Arbitration

Arbitration

A public works contract may provide an arbitration clause, whereby the parties agree to resolve potential disputes by means of an arbitrator. Public Contract Code § 10240 provides that all claims under the State Contract Act are subject to arbitration.

Many form agreements require arbitration according to the American Arbitration Association guidelines (some require mediation, see below). An agreement to arbitrate may be made either in advance of a dispute (e.g., in the contract) or after the dispute has arisen.

The California Arbitration Act and the Federal Arbitration Act enforce arbitration provisions in contracts. California courts and public policy favor the resolution of commercial disputes through arbitration "to promote judicial economy, and to settle disputes quickly and fairly." Thus, courts will generally enforce such contractual provisions.

Construction disputes are often extremely complex, and because arbitration involves many of the same drawbacks as litigation, it may not be the best alternative. For example, arbitration can be slow and expensive. But there may be efficiencies, in part because discovery rules do not apply, proceedings are informal, and it is not necessary to follow formal rules of evidence.