The Thing About Arbitration Clauses

by | Mar 24, 2022 | Contract Law, Financial Disputes, Real Estate Law

How does an arbitration clause affect my rights against a contractor in a contract dispute?

Video Translation

Speaker 1: (00:03)
Hi, and welcome everyone to ask the attorney. My name is Blair Clark and with me as always is Mr. David Sobel, David, how are you doing this evening? I’m

Speaker 2: (00:12)
Doing great. You, you always call me Mister,

Speaker 1: (00:15)
Mister that’s right. Cause my mother taught me matters,

Speaker 2: (00:19)
Please. Not that much older than you am I I, Okay. Forget it. Forget it. We won’t talk about it. Moving on. All

Speaker 1: (00:28)
Right, Claire. No. So David and I hop on every so often and his excellent staff puts together some fantastic questions that people either call in or email in to his office. And the questions always have something to do with real estate contracts, finance, uh, estates, probate, et cetera. So David, for those who are watching, can you just briefly describe to us what exactly should our viewer reach out to you for? And also how can they reach you? What number should they give you a call at?

Speaker 2: (01:02)
Okay. So the great question, you know, we’re, we’re real estate and finance attorneys, Blair. Um, we’ve been doing this program, you and I for believe it or not, I believe it’s approaching several years now. We’re going on?

Speaker 1: (01:15)
We’re near year two near year two

Speaker 2: (01:18)
Near year two. Yep. But for 30, for 32 years. So for 30 years before that, I know that’s, we’re just talking about age. Um, age is just by the way, energy and, uh, anyway, so, but, uh, for those 30 years I’ve been in the, uh, arenas of real estate and finance and, um, law and everything that we do at my law firm deals with real estate. It’s kind of like the hub and, uh, contracts, probate issues related to real estate, corporate formation related, uh, to real estate and, and also, uh, real estate investors. Uh, you name it, anything to do with real estate. We deal with it and there’s around, uh, I think 76 areas, uh, underneath the umbrella of real estate law. Mm-hmm, , there’s subcategories or sub-specialties and we, we pretty much handle all of them. Uh, so it’s a boutique firm that handles real estate and financial issues.

Speaker 2: (02:20)
And, um, the way that people can get in touch with us is to call triple eight, seven, eight, nine once seven 15, or you can go to our, uh, website, which is called proven And we try the reason why it’s called that is we really try to be a proven resource for those people who are inquiring into their legal issues, whether they’re residential, commercial, uh, they concerned vacant land or industrial property or probate issues concerning real estate. That website has a whole host of content. Uh, plus all our videos that we provide to, uh, you know, the viewing public and our friends. The one thing I wanna share with you is that, uh, we really prefer that when people just give us a call, pick up the phone and call when you have an issue, we’ll make time for you. Okay. Right.

Speaker 1: (03:12)
And if for some reason you’re watching this video and you are not on YouTube, go ahead and check out. David’s YouTube channel again, just a, a plethora and a wealth of content. Um, I’ve watched David’s videos before to help answer my own questions rather than giving him a call. I just went and watched a video and just answered the question for me really quick, or gave me that piece of information that I needed. So if you go to YouTube and you just go to the search bar, just type in David, so solo, proven resource, right. His channel will pop up, make sure that you like and subscribe right. There you go. And then stay tuned for you’re

Speaker 2: (03:46)
A big booster. Aren’t you? awesome. Thank you, Blair.

Speaker 1: (03:49)
Yes. Yes. So, so David’s questions are, or the questions for David, um, put together by his staff. We have several this evening, we’ll bring you the, the first one. And that comes to us from frustrated in Fenton. These questions always come with such great alliteration. So frustrated in Fenton writes in, I have a remodeling contract with a contractor. It has an arbitration clause. What does that mean to me if I have to Sue them from frustrated in Fentin and, and that’s, that’s a, that’s a good question. That’s a clause that, uh, you know, when, when we first started using contractors, we didn’t know what that meant either. So good question. Frustrated.

Speaker 2: (04:39)
Right. So how about this arbitration in general is, uh, a format, uh, for parties who are disputing a contract or who are having a financial dispute or any type of dispute that forum, uh, is pretty much a faster, unfortunately me a little bit more expensive process to resolve a party’s dispute. It’s usually outside of the court jurisdiction, uh, meaning you’re not going to your district court or your circuit court to have a judge make a decision on whatever the issue might be. Instead, the parties are submitting themselves to more or less a private format for, uh, what we call dispute resolution. Okay. And what happens is the same type of pleadings that, uh, an attorney would file in court, same type of complaint, same type of grievances that we would put in writing and submit to a court. We’re gonna use those same documents in the same type of format.

Speaker 2: (05:51)
Um, interrogatories, discovery, work, uh, uh, litigation processes, all that, uh, that we deal with when we go to court, we’re now going to do it, uh, pretty much on a faster track, uh, with a private, uh, individual who actually is experienced in making decisions. So you’re called an arbitrator or a mediator. Uh, the arbitration can be binding or it doesn’t have to be, uh, but what it really does is it makes the, uh, resolution of a dispute a lot faster for people who are having issues. And you don’t have to wait really for a court decision to take anywhere from, uh, 12 months to 18 months. Um, in, in good times, mm-hmm right now, as you know, we’re dealing with a slow down in the court system because of a pandemic. And so parties are not resolving their matters very fast in regular court.

Speaker 2: (06:51)
Some are taken up to 24 months to get resolved. I have cases that are now scheduled with a job to, uh, pretty much adjudicate the, the case for like out by 36 months. So that’s how long it’s taking to get something done. Uh, there are rules and regulations and arbitration that have nothing to do with how, uh, the courts function and the parties submit themselves to those rules as well. SOS just think of it as a private process. That again is gonna be a faster process. Usually, you know, parties can agree on what they want to, uh, discuss with an arbitrator, uh, what type of evidence can be submitted to the arbitrator. And most importantly, the parties have to pay the arbitrator unlike court, where our dollars pay for, uh, you know, the staff, the court staff, as well as the judge. OK.

Speaker 1: (07:45)
OK. So I in, is anyone, um, does anyone stand to benefit more either the contractor or the, let’s just say homeowner here mm-hmm or you know, who, who whomever it is hired them. Um, is it more in the contractor’s favor? So outside of just obviously the time saved mm-hmm , um, mm-hmm, because of the, because of the differences between an arbitrator or a judge mm-hmm um, why, why would a contractor outside of just this will get done faster? What would be the benefits of the

Speaker 2: (08:18)
Contractor? It’s a great question. Bla, so, um, when I talked about the rules of arbitration, mm-hmm , there are different types of rules and arbitration that, uh, concern let’s say builders, and, uh, usually a builder’s association might be the, uh, uh, the influencer on those rules and regulations, right. Um, with contractors, depending on what type of contractor you might have, uh, you know, a different set of rules, uh, for, for that type of dispute, uh, home builders definitely have their own, uh, rules and regulations, um, and arbitration code. Okay. Regulations. So, um, can it be more beneficial to a contractor to use arbitration? Uh, sometimes, I mean, you know, both parties have to actually agree to who they want to appoint as an arbitrator. However, let’s pretend for a minute, this is a building, uh, dispute, uh, between a builder and a homeowner. The rules of arbitration may say that you, the parties can only select from a certain group of arbitrators.

Speaker 2: (09:31)
And those arbitrators are usually attorneys who happen to deal in construction law. So who do you think, I mean, I’m not saying this happens all the time, but who do you think is using these construction law attorneys more right. More often, right. The builder, uh, is using these real estate attorneys. So it, it can be a little bit more, I mean, I hate to asked any dispersion on very good arbitrators, but, uh, I mean, if there’s a problem or an issue, uh, you can, the, the nice thing is after a decision is rendered, even if it’s binding arbitration, it still has to, there is a, a, uh, input from the circuit court. It still has to be ratified in a proved finally by a circuit court judge. Okay. In order for that arbitration decision to be, uh, effective. Okay. So we just did a pro, I just did a probate arbitration.

Speaker 2: (10:30)
You know, we went through several months of dealing with the properties value and what the errors of an estate were entitled to. Uh, we prevailed, which was nice, but then we had to still take the arbitrator’s decision. And then we had to go to circuit court, pardon me on that one was probate. So we went to the probate court judge, and it’s the probate court judge that gives the rubber stamp, uh, approval. Mm-hmm usually unless the other party objects to it, or claim some type of undue influence on the arbitrator, which is very rare. Very rare. Sure. Okay. Um, so, you know, do I like arbitration clauses? I like them because they do make the, you know, the process a lot faster. Um, do you have, you know, some type of favoritism towards a contractor? I think that most good arbitrators are doing their, you know, I know it’s hard for general public to believe this, but, um, most people wanna do their job and, and, uh, want to be fair.

Speaker 2: (11:28)
And arbitrator also has incentive to be fair because guess what, if he’s not fair and he’s going to, uh, you know, prefer party over another and be prejudiced by, by just the fact that you’re, you know, dealing with a contractor, well, they’re not gonna be hired again. Right. Right. Mm-hmm and some people make arbitration their whole living. Uh, so I’ve really, I personally have never had an issue with any arbitrator in 30, some odd years. Okay. But I have heard stories mm-hmm in this situation. It’s can I tell you something, bla in all situations it’s always best for the parties to resolve their differences without a third party decision maker now yes. I know that we’re going a little, you know, we always kind of go a little bit down the rabbit hole. The one thing is you really have to have an attorney look at your documentation before you sign, because, uh, you may, a good attorney could put in there.

Speaker 2: (12:28)
Look, before you go to arbitration, the parties will agree to mediate. Well, mediation is gonna be less expensive than arbitration. And it’s a, a, a process first that is, um, you know, required before you can get to the more expensive process, more involved process. Right. Okay. So you require, I put that in almost all, unless my client says, no, I don’t. I just wanna go right to arbitration if we have an issue. But for, for the most part, I will put a mediation clause in there that the parties have to mediate before they go to arbitration.

Speaker 1: (13:02)
So the mediation is like an opportunity to resolve it, uh, even faster for even less expense before even having to go to arbitration. Okay. By a

Speaker 2: (13:12)
Mediation usually is not gonna be by mm-hmm it’s going to be, uh, you know, any decision and settlement’s gonna come voluntarily, uh, between the parties mm-hmm arbitration is more or less, uh, like an enforcement. Right? Sure.

Speaker 1: (13:26)
Okay. All right. Great question though. Yeah, no, that, that was, that was a good question. And I think, um, so that was, you know, when we for started using contractors for our properties, that was something that made us raise our eyebrows, but it’s just because we didn’t really understand, we didn’t really understand it, you know, in our, in our mind everything went to court and if you’re trying to bypass getting in front of a judge, there must be something fishy there. But anyway, let

Speaker 2: (13:56)
Me, let me tell you what Blair, before we go to the other question as expensive, it is, as it is for perhaps a homeowner mm-hmm , it’s gonna be just as expensive, uh, for a contractor, right. Mm-hmm they don’t wanna spend the money on an attorney and have to go, so right. It’s incumbent on both parties to try and get things resolved. Yep. And, you know, I think, you know, mediation at the very least is a good place to start. All right. You know? Okay, good.

Speaker 1: (14:22)
Good question. Good question. Good answer. Thank you. From frustrated and right.


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