JAMS ADR Blog by Chris Poole
Many construction lawyers who specialize in transactional work acknowledge that they do not spend much time considering or negotiating the arbitration clauses in construction contracts. Should an arbitration clause be just a boilerplate provision, taken “off the shelf,” or should it be specifically negotiated and crafted for the particular construction project and to accommodate the parties’ requirements?
Some of the many questions to consider:
Anecdotal, but informative studies appear to indicate that many clients feel that negotiation is not open-ended and that arbitration clauses are not a priority, particularly given many other, more significant business terms and conditions in play. Thus, when an arbitration clause merely dictates a specific set of institutional arbitration rules to be used, parties may be reluctant to try to change the clause, even if they know they could likely negotiate something different or better.
One of the delicate balancing acts is between the “sin” of omission (i.e., omitting a crucial or useful element from an arbitration clause) and the “sin” of being overly specific (i.e., providing too much detail could produce a clause that is unnecessary or inappropriate for the parties’ actual dispute or is difficult to put into practice).
Ideally, arbitration clauses should be used to specify guidelines that facilitate better and efficient management of the process. They also may include a fair, but abbreviated timeline, limitations on discovery and motions in order to try to diminish delays and to reduce cost. Counsel who take the time to master the law related to the scope and enforceability of arbitration agreements and to understand the options as to rules and expedited procedures available with nearly every ADR provider can afford their clients the option to craft a private dispute resolution process that may better meet their needs and expectations in a particular transaction.
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