ConstructionPro Week, Volume: 3 - Issue: 49 - 12/05/2014

Do Non-Mandatory Arbitration Clauses Make Any Sense?

By Bruce Jervis


We’ve seen it before -- a contract clause that states the parties “may” arbitrate their disputes. A federal appeals court recently addressed a dispute resolution provision that said the parties “shall” submit any dispute to mediation. And, if mediation is unsuccessful, the parties “may” submit the dispute to arbitration.


After unsuccessful mediation of a differing site condition claim, the contractor demanded arbitration. The project owner refused. The contractor attempted to compel arbitration. The appeals court ruled that while mediation was mandatory, arbitration was permissive. The owner did not have to arbitrate with the contractor.


What is the sense of this? Of course the parties may arbitrate a dispute if they agree to do so. A contract can be silent regarding arbitration, and the parties can still enter into a bilateral agreement to submit a particular dispute to arbitration. Why include a permissive arbitration clause in the first place? It may mislead the careless reader. It may lead to wasteful litigation. What is your opinion?



A non-mandatory arbitration clause is of no useful value. To serve any useful purpose the clause needs to mandatory, which should be. The primary goal is to avoid incurring court cost and the time it takes to work through the court system. While arbitration does not always work, especially if the relationship is irrevocably broken it is a good first step.
Posted by: Gary Fabrikant - Friday, December 05, 2014 10:37 AM

I agree with author's implication, that this makes no sense and is misleading language. Arbitration should be clearly spelled out as mandatory/binding, or specifically waived for jury trial, so all parties are aware of their options or lack of, when entering the contract.
Posted by: James M. Gillam - Friday, December 05, 2014 10:54 AM

I'm not familiar with this particular case, but perhaps the Owner simply wanted the option of litigating, rather than arbitrating, its disputes. Not uncommon.
Posted by: Mike - Friday, December 05, 2014 11:08 AM

I see no purpose in seeking arbitration after failed mediation. We all seek to find resolution long before mediation and if both of those fail, what is different about the arbitration process that anyone would think it could resolve things? Although not as costly as litigation its but another legal cost to insert before an inevitable litigation.
Posted by: Troy Tucker - Friday, December 05, 2014 11:13 AM

The problem with binding arbitration is that in most cases you still have to plead your case to a panel of three presumable judges who usually know nothing about your line of business and common practices. If your panel were experts in the field you were arbitrating it would cut through all the time and money needed in educating the panel. Making for a fairer, quicker, more just outcome. Then binding arbitration will be demanded by and preffered in all contracts.
Posted by: Marvin Halsey - Friday, December 05, 2014 3:59 PM

Will it work to require an expert panel in the arbitration clause in a contract for a specialized type of work?
Posted by: Henri Fennel - Saturday, December 06, 2014 9:50 AM

I have always provided for mediation followed by arbitration, but only where both parties agree to the process. Emphasis is placed on the "both parties agree" part. If the parties read the document at all, it would be hard to miss.

As an architect and spec writer, I was under the impression that the "judges" in an arbitration are supposedly unbiased experts in the field (at least under an AAA proceeding). Am I wrong about that?
Posted by: W. Scott Anderton - Saturday, December 06, 2014 10:16 AM

Avoid legal language. Use simple english to spell out your terms. Here is South Philly we shake hands and look each other in the eyes, then we hug, and whisper to each other that we know where the other can be reached then foregetaboutit the work gets done well and the payment is on time. You only need a lawyer when you are trying to be a wise guy, cut corners, get rich quick and lack professionalism. In construction we regulate each others behavior because the arbitration panels area not experts in our profession and they seem to always reach wrong conclusions. Only the lawyers make money, thus legal terms whose meaning is hidden in the case law are added to contracts..
Posted by: Architect Herrera - Monday, December 08, 2014 8:34 AM


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