Avoiding court in construction litigation can be cost-efficient, effective
By Scaringi & Scaringi P.C.
Our whole lives can be tied up in the dream homes we build. Even businesses and organizations become personally invested when constructing a new headquarters, store or branch location. So it is no wonder that when these meticulously planned, painstakingly scheduled and carefully budgeted projects don’t materialize as agreed upon, the legal stakes are high.
But often the emotions of the parties involved are running even higher.
When it comes to construction litigation, parties on all sides of a project are personally invested. For the contractors and sub-contractors, this is their livelihood, and their reputations are on the line. For the homeowner, the business or the organization building a long-planned project, it is all about meeting their high expectations, tight deadlines and even tighter budgets. When problems arise, money and emotions become intertwined.
Yet neither party in construction litigation can afford to let its feelings stand in the way of an efficient and effective settlement. Often what makes the most sense is bypassing a protracted courtroom battle and for the parties to agree to mediation or arbitration. These alternative routes to a resolution dispassionately get beyond the personal and down to the dollar damages.
Commercial construction disputes are ripe for arbitration
Commercial construction contracts often identify arbitration as the primary means to settle legal disputes and differences. This predetermined arbitration route is intended to make the dispute-resolution process much more efficient and cost-effective.
In short, commercial builders, subcontractors and the clients with whom they do business all want to get on to the next project as quickly as possible. They don’t want their projects or their businesses tied up in court.
This is why builders and contractors in commercial contracts often sign an American Institute of Architects form contract, which requires arbitration to settle legal differences. Should a dispute arise, parties to these cases typically find themselves before an arbitrator, who will be a construction lawyer or construction industry expert.
These kinds of commercial construction disputes can arise from defects or delays in the promised pace of a project. Almost always construction deadlines are key to these commercial cases, making any delay fodder for greater monetary damages, including late charges and other lost-use awards that can be calculated by the day.
These cases can turn on very technical questions over whether change orders were requested and approved – and to what extent these changes departed from the initially agreed upon project.
The experienced arbitration panel hears from all sides. Then, drawing on the law and a vast knowledge of construction expertise, the panel assigns dollar values to the competing technical arguments and comes up with a binding solution that produces a fair and equitable settlement of the case.
Mediation tempers homeowners’ high expectations
In the area of construction litigation stemming from high-end residential construction, homeowners building their dream houses want everything to be perfect. It’s no wonder that many times there’s a big difference between a homeowner’s emotional belief of how he was wronged and what qualifies as dollar damages.
Non-binding mediation over defects or construction specs can help bridge the gap between an emotionally involved homeowner and the builder. An independent mediator picked by both parties hears the facts, reduces competing claims down to the actual dollars involved and dispassionately suggests reasonable solutions to settle the case.
The object here is compromise, not a forced settlement shoved down either party’s throat. The mediation process often achieves this by bringing the parties together, focusing them on the core issues at hand and enlightening them as to the relative strengths and weakness of their arguments and claims.
A key to these cases often is the cost to repair or complete the project in accordance with the original contract terms. Often the damage amount is a lot lower than the emotionally charged initial claims. Yet these mediation-aided settlements are made more palatable by avoiding the high cost of courtroom litigation.
Even in cases where there are substantial defects and it appears economically unfeasible to tear down everything and redo the work, mediation can mow through multiple technical claims and come up with a dollars-and-cents solution that works for both sides.
It all comes down to nailing down the difference between what the parties contracted for and what they got.
In the end, arbitration and mediation can provide warring sides of bitter construction litigation a common-sense way out of their dispute that is built on a firm foundation of fact-based, expert-evaluated compromise.
In this area of the law, these alternative resolution methods beat costly courtroom battles more often than not.