Tag Archives: construction contracts

Arbitration in Construction Contracts

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Arbitration in Construction Contracts

Many construction contracts contain arbitration provisions, requiring that all disputes be decided by arbitration as opposed to in court.  A court has a three-pronged test to determine whether a dispute is subject to arbitration: (1) whether there is a valid agreement between the parties to arbitrate; (2) whether the specific issue is subject to arbitration; and (3) whether the right to arbitration was waived.

The recent case of Am. Eagle Veteran Contracting, LLC v. Eiland highlights when a party waives its right to arbitration by actively participating in the lawsuit or by acting in a way that is inconsistent with the right to arbitrate.  2016 WL 6023934, at *1 (Fla. Dist. Ct. App. Oct. 14, 2016).

In American Eagle, American Eagle, the general contractor, subcontracted with Architectural Drywall for work on a construction project.  The contract between American Eagle and Architectural Drywall contained an arbitration provision.  A dispute arose between the parties and Architectural Drywall sued American Eagle for breach of contract as a result of American Eagle’s failure to make payment.  American Eagle responded by filing a motion to stay the proceedings pending arbitration.

Architectural Drywall filed a motion for summary judgement.  American Eagle responded by filing a motion to stay the proceedings, compel arbitration, and to strike Architectural Drywall’s motion for summary judgement.  While American Eagle’s motion to compel was still outstanding, the trial court granted summary judgment in favor of Architectural Drywall.

On appeal, American Eagle argued that summary judgement was inappropriate because a genuine issue remained relating to American Eagle’s motion to compel arbitration.  The Fifth District Court of Appeals agreed with American Eagle, finding that the trial court erred in failing to rule on the motion to compel arbitration prior to the entry of summary judgment.  Florida public policy favors arbitration and parties with an agreement for arbitration have a right to arbitrate disputes.

By consistently claiming its right to arbitration from the beginning of the action and not filing an answer or any other pleading in response to the complaint, American Eagle did not waive its right to arbitration.  A party must be careful not to take any action in litigation that may cause it to unintentionally participate in litigation.  Such action may be construed as waiver of the right to arbitrate.

Is This Construction Contract’s Venue Provision Enforceable?

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Is this construction contract’s venue provision enforceable?

It is important to review your venue provisions in your construction contracts to make sure they are enforceable.  Pursuant to section 47.025, Florida Statutes, “[a]ny venue provision in a contract for improvement to real property which requires legal action involving a resident contractor, subcontractor, sub-subcontractor, or materialman, . . .to be brought outside [of Florida] is void.”  Where the provision is void, venue shall be brought where the property is located, where the defendant resides, or where the cause of action accrues.

So here is what the statutes says:

  • If one party to a construction contract is a resident of Florida; and
  • If the construction contract has a venue provision outside of Florida;
  • Then that provision is void.

Does it matter if the contract also has a choice of law provision – applying the law of another state?

No.  In Kerr Construction, Inc. v. Peters Contracting, Inc., 767 So. 2d 610 (Fla. 5th DCA 2000), the Fifth District Court of Appeal held that section 47.025 is procedural and not substantive.  When a law is procedural the court applies the law of the forum rather than the law selected by the parties.  Therefore, for purposes of applying section 47.025, it is irrelevant as to whether the parties have a choice of law provision in their construction contract.  So, if a Florida resident contractor enters into a Florida construction project, and there is a provision in the contract which applies the law of a different state and requires venue in another state, that provision is void and litigation can proceed in Florida.