Board-Certified In Construction Law By The Florida Bar

Why your construction contract needs a dispute resolution clause

On Behalf of | Jun 6, 2024 | Contract Law

Disputes in construction projects can be costly and time-consuming. They can be minor clashes or major disagreements that can stall projects and strain business relationships.

One way to manage disputes is by adding dispute resolution clauses to construction contracts. If you are drafting a contract for a construction deal, how can a dispute resolution clause help avoid and resolve conflicts?

Elements of a dispute resolution clause

A dispute resolution clause aims to maintain business relationships by providing a guide for resolving disputes. When creating a dispute resolution clause, among the essential elements to include are the following:

  • Method of dispute resolution: The clause should name the type of dispute resolution, such as mediation, negotiation, arbitration or litigation. Each method has pros and cons, and the choice depends on the nature of the dispute as well as the preferences of the parties.
  • Time frames: Clear time frames should be set for each stage of the dispute resolution process. This helps to ensure that the parties will deal with disputes promptly and efficiently.
  • Cost allocation: Specifying the allocation of dispute resolution costs can help prevent disputes over costs.
  • Confidentiality: Also, it should include a confidentiality provision to protect sensitive information during the dispute resolution process.

Aside from preventing disputes, the clause can help control costs by setting out a process for dealing with them. As a result, it can encourage parties to resolve disputes in a cost-effective way. Further, the clause can speed up the process by naming an alternative resolution method to avoid lengthy court proceedings.

Managing potential disputes

Dispute resolution clauses are vital in construction contracts because they can reduce the impact of disputes. However, drafting these clauses requires a deep understanding of construction law. By seeking legal assistance, you may protect your rights and interests while ensuring the effective management of potential disputes.