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Arbitration in construction disputes: Everyone wins

Whether you've been in the construction industry for decades or you're a property owner embarking on your first building project, you're probably aware of the potential for a dispute in your business agreement. Just because you're operating under a contract doesn't mean that disagreements can't arise. If they do, what's your next move?

The details of the contract and the type of person you are may have some bearing on your decisions when conflict arises, but virtually every party should consider arbitration as a way to work through disagreements. In fact, many construction contracts require the parties to use arbitration as an alternative to litigation, which can be both expensive and time-consuming -- two things no one wants in the midst of a building project.

What exactly is arbitration?

Arbitration is a dispute resolution alternative to litigation. Instead of a judge, the parties work with a neutral third party (either one person or a small panel of people) who hears both sides of the dispute and helps them work toward a mutually fair and agreeable solution. In agreeing to arbitration, both parties agree to avoid going to court. The final decision is spelled out in a document known as an award; many contracts requiring arbitration specify that this award is binding, which prevents either party from pursuing the matter further in court, though non-binding agreements can be agreed to as well.

Arbitration has many advantages over litigation:

It's fast: There's no need to wait for court dates; rather, the two parties can meet with an arbitrator as soon as they both have the time.

It's confidential: Unlike court proceedings, arbitration records are private and can remain that way.

It's affordable: If you take the other party to court, you will need to pay for an attorney and other legal fees. Because the "discovery" -- that is, the exchange of documents, witness lists and any depositions -- of arbitration is much more limited than in a typical lawsuit, you can expect to save money on legal costs.

It's friendly: Perhaps your dispute is the first in an otherwise harmonious business transaction. A lawsuit can quickly sour a professional relationship, ensuring that you and the other party never cross paths again. Arbitration often has the opposite result; the two sides reach an agreement and a better understanding of each other's position, increasing the chances that they'll work together in the future.

You can find an arbitrator through the American Arbitration Association, or reach out directly to an arbitrator. The latter option is especially helpful when you wish to research a specific arbitrator's credentials. An arbitrator can also provide further education on the process before you ever have the need for it.

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