An arbitration agreement makes sense for a number of reasons – it can be relatively quick and you expect that an arbitrator, unlike a jury, has the technical knowledge and expertise to understand a complex construction dispute – to name a few.
Those considerations notwithstanding, arbitration can be expensive. If the parties have agreed to have the American Arbitration Association administer an arbitration, the administration fees will typically run in the thousands to the tens of thousands of dollars. Add to that the cost of the hearing locale and the fees for the arbitrator to prepare for, and participate in, the arbitration hearing, and the costs may become prohibitive.
There is another possibility to consider: a contractual agreement to have a dispute heard in a bench trial. Section 11-1-18 of the Mississippi Code, as amended, provides that:
If the parties to a cause of action agree, any claim filed alleging damages may receive a bench trial which shall be conducted in two hundred seventy (270) days or less after the cause of action has been filed. The cause of action shall be a priority item in the court. This alternative may provide a significant cost savings. Also, like arbitration, it eliminates the possibility of a jury deciding the issue. While a bench trial may involve higher transaction costs than an arbitration (e.g., conducting discovery), that consideration is mitigated by the relatively short period of time available between filing suit and trial. Furthermore, with a bench trial, summary disposition of the claim is a possibility, as is the right to an appeal.
Typically, a one-size fits all approach is not very effective or efficient; that’s undoubtedly the case with selecting a forum for dispute resolution. If you already have an arbitration agreement in your form contract (if you do not, you should consider including one) it is wise to leave it in place; however, it may make sense to amend the dispute resolution clause in your contract form to include a provision for a bench trial for certain claims.
While an arbitration agreement for complex defect or delay claims may make sense, adding a bench trial provision for certain limited claims, such as claims below a certain dollar amount, may well save you significant legal costs and still provide a timely result.
If you would like to discuss this, or practical solutions to help grow your construction business, please call Matthew Vanderloo at (601) 427-0065, or Adam deNobriga at (601) 427-0069.
Disclaimer: The information and comments presented above are general in nature, are the author’s understandings for educational purposes only, and are not intended to offer a legal opinion for use in dealing with any specific set of facts or to create any attorney/client relationship. You should consult with an attorney before taking any action of a legal consequence. Further, the authority cited above is subject to change and/or re-interpretation.