Masonry Magazine January 1968 Page. 38
American Arbitration Association
As the saying goes, when an irresistible force meets an immovable object, something has to give.
Recently, a New York masonry subcontractor completing work on a Post Office building was nothing short of irresistible in his efforts to collect a $20,000 balance due from the general contractor. To his dismay, however, he found the contractor quite immovable in his determination to make the offsets stick. Something had to give, all right!
Disputes like this often become the subject of lawsuits which not only drag on and on into months or even years, but also saddle the parties with burdensome legal expenses.
In this dispute, however, both sides were determined to avoid the costs and delays of court action. Following a trend that has been gaining momentum in recent years, not only in construction but also in almost every area of commerce, the parties provided in advance to have any disputes arising from the contract decided impartially and privately by an arbitrator. This was done by simply writing into the contract what is known as a "future dispute arbitration clause." It reads as follows:
Any controversy or claim arising out of or relating to this contract, or the breach thereof, shall be settled in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association, and judgment upon the award may be entered in any court having jurisdiction thereof.
On the strength of this clause, the subcontractor was able to bring the matter to arbitration without delay. Within just a few weeks, the controversy was scheduled for hearing before an arbitrator acceptable to both sides. Naturally, the parties wanted an arbitrator familiar with the type of work in dispute, and capable of determining the issue without bias. The man they chose was also an officer and director of a large construction corporation.
During the hearing, which was held at the parties' convenience in the New York office of the American Arbitration Association, the general contractor presented a list of offsets containing more than a dozen items. They ranged from $35 for labor and material required to straighten walls in a washroom to $2,100 credit for changing certain vaults from 8-inch reinforced concrete with 4-inch block to 12-inch block. He told the arbitrator that he had to replace faulty curbing, repaint prefinished block which was rejected by the Post Office Department and repair cracks in the receiving platform. Backing up curbs and cleaning the basement and floors alone required 192 hours' work which came to $970, the general contractor said.
According to the subcontractor, most of the items were not his responsibility. In some cases, he told the arbitrator, the general contractor was holding him responsible for materials not in the plans or specifications he had bid on. In others, items listed as "repairs" or "corrections" were actually changes required by the architect. Some changes, he said, the general contractor had "pulled out of thin air."
During the proceedings, the parties were represented by attorneys although they could have appeared without counsel if they chose. The contract was submitted in evidence, as well as photographs of many items in dispute. Witnesses were examined and cross-examined and the arbitrator inspected the building to see for himself what the facts were on a few disputed questions. After each party indicated that he had no further evidence, the hearing was concluded. As is required by standard AAA rules, a decision followed within 30 days of the close of hearings.
The arbitrator ruled that $7,000 worth of offsets were justified and directed the general contractor to pay the subcontractor $13,000.
All state and federal courts enforce arbitration awards except, rarely, when there is evidence that the arbitrator was guilty of fraud or corruption or rendered an award beyond the scope intended by the parties. Thus, in the above case, as in most brought to arbitration, the arbitrator's decision ended the dispute once and for all. The whole process took about 90 days from the filing of the demand for arbitration to the receipt of the award.
The experience of the parties in this case was not unlike that of thousands who have made use of the American Arbitration Association's non-profit services for more than 40 years. Last year alone, the Association helped resolve some 13,000 disputes. The parties were not only from the construction industry: they included insurance companies and policy-holders, labor unions and management, and buyers and sellers of goods and services of all descriptions. Matters ranged from a $100 claim brought against a carpet cleaning service by a housewife for damage to a rug, to a $1 million patent dispute involving two large corporations.
While AAA does not itself decide disputes, it makes available tested administrative machinery, expert arbitrators and hearing facilities in 23 cities in the United States and Puerto Rico.
Recently, in cooperation with organizations representing virtually every segment of the construction industry, AAA established the "Construction Industry Arbitration Rules," and a National Panel of Construction Arbitrators. Previously, construction disputes were arbitrated under the Association's "Commercial Arbitration Rules." The new rules created custom-made and uniform procedures for the industry and established an even more expert panel of arbitrators.
The procedures are simple but effective. Parties may initiate arbitration in one of two ways: either by a "future dispute arbitration clause" like the one above or by "submission agreement," a statement declaring the willingness of the disputants to arbitrate and abide by an arbitrator's ruling. Unlike the dispute clause, the submission agreement comes after the dispute has arisen and authorizes arbitration of a particular issue spelled out in the agreement. The dispute clause usually provides for arbitration of "any and