The Advantages of Mediating Construction Disputes

This article originally appeared in the Summer 2017 issue of By Thomas I. Elkind, Esq. The construction process necessarily in- volves many parties, some of whom may not have contracts with each other. While the owner usually has contracts with the architect and the general contractor, the architect and the general contractor are not often related by contract, and the subcontractors and consultants of the general contractor and the architect rarely have contracts with the owner. When disputes arise, as they often do on construction projects, it is common for many parties to become involved, since it is often not clear whether a dispute is the result of improper design, faulty con- struction, defective materials or actions of the owner. It has become standard practice for con- struction contracts to contain clauses requiring the parties to arbitrate any dis- putes that arise. Although these clauses may be stricken from the printed Ameri- can Institute of Architects forms that are commonly used in the construction in- dustry, lawyers and parties are more like- ly to amend the printed provisions than to eliminate them entirely. Thus, most construction contracts provide for some form of arbitration of disputes between the parties. However, arbitration is solely a creature of contract. A party that has not contrac- tually agreed to arbitrate a dispute can- not be forced to participate in an arbitra- tion, although if all involved in a dispute consent, other parties can join an arbitra- The Advantages of Mediating Construction Disputes tion. This can lead to a situation where all parties involved in a dispute cannot be brought into one proceeding to resolve the dispute. A party can be forced to ar- bitrate against one or more parties at the same time as it is engaged in court litiga- tion against other parties involved in the same dispute. Such a situation not only can be very expensive, but there is also the possibility of inconsistent results be- ing reached in the multiple proceedings. Parties facing this type of situation are well-advised to seek an early resolution of their dispute. If the parties cannot ne- gotiate a resolution, mediation is the best and least expensive way to resolve such disputes. In mediation, all the parties can agree to participate in the process, even if they have not agreed to join in one ad- judicatory proceeding. The cost of the mediation, when spread among all the parties, is minimal when compared to the cost of engaging in multiple adjudicatory proceedings. Another advantage of mediation in these situations is that the dispute can be promptly resolved so that the parties can get back to productive activities. Con- struction arbitrations can be very com- plex, with many facts to examine, experts to testify and documents to review and explain. Hearings of these proceedings can take many days over many months. A related litigation regarding the same issues can take even longer. In addition, many judges do not like handling con- struction cases, and they may delay the resolution of these cases in the hope that they will settle before trial. For these reasons, mediation—which is always a good option for resolving dis- putes—is an especially attractive tool in construction disputes. The advantages of speed, low cost and final resolution of the issues all support using mediation in an early attempt to resolve complicated construction disputes. Thomas I. Elkind, Esq., a JAMS Boston neutral and former litigator, has worked throughout his career to resolve construction cases, representing owners, contractors, architects, engineers, sureties and lenders in a wide variety of matters. He can be reached at telkind@jamsadr.com. If the parties cannot negotiate a resolution, mediation is the best and least expensive way to resolve such disputes. In mediation, all the parties can agree to participate in the process, even if they have not agreed to join in one adjudicatory proceeding.