Construction Law Blog

Contractors in New York may not be bound by Architect Certifications

  

 Email Article  

Tweet  

  

  

Construction contracts in New York often place the architect or engineer in the additional role of an initial impartial decider as to any disputes between the contractor and the owner, in addition to their roles as the design professionals. Such clauses make the architect or engineer an arbitrator for purposes of factual disputes on the project, and are typically valid and enforceable as conclusive and binding upon the parties.

Under such a dispute resolution clause, if the contractor accepts the decision of the architect on its dispute with the owner, the dispute is considered resolved. Where the contractor disagrees with the decision of the architect, however, contractor must provide prompt written notice to the architect and owner as to contractor's disagreement with the decision of the architect, and contractor's continuing performance of its contract work is being performed under protest. Failure of the contractor to issue such a prompt notice of disagreement can serve to bar the contractor in any subsequent efforts to pursue this claim through litigation or arbitration.

Where the construction contract requires certification from the architect to establish sufficient cause for termination of the contractor for cause, however, such certifications may or may not be binding upon the contractor.  The binding authority of certifications for termination from the architect or engineer are only binding to the extent that the architect's agreement for services specifically provides for such binding authority, and the contract between the owner and the contractor vest such authority in the architect. 

Both of the parties to be subject to the decision making of the architect must agree to be bound by the architect, and confirm the factual and legal authorities being provided to the architect for resolution of disputes. Depending on the extent of the architect or engineer's powers under their contract, their decisions on whether sufficient cause exists for contractor's termination for cause may or may not be binding on the contractor.  

Where contracts do provide effective authority to the design professional to issue certifications for termination, such certifications will be binding and enforceable on the contractor as a matter of New York construction law unless the contractor can establish that the certification issued by the architect was issued in bad faith, fraud, or palpable mistake. Adsley Const Co., Inc. v Port Authority of New York and New Jersey, 54 N.Y.2d 876.

New York construction law also allows for the parties to appoint any person, even an employee of one of the parties, to serve as final arbitrator for all factual and legal determinations, including determinations of contract interpretation as final and binding.

"The requirement of explicit and unequivocal agreement when there is to be mutually binding arbitration before a neutral arbitrator obviously takes on even greater significance when resolution of all disputes is to take place before the employee of one contracting party, and bind only the other." Westinghouse Elec. Corp v. New York City Transit Authority, 82 N.Y.2d 47

Your comments and future article topic suggestions are invited in the field below.

The author, John Caravella Esq., is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email: John@LIConstructionLaw.com or (631) 608-1346.

This is a general information article and should not be construed as legal advice or a legal opinion.  Readers are encouraged to seek counsel from a construction lawyer for advice on a particular circumstance.

5 Reasons to Consider Arbitration for Your Construction Dispute

  

 Email Article  

Tweet  

  

  

In a recent client conference I was asked, “So what is arbitration, anyhow?” In the context of a construction claim or in seeking to prevent a construction claim, there are several significant advantages that arbitration can provide in lieu of litigation. In today’s challenging business environment being aware of the various options available could make a significant impact on your business.

     Briefly stated, arbitration is a private, informal process by which all parties agree, in writing, to submit their dispute to one or more impartial persons authorized to resolve the controversy by rendering a final and binding award.[i] What makes this process unique is the ability, with some advance consideration, to customize and tailor the dispute resolution process to suit your company’s needs.

CUSTOMIZATION – Customization allows you to tailor the dispute resolution process by stating the location of arbitration, the number of arbitrators and even the specific technical qualifications of the arbitrator(s) to best suit the dynamics of your claim.

This is especially important in the construction arena where you are not likely to be appointed a judge who has any specific technical knowledge or appreciation of construction. In arbitration, you can request an arbitrator with the level of construction appreciation you feel appropriate. As stated by Michael Marra, Vice President Construction Division American Arbitration Association, “There is no concern about the arbitration process that a good [contract arbitration] clause cannot fix. People do not always realize they can customize the process to their specific project needs.”

COST SAVINGS - As a process intended to be less formal than litigation, the entire case preparation and information exchange can be streamlined saving both counsel and clients’ time and resources. Further, it is often possible to have an entire dispute brought before the arbitrator in a one-day hearing and possibly without the need for court reporters and fees. This is an accomplishment not often found in litigation. There is, however, some debate in the field whether arbitration is less costly than litigation. Arbitration for larger and more complex claims may not produce the cost savings found in less complicated claims.

TIME FRAME - When considering taking an action to the Supreme Court for litigation, it is important to keep in mind the timeframe in which the matter can expect to be concluded. Based on a recent litigation filing from my office, the time between when a matter is assigned an index number to resolution is approximately two years and six months, or 914 days.[ii]

This is much greater than the anticipated timeframe in a corresponding arbitration claim. Based on a recent administrative study by the American Arbitration Association for cases under the AAA Commercial Arbitration Rules, with claims between $75,000.00 and $500,000.00, the median claim was resolved within 297 days of filing.[iii]

LESS FORMAL – It’s fair to say that most people don’t mistake Supreme Court for the Hilton. In fact, many clients have a great deal of apprehension or anxiety regarding the thought of having their dispute brought out in open court. In the context of an arbitration, however, the hearing can be conducted in either your attorney’s conference room, or in any other suitable location, making the process considerably less stressful.

REVOVERY OF FEES AND COSTS - Where properly stated and agreed to in writing, the arbitrator may be free to award the reimbursement of all fees and costs associated with bringing forth the claim to either party, including all filing and attorneys fees. This is an example of how some advance planning and consideration with your attorney can make a future claim more to your businesses’ advantage.

Although arbitration may not be available for every dispute or conflict[i], where available, its numerous possible advantages make it well worth consideration.

Your comments are invited in the field below.

The author, John Caravella Esq., is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email: John@LIConstructionLaw.com or (516)462-7051.

---