Let’s face it, some projects just don’t go well and everyone knows there will be a fight over payment at some point. If there were only some way to avoid costly litigation or arbitration. Or is there? You could include a mandatory mediation provision in your contract to require the parties try to resolve the matter before litigation or arbitration is initiated.
What is Mediation?
Mediation is not simply requiring the parties to get together in the same room and try to work it out. Some standard contracts do require a “good faith” effort towards resolution before filing suit. That is not mediation. Mediation requires the parties to hire a mediator who will work diligently to facilitate resolution of the problem. A good mediator will explain the benefit of a mediated result, including avoiding the expense and time involved in litigation or arbitration. As my favorite mediator says, “the parties to a successful mediation walk away feeling they either paid too much or didn’t receive enough, but they are happy the matter is resolved.”
What Does a Mediation Provision Look Like?
Although mediation provisions can vary like other construction contract provisions, I like this one:
Before any claim, dispute, or other matter between the Parties is submitted to litigation or arbitration, the Parties agree to mediate all claims and disputes before an experienced, professional mediator mutually agreeable to Subcontractor and Contractor. If the Parties cannot agree on a mediator, each party shall select a mediator and those mediators shall appoint a single mediator to handle the mediation. All offers, promises, conduct, and statements, whether oral or written, made in the course of the negotiation by any of the Parties, their agents, employees, experts, and attorneys shall be confidential, privileged and inadmissible for any purpose. The mediation will occur in [location of project] and each party shall bear the costs of mediation equally.
Take Away: Including a mediation provision in your construction contracts that requires the parties to participate in mediation before pursuing litigation or arbitration is a great tool to quickly resolve construction disputes and avoid the costs and delay of litigation and arbitration.