Why Contractors Should Consider Mediation

When a construction dispute arises, among the first thoughts that may come to mind is, “Oh no, is this going to wind up in court?” Sometimes that eventuality is unavoidable, but there’s often a much easier and even productive way to resolve the matter — mediation.

Developing strategies

In mediation, a neutral mediator facilitates a settlement that’s acceptable to both parties. The mediator meets with the parties in informal joint sessions — and possibly separately — to help them explore relevant facts, issues, positions, needs and options.

A mediator might identify obstacles, point out overlooked issues and develop resolution strategies. He or she doesn’t give legal advice or resolve the dispute. Instead, the parties must attempt to reach a settlement themselves with the mediator’s assistance.

The parties to the dispute select the mediator — typically a practicing attorney, retired judge or other professional. Working with a mediator who has experience and expertise in real estate and construction can expedite the process and foster the introduction of options not previously considered.

Negotiating an agreement

Typically, the mediator begins with an opening statement, which includes introducing the attendees and reviewing the procedures, ground rules and goals. The parties then make their opening statements. These commonly:

  • Describe their understandings of the dispute,
  • Present their cases, and
  • Suggest ideas for a resolution.

Next comes the joint discussion in which the mediator speaks with the parties about the information in their opening statements and determines which issues to address. Each party then meets separately to assess the strengths and weaknesses of their respective positions.

At the joint negotiation stage, the mediator reconvenes the parties to negotiate face to face. If an agreement can be reached, the parties put it in writing and either sign the document or have their attorneys review it. Such agreements, once entered into, are enforceable as contracts. If no agreement results, the mediator reviews the process and discusses available options, including holding another mediation session or elevating the matter to arbitration or litigation.

Working together

A good mediator will take a neutral stance but actively encourage the two parties to collaborate rather than sit back and challenge one of the parties to “win the argument.” In this way, mediation is less adversarial than arbitration or litigation.

What’s more, lawsuits can take months, if not years, while mediation rarely lasts longer than several days. And parties can speak for themselves, which can lead to creative solutions not possible in an adversarial setting. A mediator’s evaluation of the strengths and weaknesses of a case can change perspectives about the odds of winning in court, paving the way for settlement.

Further, mediations are conducted confidentially. Statements and evidence used generally can’t be admitted as evidence in subsequent litigation, and mediators can’t be compelled to testify. Avoiding a courtroom also means parties aren’t subject to legal precedents or the rigid structure of litigation. Mediation doesn’t involve formal rules of evidence or the question-and-answer format of a trial.

Moving on to arbitration

Mediation is often used with the understanding that the parties will move on to arbitration if one or both can’t be satisfied.

Arbitration tends to be less formal than litigation, but it can include discovery and the use of legal standards. Before arbitration, the parties stipulate locale, confidentiality, rules of evidence and issues to be considered. Each party then presents evidence, including testimony and arguments, and can cross-examine witnesses.

Unlike in mediation, where the parties themselves reach a consensus, the arbitrator renders a final and typically binding decision. Further, the rules in arbitration can limit damages, restrict the time limits for filing a claim and impede information sharing. Arbitration has one key limitation: an appeal is virtually impossible.

Taking a less costly route

Ideally, contractors can avoid disputes by engaging in clear and strong communication with project owners and everyone else involved in a job. However, if a disagreement rises to a certain level, mediation may hold the key to avoiding the costliest road to resolution.

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