Arbitration Clauses

Many construction companies include arbitration clauses in their contracts with managers, property owners, or HOA's. These provisions articulate how parties may resolve litigation- usually exclusively in private arbitration. Previously, most courts would not enforce arbitration clauses following the precedent set by the U.S. Supreme Court case, AT&T Mobility LLC v. Concepcion. However, in a recent construction case, Pinnacle Museum Tower Association v. Pinnacle Market Development, LLC, an arbitration clause in the management association's Covenants, Conditions, and Restrictions (CC&R's) was found to be enforceable due to the fact that CC&R's are binding contracts and the CC&R's were not unconscionable in nature.

An arbitration provision can be immensely helpful in resolving a construction case quickly regardless of the fact that some California courts may choose not to enforce them. In some cases, courts do not enforce them if a contract is considered to be unconscionable, or unusually one-sided in favor of one party, especially if the other party is, for some reason, unable to understand the full terms of the contract. Arbitration will usually cost about twice as much as a lawsuit, but can be completed more quickly since matters are handled privately, allowing your organization to focus its time and resources back on doing business. When creating your contract, it is very important to consider the advantages and disadvantages of including an arbitration clause.

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