable agreement to a dispute. If/once an agreement is reached upon, it is usually written down into a legally binding contract or settlement agreement. Mediation is popular due to the fact that parties make the final “decision” on whether to resolve the dispute or not.
Neutral evaluation is a procedure in which each party gets an opportunity to present his/her case to a neutral party, the “evaluator.” The evaluator is often an expert on the specific subject matter of the dispute. After hearing both sides of the dispute, the evaluator issues a non-binding opinion on the strengths and weaknesses of each party’s evidence and arguments. Though this opinion is not legally binding, the parties will usually use it as a basis for dispute resolution. This process is popular in insurance policies. Insurance companies usually stand by the decision of the neutral.
Settlement conferences are either mandatory or voluntary and involve a judge or a neutral party, the “settlement officer,” to discuss possible settlements to the dispute. The judge or settlement officer do not issue a formal decision for the case. Rather, they help the parties negotiate a settlement based on the strengths and weaknesses of their respective arguments. This is like a free mediation before someone with strong influence on the parties.
Please keep in mind that this list is not exhaustive and merely attempts to present you with a general overview of your dispute resolution options. Remember, litigation is not the only tool in your toolbox. If you’re facing a dispute or simply want to be prepared in case a dispute arises in the future, we recommend speaking to an attorney to see what makes sense for you. Here at Smiley Law, we are always ready to take all your ADR questions.