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The Ins-and-Outs of Arbitration

When crafting a contract, you may find yourself questioning whether including an arbitration clause is right for you. Arbitration is an often misunderstood alternative dispute resolution (ADR) technique that may help preserve business relationships and avoid costly litigation procedures. In this brief article, a Tallahassee construction arbitration lawyer with Cotney Construction Law shares the ins and outs of arbitration so that you can decide if this ADR technique is right for you. 

Related: What Construction Businesses Need to Know About Using Arbitration as a Method of Dispute Resolution

What Are ADR Techniques?

Before we discuss the specifics of arbitration, it’s important to understand what ADR techniques actually are. The main point of ADR is to keep disputes out of the courtroom. In mediation and arbitration, a third-party will still help you come to a mutually beneficial agreement with the assistance of a Tallahassee construction attorney

For many construction firms involved in a dispute, the most practical and cost-effective option to resolve their issue is ADR. ADR is less formal than litigation and doesn’t involve a judge or jury. Depending on the type of ADR process selected, this may be a binding decision or just advice to resolve the issue. Many elements can factor into the type of ADR process your construction firm elects to pursue, but the two most common forms of ADR are mediation and arbitration. 

No matter which method you choose, ADR has many benefits and gives both parties more control than in a traditional litigation setting. For example, both parties can schedule hearing times tailored to their schedule and determine what type of evidence can be used in the proceedings rather than adhering to a courtroom’s schedule. ADR also gives both parties complete control over the type of legal proceeding they want to take on. 

Generally speaking, the process of ADR is more accelerated and cost-effective than litigation, as litigation can be a drawn-out process that takes months, if not years, to seek a resolution. Further, ADR can be a great way to mend or preserve professional relationships. The ADR process can resolve disputes in an effective and positive way where both parties agree to a compromise that accommodates the other party’s needs. 

Benefits of Arbitration

Arbitration has many benefits. Especially when compared to other ADR techniques, such as mediation and negotiation, arbitration is much more structured and, as mentioned above, still more flexible and less expensive than the litigation process. When choosing arbitration, the parties have the ability to decide how formal the procedure will be and what rules need to be followed regarding evidence.

Arbitration is also typically cheaper than lengthy litigation. Even though both parties need to hire an arbitrator (prices can vary from $3,000 to $4,000 per day for services) as well as their own Tallahassee construction arbitration lawyer to help them go through the process, it’s usually still lower in cost than traditional litigation. 

Arbitration proceedings can also preserve professional relationships because it’s less hostile than litigation. As any construction professional knows, disputes can put people in a very tough position. Because the arbitration process avoids a courtroom visit, that can help improve tension between both parties. In arbitration, parties are encouraged to air their grievances out loud and communicate with one another to resolve their dispute, and this can help them work together peacefully.

Arbitration can also lead to quicker resolution time. According to the Federal Mediation and Conciliation Services, the average time from filing to decision is about 475 days with arbitration. In litigation, because a case has to make the rounds through court, it can take between eighteen months to three years to conclude. Further, arbitration is confidential. Arbitration hearings do not take place in an open court, and transcripts are not part of the public record.

Related: Should I Resolve My Dispute By Arbitration?

Arbitration vs. Litigation

Arbitration is a formal way to resolve a dispute. During the process, the opposing parties will both present their case to a third party, known as the arbitrator. After the arbitrator listens to both sides of the case, taking into account the evidence presented, they then make a determination. The arbitrator’s decision is both private and binding unless the parties mutually agree to an advisory opinion.

This is different from traditional litigation settings because both parties select the third party arbitrator rather than being assigned a judge. Litigation also may involve a jury trial, whereas arbitration settles disputes with only the parties involved. A Tallahassee construction dispute lawyer will help you decide which method is best for your unique situation.

Related: When Can Arbitration Be Utilized to Settle a Dispute?

Reasons Arbitration May Not be Right For You

Although arbitration may be a better solution than litigation, it may not be right for all dispute types. A few cons of arbitration include: 

  • In arbitration, a final decision is hard to get changed. Most litigation decisions can be appealed. However, due to the language that the parties often agree to before entering arbitration, the decisions are usually considered final; barring some egregious unfairness in the arbitration process, and thus are unlikely to be reversed or even reviewed by a court.
  • While for some, having no jury might be beneficial, others think the opposite. Having a jury of peers can be an important right. In arbitration, an arbitrator plays the roles of a judge and a jury.
  • While the cost of arbitration is listed above as a benefit, it’s also a negative in some cases as well. Arbitration can vary in complexity, take many forms, and potentially cost more than litigation in some cases.

Navigating legal matters, including ADR techniques, on your own can be dangerous to both your reputation and your wallet. If you are in need of experienced and dedicated Tallahassee construction attorneys, contact Cotney Construction Law. Not only do we advise our clients on legal matters, but we also provide a myriad of other valuable services for construction businesses, including contract review, employment law advice, and litigation and arbitration services. We also advocate for clients involved in licensing complaints, permitting issues, stop-work orders, business immigration, and more. 

If you would like to speak with one of our Tallahassee construction attorneys, please contact us today.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.