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.