National Roofing Legal Resource Center

Contract provision addresses dispute resolution

This month's contract modification is intended to be used when a roofing contractor is signing a contract form prepared by the owner or general contractor. Many general contractors and owners include one-sided language in the Dispute Resolution article of the contract, which provides the general contractor or owner with the discretion to determine whether claims will be resolved by arbitration or litigation and can exercise that discretion after the roofing contractor files a formal claim. An example of such a provision follows:
    "Claims or disputes between Contractor and Subcontractor arising out of or relating to this Agreement shall be resolved by arbitration unless the Contractor, in its sole discretion, elects to have claims or disputes resolved by litigation. Subcontractor shall be advised of Contractor's election within thirty (30) days after the filing of any complaint or demand. Subcontractor consents to the dismissal of any arbitration in the event Contractor elects to have the claim or dispute resolved by litigation."
The purpose of this provision is to allow the owner or general contractor an opportunity to review the claim and select what he or she believes is the most advantageous forum for dispute resolution. It also can be used as a tactic to delay commencement of the suit and harass the roofing contractor. The roofing contractor, after paying a nonrefundable filing fee, is forced to dismiss his or her claims 30 days later and refile them in court, where he or she will pay another filing fee, and the owner or general contractor gains an additional month or more before having to respond to the claims.

The parties to a construction contract are entering into an "arms-length" business transaction where each party should be treated fairly. Allowing this discretion to the owner or general contractor subverts this principle and promotes uncertainty. Instead, this provision should be deleted and the parties should select a certain dispute resolution method at the outset.


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