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Arbitration and the construction industry - II

In our last post, we began examining how the preferred legal forum for many builders, suppliers, developers and homeowners is not litigation, but rather arbitration. Indeed, we spoke about how the majority of the contracts in the construction industry contain arbitration clauses mandating that any legal disputes must be resolved via this form of alternative dispute resolution.

We'll continue this discussion in today's post, focusing on how the arbitration process works and why exactly it's utilized so heavily.

How is the arbitration process initiated?

In general, the arbitration process is initiated when written notice is given by one party to another party expressing their intent to arbitrate a particular matter pursuant to the terms of their contract. Here, the written notice would set forth in detail the exact legal dispute around which the arbitration would be centered.

The other party is then given time to craft their own written response indicating that they agree to arbitration and, once this occurs, the arbitration is scheduled.

How exactly is an arbitration structured?  

While the parties to a contract may have established their own rules and procedures to be used in the arbitration, the basic format is largely the same. Indeed, the actual arbitration will unfold much like a trial once the abbreviated discovery process is complete.

Specifically, each side will be given the opportunity to present their arguments to the arbitrator(s), present evidence and even call witnesses. However, the ability to cross-examine these witnesses may be more restricted than in a trial.

Upon conclusion of the hearing, the arbitrator(s) will consider the matter and render a decision in accordance with the time limits set forth in the arbitration clause governing the proceedings.  

Why does the construction industry favor arbitration?

Simply put, the reason why so many parties in the construction industry opt for arbitration is that it's considerably more cost-effective and much faster than traditional litigation.

Please consider speaking with an experienced legal professional if you are in need of assistance with the negotiation and/or drafting of a construction contract, or have questions about arbitration.

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