Construction contracts often contain an arbitration or litigation provision. While each forum has its advantages, a question often times overlooked is whether an arbitration provision is enforceable.
Litigation is the Default
Litigation is the default method of dispute resolution. This is not to say that litigation is the best way to resolve a case. But unless the contract contains an enforceable arbitration agreement, the parties will have to take their dispute to court.
Enforceable Arbitration Clauses
If the parties to a contract really want to avoid litigation, they must include an arbitration clause requiring the dispute to go through arbitration. But, that clause must comply with state law. Here in Nebraska, in order to have an enforceable arbitration provision, the contract must contain the following language, just above the signature block:
THIS CONTRACT CONTAINS AN ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES
If the contract does not contain this language, there is a strong chance that a court will refuse to enforce it and allow the case to proceed through litigation.
If you are thinking about including an arbitration clause in your construction contracts, we recommend you contact an experienced construction attorney to help you draft your contract.