Sample Construction Contract Arbitration Clause

Construction contracts are essential documents that outline the terms and conditions of a project. These contracts also stipulate the legal obligations of the contracting parties and the procedures to be followed in the event of disputes during the project`s execution. One of the essential clauses that every construction contract should have is the arbitration clause.

An arbitration clause is a provision that specifies how disputes will be resolved amicably when they arise between the parties. Arbitration is a form of alternative dispute resolution (ADR), which involves the appointment of a neutral third party to mediate and make a binding decision on the dispute`s outcome. This approach is beneficial because it saves time, money, and reduces the legal complexities associated with resolving disputes in a court of law.

Here is a sample construction contract arbitration clause:

“Arbitration is the preferred method of resolving disputes arising out of or relating to this construction contract. The parties agree to submit any such dispute to binding arbitration in accordance with the rules of the American Arbitration Association (AAA) or any similar organization mutually agreed upon by the parties.

The parties agree to appoint one arbitrator, who shall have expertise in construction law, to preside over the arbitration proceedings. The arbitrator shall be appointed within thirty days from the filing of the demand for arbitration.

The arbitration hearing shall take place in the county where the construction project is located. The arbitration proceedings shall be governed by the Federal Arbitration Act (FAA) and any applicable state laws.

The decision of the arbitrator shall be binding and final, and the parties waive all rights of appeal to any court of law. The arbitrator`s award shall be in writing and shall include findings of fact and conclusions of law.

The parties agree to keep the arbitration proceedings confidential, except as necessary to enforce the award or as required by law.

The costs of the arbitration, including the arbitrator`s fees and expenses, shall be shared equally by the parties unless the arbitrator determines that the costs should be allocated differently.

This arbitration clause shall survive the termination or expiration of this construction contract.”

In conclusion, an arbitration clause is an essential provision in a construction contract. It provides a cost-effective and efficient way of resolving disputes and avoiding litigation, which can be lengthy, costly, and unpredictable. The above sample construction contract arbitration clause outlines the key elements that should be included in such a clause. As a professional, it is essential to ensure that the language used in the clause is clear, concise, and legally sound.