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

Should Every Construction Contract Have an Arbitration Clause?

I am an arbitrator for a number of arbitration organizations, but I have mixed feelings about arbitration clauses in constuction contracts. The interesting thing is that they are standard in many form contracts, and parties do not give them a second thought. As with all aspects of a contract, participants need to make informed decisions about what they are agreeing to, but I would guess that many contractors sign contracts that are presented to them without carefully reading them.

Arbitration is a terrific process. The arbitrator acts as a private judge and is chosen (usually) by the parties. The rules of evidence do not apply, the process can be scheduled at the parties' convenience, and it can save both money and time.

Here's the down side: arbitration is binding and non-appealable. The bases for overturning an arbitration are incredibly limited. In Massachusetts, an arbitrator's decision can only be overturned for fraud or bias on the part of the arbitrator. In other jurisdictions, "manifest disregard of the law" forms a basis for an appeal, but not in Massachusetts.

So, think carefully about agreeing to a process from which there is no return. Agree to it with your eyes open, and make sure that you pick your arbitrator carefully. That choice will determine the potential for a positive outcome.

The next post will discuss the wording of arbitration clauses.

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