In Florida, many construction contracts include provisions obligating the parties to resolve any disputes via arbitration rather than in court. The arbitration process offers several pros and cons depending on the situation.
Parties who want to litigate their contract issues in court rather than resorting to arbitration may be able to challenge a contract's arbitration clause. As with any contract issue, consult your lawyer about whether it makes sense to attempt to get out of an arbitration provision.
How arbitration differs from litigation
Arbitration takes place before an arbitrator rather than a judge. Usually, both parties participate in choosing the arbitrator. Generally, the arbitration process goes faster and involves less paperwork than a court case. Some main features include the lack of a jury and the very limited opportunities for appeal of the decision. In many cases, arbitration is also confidential.
How courts decide whether to enforce an arbitration clause
When one party goes to court to challenge an arbitration provision, Florida courts typically use a three-part test to decide whether or not to enforce it. First, the court considers whether there exists a valid arbitration agreement. Then it asks whether the agreement covers the issue in dispute. Finally, it examines whether the party that does want arbitration has waived its rights to enforce the clause.
Several factors may affect the validity and reach of an arbitration provision. These decisions can be very individual, and a lot will depend on the specific language in the contract, as well as surrounding circumstances.
Even if the clause is valid and the issue is covered, a party can waive its rights to arbitration. A company can do this by participating in litigation of that same issue. For example, one party files a complaint concerning an issue that should go to arbitration, not to the court. Participating in the case without demanding arbitration can constitute a waiver, although there may be questions about the specific level of participation required.
Contract disputes can involve many legal complexities. If you have questions about arbitration, whether it is a good idea for you and how you should handle disputes, speak with a knowledgeable contract attorney who is familiar with your industry.