Philadelphia Construction Law Blog

Many contracts provide that before a party can arbitrate or litigate a dispute, a mediation must occur. Often a party will choose not to submit a dispute to mediation believing that a mediation will not resolve the dispute. Many parties proceed directly to arbitration or litigation, dismissive of the contract language requiring mediation.

Alternative dispute resolution was introduced to the legal system years ago as a way to get cases to final resolution faster and contain costs. While these two objectives are not always accomplished with alternative dispute resolution in the modern system, the idea is still inserted into construction contracts and widely used. The concept is seen in two forms: mediation and arbitration.

Construction agreements often contain clauses requiring parties to submit their claims to arbitration. These provisions are favorable to the parties, as arbitration has certain benefits. For example, it may be quicker and more efficient than going through the court system and may be more relaxed than the legal process, thereby encouraging compromise or ongoing business relationships between the parties. An arbitrator or a panel of arbitrators is generally chosen by the parties, which typically results in the selection of someone sophisticated and knowledgeable in the construction industry.

A demand for mediation or arbitration based on a contractual agreement may qualify as a “first filed action” according to the Appellate Division in New Jersey. In a matter of first impression, the court considered whether a demand for mediation or arbitration may be viewed as a first filed action in CTC Demolition Company Inc. v. GMH AETC Management/Development, L.L.C.