Construction Arbitration

Construction Arbitration

New Jersey law allows for the arbitration of construction disputes, and enforces arbitration decisions.  Arbitration provides a faster and less expensive means than litigation for New Jersey contractors to resolve their construction disputes.

Our attorneys have successfully pursued construction arbitrations on behalf owners, contractors, subcontractors and vendors.

What is Construction Arbitration?

Arbitration is a type of alternative dispute resolution.  Under federal and New Jersey arbitration law, a neutral third-party known as an “arbitrator” will hear the evidence and render a final, binding and unappealable decision.  Our construction attorneys are experienced handling construction arbitrations throughout New Jersey for contractors, subcontractors, owners, and vendors.

Construction Arbitration Procedures

In arbitration, an arbitrator will review the evidence and make a decision.  This will include witness testimony and documents.  In construction arbitration the witnesses normally include the parties negotiating the contract and the people working on the jobsite.  It may also include experts.  There will often be experts to quantify and dispute the claimed damages.  In a construction defect case, there will normally also be engineering experts to testify about the quality of the work and the causes of the defect.  Experts may also be needed when there are allegations of fraud.

Arbitration can only be undertaken when both sides consent.  Normally this agreement will be found in an arbitration clause in the prime contract or the subcontract.  When a party does not agree, it cannot be forced into arbitration. Well-drafted contracts and arbitration agreements are therefore vital.  Our construction attorneys have significant experience negotiating and drafting arbitration agreements and contracts.

Advantages of Construction Arbitration

Arbitration delivers a decision in a shorter timeframe than litigating in court does.  That decision is final and, with few exceptions, unappealable.  While it may take two years or more to get a construction case to a jury, and perhaps several years of appeals after that, an arbitration decision will often come in a matter of months.

Arbitration can also be less expensive than litigation.  Because discovery is limited (generally depositions are not allowed), and appeals are generally not allowed, costs can often be reduced.

Disadvantages of Construction Arbitration

Arbitration is decided by one or more mediators (usually one, occasionally three, rarely some other number), and the arbitrator’s decision is final.  If it is wrong, there is no appeal – you are stuck with it.  It is impossible to know who the arbitrator will be before you make the decision to arbitrate.  While it is also true that you will not know the identity of the judge or jury suit is initiated, in court there is always the opportunity for appeal of an adverse decision.  In arbitration, however, that one random arbitrator’s decision, even if it is unreasonable, cannot be appealed.  So you are stuck with the decision even if you get an unreasonable arbitrator.

Also, although arbitration is normally faster and less expensive than litigation, it cannot be considered “fast” or “cheap.”  Indeed, the filing fees and arbitrator expense for the major arbitration organizations are normally significant.  Where the savings on expense comes from is the fact that discovery is limited.  This means you will not have as much opportunity to explore the other side’s evidence.  Thus, what on the one hand is an advantage (the costs savings), is a disadvantage on the other (the limited discovery available).  And while arbitration normally takes months instead of years, it can take many months, often up to a whole year.

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Construction arbitration is a valuable method of resolving construction disputes in New Jersey.  Construction attorneys from our firm have been successfully pursuing construction arbitration for our clients for many years.  Although we are located in Totowa, in Passaic County, our lawyers handle arbitration throughout New Jersey and the New York metropolitan area.  Please call us at (973) 890-0004 or e-mail us to discuss our services.  We can help.

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