Construction is a high-risk industry in many ways. Millions of dollars can be at stake in even a relatively modest construction project, and multiple businesses can be involved, including not only construction contractors, but also real estate concerns, insurance companies, finance companies and more. As a result, any legal dispute that arises over a construction project can be very difficult to resolve, and can quickly turn very expensive.
One way to reduce the costs and complications is by resolving the dispute out of court. This also has the advantage of helping to preserve the privacy of the parties involved.
But reaching an agreement out of court isn’t necessarily any easier than resolving a dispute through trial. Negotiations can drag on for weeks or months. When there are multiple parties involved, it can be even more difficult to reach a resolution everyone can live with. Many construction businesses look to alternative dispute resolution to help them move their issues along more quickly.
Alternative dispute resolution, or ADR. refers to a number of techniques designed to resolve legal disputes without going to trial. The most common of these within the construction industry are arbitration and mediation.
Arbitration
In some ways, arbitration is similar to a trial. The process involves the parties presenting arguments before an arbitrator. Like a judge, an arbitrator has the power to decide the case. Unlike a judge, the arbitrator’s decision isn’t necessarily binding on all the parties. The parties must agree to abide by the terms of the arbitrator’s decision.
In some cases, the parties agree in advance to resolve any legal issues through arbitration. In others, they choose arbitration in order to avoid the expense and time commitment of going to trial. In either case, it can be important to choose an arbitrator who understands the construction industry and construction law.
Mediation
Mediation is a form of negotiation that is guided by a neutral third party, who is known as the mediator. Unlike a judge or an arbitrator, a mediator does not have the power to render a decision. Instead, the mediator’s job is to facilitate negotiation so that the parties can more easily resolve their differences and come to an agreement. Each side is represented by its own attorneys, and for best results, all should go into the mediation with the goal of reaching agreement.
Because the issues involved in construction disputes can be so complex, it can be important to choose a mediator who is knowledgeable about the industry and construction law.