Thinking about the “When” . . . when drafting a dispute resolution provision in construction agreements
The importance of the dispute resolution provision in a construction contract should not be overlooked. This means addressing not only how the parties will resolve disputes between them (e.g., mediation, arbitration or litigation) but also answering the “when?” of that process. New York State’s suspension of filing deadlines in civil cases is coming to an end on November 3, providing a good opportunity to address the point.
In New York State, motions to compel arbitration awards must be made within one year of issuance of the awards, and to modify or vacate that award within three months of issuance. The deadlines comport with the Federal Arbitration Act, which requires arbitration agreements privately made between parties to be honored notwithstanding state laws or judicial decrees precluding such arbitrations. But in New York State, Governor Cuomo has issued successive Executive Orders suspending the filing periods under the Civil Practice Laws and Rules (CPLR), including for arbitrations. That suspension period ends on November 3.
Recently, a property owner relied on the Federal Arbitration Act to argue that our client’s application to modify an arbitration award was untimely because it was made more than three months after a “final” arbitration award was issued. We expect that argument to fail. As governing courts have held, the Federal Arbitration Act creates a body of substantive law without replacing the procedural rules that govern state court proceedings. Unless the state court in our case finds that Governor Cuomo’s suspension of the filing periods was invalid (a near impossibility for several reasons), our application will be deemed timely.
But our adversary’s point is well taken. In considering whether to resolve a construction dispute by arbitration, or even litigation, parties should think about the when in the process. For instance, does the period to confirm or challenge an award begin only when that award is “final”, or when intermediate awards are granted. If an arbitrator first issues an award on liability, and then conducts a further hearing on damages, must the aggrieved party challenge the award of liability even as a further hearing on damages is conducted? Construction agreements should clearly define the controlling date for purpose of determining when parties are required to act upon an award.
Upcoming presentation: On December 9 at 3:30 pm, Jacob Amir will be presenting at the virtual annual conference of the Associated General Contractors, New York State, on the topic of “Preparing for and addressing subcontractors’ failure.” Click HERE to register.
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