Contract Dispute Procedures

Construction contracts are frequently written on forms provided by the American Institute of Architects (AIA). Commonly such contracts are a combination of the owner-architect agreement, general conditions, plans and specifications and frequently supplementary general conditions. The general conditions and supplementary general conditions are often bound in the same “book” with the project specifications.

Not infrequently parties ignore or overlook the contract terms included among those documents. This failure may result in adverse consequences if, for instance, the dispute procedures do not both simplify the resolution of conflicts between the parties, yet permit the progress of construction without interruption.

This (AIA) dispute procedure first requires submission of claims or controversies to the project architect. Either party dissatisfied with his decision may then seek arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association.

Unless the parties otherwise agree in writing, the contractor is required to continue his work on the project during the pendency of the arbitration proceedings. For example, if a dispute arises between the owner and contractor concerning whether certain work is extra and should therefore result in a change order increasing the contract sum (and possibly a time extension), the contractor’s claim must be submitted to the architect for determination. The architect is required to make a decision on the claim as an impartial judge.

The contractor should make his claim in writing and include all supporting documentation with references to applicable plans and specifications, cost detail and time extension supporting data.

The architect should then make his determination in writing and submit copies to both parties. If that decision states that it is final but subject to appeal and, further, recites that a demand for arbitration may be made within thirty days, either party dissatisfied with the decision may demand arbitration within that time limitation.

During this process, however, the contractor is required to perform the work and maintain his progress schedule.

Under this example, the failure to maintain the work may result in a breach of contract for which the contractor would be responsible. If arbitration is not demanded within the time limit fixed, the decision of the architect becomes final and binding upon the parties. Otherwise, the parties would proceed with arbitration and’ within thirty days following the completion of the arbitration hearings, the arbitrator(s) are required to render an award. In most states the award may be enforced by entry of judgment in court Generally, the award is final and binding upon the parties and will not be reviewed by the courts except for non-compliance with the contract or applicable rules. In extreme cases where the arbitrator(s) had been guilty of some misconduct, the arbitration award may be set aside and enforcement denied.

These contract provisions are intended to facilitate the resolution of disputes by prompt and relatively inexpensive procedures calculated to minimize any delays or interruptions in the progress of construction. A thorough understanding and utilization of the contract provisions will generally achieve this result. On the other hand, if either of the parties ignores those provisions he should expect unfavorable consequences.

There is no known substitute for thorough familiarity and compliance with the provisions of a contract to which parties have agreed. The time spent in this understanding and compliance will usually be well worth the effort.

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