Construction Contract Arbitration Clause

Choose Your Arbitration Clause Wisely

Christopher Solop
January 19, 2011

During the last several decades arbitration has become a valuable method for resolving disputes between parties in the construction setting. A simple arbitration provision might read as follows:

Claims and disputes not resolved shall be decided by arbitration which shall be in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association currently in effect.  The locale of any arbitration shall be [Jackson, Mississippi].

Simple and straightforward, but is it enough? It depends on what your expectations are for arbitration. An arbitrator is bound by the requirements of the arbitration clause. Therefore, if you are drafting an arbitration clause, you might want to consider including certain "bells and whistles" that will get you to the finish line faster. Here are some items you might want to consider including in an arbitration clause. 

• Location of the arbitration proceeding;
• Number of arbitrators and experience requirements;
• Limitations on discovery;
• Specific rules governing admissibility of evidence at hearing, i.e. state or federal rules of evidence verses the liberal rules for admissibility of the AAA;
• Time within which arbitration hearing must be conducted; and
• Payment of fees and costs.

Remember, it is your arbitration clause so draft it to suit your business objectives.

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