Your Life and Your Livelihood Are in Your Hands: Make Sure Your Contracts Protect You
By Peter G. Merrill

It is inevitable that at some time in your career as a construction professional, that you will be involved in a dispute with one or more of your customers. You have the opportunity to be well-prepared for those disputes. If you have not taken the proper steps to protect yourself and your company, you may lose large sums of money or even your business. This article assumes that you are right in your position on the dispute and your customer is wrong.

To be properly prepared, you need the correct dispute resolution clauses in your contract. Hopefully you have an arbitration clause in your contract to settle your disputes.

If you were sick, ill, injured or didn’t feel right, you would most likely go to see your doctor. You would go to see a doctor who knows how your body is built and should function. Most importantly, your doctor should know how to remedy or cure your ailment. If necessary, the doctor might refer you to a specialist who can better address your medical problem such as a cardiologist, oncologist, surgeon, etc. Likewise, if you have a residence that appears to have problems that you can’t work out with your homeowner, you will need to see someone who knows about construction and who can render an educated decision on how your dispute should be settled. If you go to court to settle your dispute, most judges do not know much about construction and the judge’s decision will most likely be based on which party made the most compelling and convincing argument, right or wrong. I have heard many horror stories from builders and remodelers who have gone to court and lost their case even though they were right. The other party had an attorney who made a more convincing presentation.

If you specify arbitration in your contract, you can also specify the arbitrator or arbitration provider. The Federal Arbitration Act allows the parties to pre-agree on who will serve as their arbitrator should they get into a dispute. Most contractors specify an arbitration provider who has several qualified construction-knowledgeable arbitrators on their panel. If you are specifying the arbitration provider, prior to specifying them in your contract, you should check them out to make certain that they have qualified construction-knowledgeable people to serve as the arbitrator. If you were trying to find a framer, carpenter, plumber, electrician, etc., you would not just simply select them from the yellow pages or from some list that you had available to you. You would check out their references, review their pricing and make certain that they had the knowledge and expertise to do a good job working for you. Likewise, you should similarly check out your arbitration provider prior to specifying them in your contract.

It might interest you to know that ALL of the major home warranty companies such as 2-10 HBW, Residential Warranty Company, Professional Warranty Services Corp., StrucSure Home Warranty, etc. specify arbitration as the dispute resolution process to be followed to settle disputes over warranty issues. They have come to know that specifying arbitration and the “right” arbitration provider will render much better, more accurate and appropriate results based on construction knowledge and expertise. These home warranty companies usually specify one or two arbitration providers in their Warranty Agreements who they know have construction-knowledgeable arbitrators.