As I sit down to write my annual list of resolutions for contractors, I am amazed at how much things changed in 2020. Construction was going well and then, in March 2020, COVID-19 hit. At first, we thought it was going to be a disaster for the construction industry. States, cities and towns shut down projects and many applied for PPP loans. Then, something amazing happened. Construction was considered an essential service and everyone was back to work.  That said, the work world changed: companies were donating their PPE to frontline workers, COVID-19 protocols had to be followed and paperwork had to be filed. Everyone was scrambling to figure out how to comply and keep their businesses going. So, you may or may not ask, what was I, as a construction lawyer doing? I spent March and April thinking about the new risks contractors/construction companies were facing and developing contract clauses to protect the industry. I wrote a number of blog posts with clauses to add to your contra

The Arbitration Clause-Points to Include

Here is an arbitration clause that I included in a contract for the construction of a new home:

The Contractor and the Owner(s) hereby mutually agree in advance that in the event that the parties have a conflict concerning this Agreement, either party may demand arbitration of the dispute. The parties will select a mutually agreed-upon arbitrator. If the parties cannot agree on an arbitrator, then each party will select an arbitrator who will then mutually agree upon an arbitrator.

The arbitration will be conducted according the Construction Industry Rules of the American Arbitration Association and will take place in Norfolk or Middlesex Counties in Massachusetts. The Arbitration Award will be binding upon all the parties. Judgment upon the award may be entered in any Court having jurisdiction thereof.

Any controversy or claim arising out of or related to this Agreement involving an amount of less than $2,000 (or the maximum limit of the court) must be heard in the Small Claims Division of the Municipal Court in the county where the Contractor’s office is located.

As long as both parties agree, they may at any time and without consequence opt out of such alternative dispute resolution and seek a remedy for breach of this Agreement in any court of competent jurisdiction.

We, Contractor and Owner(s), have read the above provision and both have signed it as our free act and deed, thereby assenting to the procedure.

Consider the following:

1. How will the arbitrator be chosen?

2. Will you designate an arbitration organization to be used?

3. Are there rules that will be followed (I like the Construction Industry Rules of AAA)?

4. Where will the arbitration take place?

5. How will the arbitrator be paid?

6. Will the arbitration be binding?

7. Should smaller cases go to small claims court?

8. Should the parties have the option of not going to arbitration?

9. Do the parties want to include a mediation clause as a primary step before going to arbitration?

10. Are there any exceptions to the kinds of disputes that will be decided through arbitration as they relate to the project?

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