J. David Arkell and Benjamin M. Petre – February 14, 2013
Our topic for the month…
Deciding whether to utilize a mandatory arbitration clause in a contract is important, especially in the construction industry. Advantages and disadvantages of litigation versus arbitration should be carefully weighed before entering into a contract or subcontract. Factors to consider:
Time. Arbitration frequently results in a quicker decision than taking the matter to trial, largely due to the absence of extensive pretrial discovery.
Cost. Arbitration tends to be less costly than litigation, most often because of the limited discovery process.
Confidentiality. Barring the entry of a protective order, litigation is a matter of public record. Arbitration is a private proceeding, and thus more likely to ensure confidentiality.
The Decision Maker. An experienced arbiter or panel with expertise in the subject area can greatly streamline the process and bring credibility to the decision.
Appeal. Litigants can appeal disputed results, while an arbitrator’s decision is generally not subject to appeal. If finality is a priority, arbitration is likely the better option. Litigation is preferable if you want to maintain the option to correct decision mistakes through appeal.