California Construction Contracts and Arbitration

It's a general piece of common wisdom that decisions rendered by a legally-empowered arbitrator are absolute and absolutely binding. The entire point of a binding arbitration clause, after all, is that it is binding. If the decisions of arbitrators were easily overturned in the courts, it would render the entire process moot.

In general, the supremacy of properly-invoked arbitration decisions is firm and unassailable. However, under California law there are two general situations where an arbitration decision can be reversed or invalidated. In the first, a decision rendered by an arbitrator can be invalidated if the decision is based on an illegal contract, regardless of whether the arbitrator or the parties involved were aware of the contract's illegality.

The second situation allowing for the invalidation of an arbitrator's decision or award is if that decision 'violates an explicit expression of public policy.' This is a more diffused situation requiring a deeper understanding of the underlying law. A good example of this is a case where an unlicensed contractor is paid for acting as a general contractor, which is prohibited under California law; a contractor must have a Class B License to build a commercial building. In a situation where a contractor without a Class B License is paid to perform construction, they are compelled by law to return all fees. If a dispute is brought to arbitration and the arbitrator decides instead that the contractor can retain all fees despite a lack of license, this decision can - and most probably would be - invalidated by a judge if the case were brought into the courts.

It is often mistakenly assumed that if an unlicensed contractor is paid for construction work in violation of the law, the entire contract between the parties is deemed illegal, also invalidating any decision rendered by the arbitrator, but this is often not the case. Simply paying an unlicensed contractor - even with full knowledge of their unlicensed (and therefore illegal) condition is generally not regarded as infecting the contract as a whole, and thus the contract is not deemed illegal. This is therefore not a valid reason to reverse an arbitrator's decision. In the previous example, if the arbitrator had decided to return all fees from the unlicensed contractor this decision would likely have been upheld and the argument of an illegal contract would not have carried the day.

A thorough knowledge of the laws governing both construction and arbitration is essential to have an effective outcome. When seeking an arbitration or mediation professional, make sure to vet their experience in both.

If you need legal assistance regarding California construction contracts, let John S. Preston help you determine the best way course of action. As an attorney and licensed real estate broker who has practiced in real estate law and securities law for more than 30 years, John can serve you as an expert arbitrator and mediator. Call 510-763-9131 or go to http://www.johnspreston.com/

Why Construction Disputes are Better Resolved Through Mediation?

HomeLaw ArticlesWhy Construction Disputes are Better Resolved Through Mediation?

Working as contractors, project owners, sureties and even lenders unfortunately puts some construction professionals at risk for legal disputes. Disputes over the specifics of the job, the cost of the job, change orders as the construction is ongoing or the quality of the completed project or even delays in construction, can all cause grief and headaches for a property owner and for an experienced construction expert.

In a typical dispute over construction, the case can move forward into litigation or into the arbitration process. A third option, however, may be more ideal for all involved parties, and that method is mediation. Many parties have had success negotiating their disputes with a mediator outside of the courtroom. Mediation also has many benefits for all parties associated with a construction project.

To start with, mediation is less expensive than other methods. Usually, a mediator handling a construction case will charge by the hour, which benefits parties since construction cases generally take a few days or less to complete. This is also beneficial for business owners and executives who don't want to miss too many days from work. Since the preparation for mediation can be completed more quickly, the burden of preparing for weeks or months in advance is removed for both parties involved.

Mediation is a much more expedient way to manage disputes, since the entire process can be completed in as short as a few days. Just waiting for a trial date on a construction case can take months or years; mediation can be scheduled simply in a few days. When construction projects are involved where resolution is possible, quick agreements can allow the project to get back on track right away.

In the mediation setting, parties can work together to generate a solution that's mutually agreeable. In a courtroom setting, the scenario can make parties feel like it's a winner take all system, but mediation allows the sides to generate creative agreements. Mediation can also be helpful when other issues have already been settled in past mediation sessions, providing an easy ground to discuss contested problems without having to go back into court.

Construction mediations tend to be handled by a mediator with specific experience in that industry. Mediators are trained in best practices and can use their industry expertise to work through arguments. Unless a specific mediator is named in an existing contract, the parties can review the experience and background of their chosen mediator before the process begins, lending some comfort about the professional who will lead them through. There are numerous benefits to mediation, and both parties tend to find that a solution is easily reached.

Ms. Bonnie Hochman Rothell chairs Krooth & Altman's litigation group and risk management in Washington D.C. Law and real estate are her expertise. Ms. Rothell has been sought to mediate disputes for her passion in finding alternative dispute resolutions to complex problems. If you're in a construction dispute, call (202) 293-8200 for advice or visit http://www.krooth.com/ Rate this Article

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Bonnie Hochman Rothell has published 1 article. Article submitted on July 04, 2013. Word count: 434

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