and Member of RMRF’s Construction Law Team
Courtrooms are solemn, dignified places where learned, impartial judges dispense justice according to the rule of law. We are civilized precisely because we have courts – they let us resolve our differences without clubs and spears. And yet a courtroom is not always the first, or even the best, place to take a construction dispute. That’s because there are some things you just can’t get in court.
One thing you can’t get in court is privacy. A fundamental principle of justice is that justice must be seen. It can’t be hidden. So, everything that’s said in court is said in public, and all documents and all records that are used in court are (with some very limited exceptions) available to anyone. This means, for example, that when a contractor sues an owner for extras and delays, the contractor’s costs, pricing strategies, and profits become public knowledge. Or consider the counterclaim of the owner who alleges it was the contractor who botched the job; at the ensuing trial all the dirty laundry of both sides will be aired for the world. Worse yet, if the judge puts her decision in writing (which often happens), all the juicy facts and embarrassing details will be available to anyone, online.
To keep things private and confidential, the parties might instead choose to arbitrate their dispute. They could hire an arbitrator – perhaps an experienced industry executive, or a senior lawyer, or a retired judge – who would hear the evidence and decide the case in private. They could, if they wanted to, follow all the same rules and procedures as a court, but do it in a boardroom behind closed doors. The results would be known to the parties, and no one else.
Another thing you can’t get in court is something other than money. Judges are powerful, but that power is limited. Judges pronounce the law, uphold the rights of parties, and sometimes award money. But they can’t repair bad work, draft new deals, involve strangers, revamp financing, or do other creative things to solve the underlying problems. Imagine, for example, a project that’s over budget, past deadline, and in need of repairs. The owner blames the contractor for some of the delays and defects, withholds further payment, and demands an immediate fix. The cash-strapped contractor doesn’t have the resources to mobilize and repair, and while acknowledging some of the warranty work, has its own counterclaim for extras and delays and won’t do anything until it sees some money. All a court could do would be to sort out the competing claims, award one side or the other (or perhaps both) a money judgment, and then let them chase each other for payment. It wouldn’t finish the project. It wouldn’t solve the problems. And if one side is broke, the other side might not even get paid.
Instead, if the parties negotiate or mediate the dispute, they might hit upon a solution that serves both their needs. Perhaps the owner can put up some security to guarantee payment of undisputed amounts; perhaps the contractor can arrange for a sister company to do the warranty work; perhaps they can agree to arbitrate the really contentious issues and get on with the rest. None of these options are available in court.
Finally, courts can’t repair relationships. Indeed, it’s a sad fact that trials divide rather than join the parties – somebody wins, somebody loses, and the painful march to the courthouse tends to burn bridges. Along the way, good relationships sour and bad relationships go toxic. Avoiding this, if possible, has great value. Moreover, sometimes the better solution lies in strengthening rather than weakening the ties between the parties. Perhaps they can be added to bid lists. Perhaps they have future work for each other. Perhaps they can team up on something else. A judge can’t make people talk, shake hands or even say they are sorry.
The alternatives to court — such as negotiation, mediation or arbitration — don’t always work. But, in a very literal sense, a courtroom is sometimes the last place to take a construction dispute. Not that construction disputes should never go there, but rather they should end up in court only when all else fails. A courtroom should be the last stop, after the parties have exhausted their other options.∎
This post is meant to provide information only and is not intended to provide legal advice. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this post to be outdated.