I bring you a case from Hawaii to warm you through this cold snap we are having. A recent case required the parties to litigate whether the arbitration clause in the contract applied to the supplemental conditions and the damages caused by the work done under the supplemental conditions.
The contract at issue contained a boilerplate arbitration agreement:
Any claim arising out of or related to the contract . . . shall be subject to arbitration.
This provision, standing alone, would have required the parties to arbitrate their dispute.
But, during construction, the owner issued supplemental conditions. The supplemental conditions referred to the arbitration provision in the main contract. But, in reference to the arbitration provision, the contract stated:
Delete this paragraph in its entirety.
So, does the contract require arbitration or not. The court wasn’t sure, so the parties had to litigate whether they intended to arbitrate the dispute. That’s a lot of expense for the parties to incur to figure out whether the case will be arbitrated. Especially when arbitration is intended to provide a more cost effective resolution.
The lesson here is to (1) review your contract; and (2) make sure the terms are consistent throughout. It may also help to know whether you want to pursue arbitration or litigation.
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