Matthew DeVries | Best Practices Construction Law
As a single dad of seven, resolving daily disputes is a common occurrence in my house. Whether it’s whose turn it is to pick the next Netflix stream or who gets the last Crumbl cookie, disagreements are inevitable. Fortunately for my kids, they don’t need to go to an arbitrator or judge to resolve these battles. Instead, they have me, their dad, as the sole decision-maker—immediate, fair (at least in my mind), and no legal costs involved! But for construction industry players, the resolution process isn’t as simple.
In the world of construction, disputes often arise and the language in the parties’ contract makes all the difference. A common challenge is to decide whether disputes between the parties will be resolved by litigation or arbitration. As one contractor recently learned in a New Mexico Court of Appeals decision, the words matter!
In Atlas Electrical Construction Inc. v. Flintco LLC, a dispute arose between a subcontractor (Atlas) and a general contractor (Flintco) over work performed on a large renovation project at the Albuquerque International Sunport. The subcontract included a dispute resolution clause that gave Flintco the sole discretion to choose whether any disputes would be resolved through arbitration or litigation. When Atlas filed a breach of contract claim in court, Flintco invoked this clause and successfully moved to compel arbitration.
Atlas argued that the clause was unfair because it was one-sided—Flintco, the general contractor, had all the power to decide the method of dispute resolution, while Atlas, the subcontractor, had none. The appellate court agreed with Atlas, finding that the arbitration provision was “substantively unconscionable.” The court ruled that the clause was so one-sided it was unfair and unenforceable. The subcontractor had no say in whether a dispute would go to court or arbitration, and this imbalance tipped the scales too far in Flintco’s favor.
So what? Here is the primary lesson learned from the Atlas decision—whether you are an owner/developer, contractor, subcontractor or supplier, take the time to review every provision of the contract. Don’t skimp. Don’t get lazy. Don’t assume things will work out. You see, words matter!
Even if you believe that the contract negotiation has gone your way, understand that a decision-make might come to a different conclusion down the road. While I, as a father, can make quick decisions to keep the peace in my house of teenagers, construction industry players don’t always have that luxury. This recent court decision is a reminder of how important it is to carefully review and negotiate the terms of your contracts.
When one of your cases is in need of a construction expert, estimates, insurance appraisal or umpire services in defect or insurance disputes – please call Advise & Consult, Inc. at 888.684.8305, or email experts@adviseandconsult.net.