Contractors are no strangers to arbitration or mediation clauses in construction contracts. These provisions clearly identify the process for dispute resolution at the outset of a project rather than having to deal with disputes over how to resolve disputes. However, a recent case in Florida illustrates the importance of following the requirements of these provisions to protect your rights.
In Leder v. Imburgia Constr. Servs., 325 So. 3d 256 (Fla. Dist. Ct. App. 2021), the plaintiff homeowners contracted with the defendant general contractor to perform renovations on the home. The contract required the parties to submit any disputes to an Initial Decision Maker within 21 days of the when the dispute arose and then provided for arbitration.
In this case, after a dispute arose regarding a change order, the general contractor walked off the job and the homeowners filed a lawsuit for breach of contract. In response, the contractor filed a motion to dismiss the lawsuit, arguing the lawsuit was improper given the arbitration provision in the contract. The trial court agreed and dismissed the homeowner’s lawsuit.
On appeal, the Florida Court of Appeals looked to the language of the arbitration provision and the parties’ conduct. The Court noted that neither party had submitted a claim to the Initial Decision maker within 21 days of dispute and therefore failed to adhere to the requirements of the arbitration provision. The Court determined by failing to adhere to these requirements, both parties had waived their right enforce the arbitration of the contract and the homeowners’ lawsuit was wrongfully dismissed.
Leder illustrates that it is important to follow the terms of an arbitration or mediation clause within a contract in order to retain the protections those clauses offer in the event of a dispute. Failure to follow such terms can act as a waiver of the clause altogether, subjecting the waiving party to litigation rather than the originally intended dispute resolution process. Make sure to identify any arbitration or mediation clauses in your current or future contracts, especially the requirements laid out within those provisions in the event of a dispute.
This article was written by Seth McCauley.