The construction law attorneys at SMLH explain the use and legal issues surrounding mandatory mediation clauses in construction contracts.
Mediation can be an excellent way to resolve contractual disputes. It is often less expensive and results in agreements that both parties find acceptable and fair. In fact, more and more standardized construction contracts are including mandatory mediation clauses.
However, mandatory mediation clauses can ironically cause more disputes than resolutions when it comes time to enforce them.
Mediation and alternative dispute resolution require good faith and a willingness to cooperate. Mediation can feel like being denied justice if one party wishes to bring the issue before a judge but instead, is forced to mediate. In that sense, mandatory mediation clauses can seem like an oxymoron.
Nonetheless, standardized construction contracts increasingly include clauses which impose an obligation to mediate before arbitration. Both the Associated General Contractors of America (AGC) and the American Institute of Architects (AIA) have adopted mediation clauses into their standard construction contract forms.
Aside from the actual dispute at hand, the enforceability of mediation clauses themselves often becomes a central focus in contractual disputes. If an agreement to mediate is enforceable, then arbitration cannot be commenced until the mediation is finished. There is often a statute of limitations on the mediation period. When a mediation clause is not enforceable, it can be difficult to know if and when the parties can start arbitration or litigation.
Look at alternative dispute resolution clauses in construction contracts carefully. Mediation may not require the presence of a lawyer in some industries. However, the complexity of construction contracts and disputes has proved that having a qualified construction mediator and construction law attorney present during mediation sessions can be very valuable during the process.
For more information regarding mandatory mediation clauses in construction contracts, please contact the construction law attorneys at SMLH Law.