If you`re entering into a building contract, it`s important to pay attention to the arbitration clause. This clause outlines how disputes between you and the other party will be resolved. Arbitration is a form of alternative dispute resolution that involves a neutral third party who will make a binding decision on the issue at hand.
Why include an arbitration clause in a building contract?
An arbitration clause can provide several benefits to both parties. For the builder, it can help to avoid costly and time-consuming litigation. For the homeowner, arbitration can provide a quicker and less formal way to resolve disputes.
Arbitration can also provide more privacy than court proceedings. Court records are public, while arbitration proceedings are confidential. This can be especially beneficial in cases where the dispute involves sensitive information that the parties would prefer to keep private.
What should the arbitration clause include?
The arbitration clause should outline the specific rules and procedures that will be followed in the event of a dispute. This can include the selection of an arbitrator, the location of the arbitration, and the timeline for the proceedings.
The clause should also specify whether the decision of the arbitrator will be binding or non-binding. If the decision is binding, the parties agree to accept the arbitrator`s decision as final. If the decision is non-binding, the parties can choose to accept or reject the decision and may still choose to pursue litigation.
Some arbitration clauses may also include limitations on the types of damages that can be awarded or the amount of damages that can be awarded.
What are the potential drawbacks of arbitration?
While arbitration can provide several benefits, it`s important to also consider the potential drawbacks. The cost of arbitration can be significant, with fees for the arbitrator and other administrative expenses. The parties will also need to pay for their own attorneys, which can add up quickly.
In addition, the decision of the arbitrator may not provide the same level of judicial review as a decision made in court. In some cases, the decision may not be appealable, even if it is clearly erroneous.
Finally, the arbitrator may not have the same level of legal expertise as a judge. This can be especially problematic if the dispute involves complex legal issues.
In conclusion, if you`re entering into a building contract, it`s important to carefully review the arbitration clause and consider the potential benefits and drawbacks. While arbitration can provide a quick and confidential way to resolve disputes, it can also be costly and may not provide the same level of legal review as a court proceeding. By understanding the arbitration clause and its implications, you can make an informed decision about whether to include it in your building contract.