What is an arbitration? Arbitration is a type of conflict resolution where arbitrators conduct a hearing so that both parties may present their issues. This is typically seen when a conflict arises that the parties cannot resolve by themselves.
The arbitration process is similar to a hearing, with opening and closing arguments along with testimony from witnesses. After all information has been presented, the arbitrators will make a decision, which is then usually enforceable in court.
To begin the process, there must be an arbitration clause in the contract stating that both parties acknowledge the process and will follow all the rules. This agreement defines the guidelines and declares both parties will commit to resolving the dispute through arbitration.
Typically, the arbitration process has regulations set at both the federal and state level. The circumstances of the situation determine which rules to follow. The case of GeoSurveys, Inc. v. State Nation Bank set precedence that arbitration should align with the statute as defined in the arbitration agreement. In the case that the arbitration agreement specifically states that the Texas Arbitration Act is applicable, the TAA would override the rulings of the Federal Arbitration Act. However, federal courts may require arbitration to be under the guidelines set by FAA in certain situations.
Who administers the arbitration process? The American Arbitration Association administers most arbitration cases regarding construction disputes. Arbitration clauses in construction contracts will most likely refer to AAA as the administrating agency for arbitrations, as AAA has an old and well-known set of rules for arbitration of construction disputes.
If you would like to consider adding an arbitration clause to your contract, it is worth it to discuss the legal implications beforehand. Arbitration contains many rules and procedures from both the FAA and the TAA. It is important to converse with an experienced real estate attorney to navigate the process. We invite you to contact us at 713-572-4900.