Tag Archives: dispute resolution provision

FOLLOW THE DISPUTE RESOLUTION PROVISION(S) IN YOUR CONTRACT

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When you are in a dispute, one of the first things you want to look at is the dispute resolution provision(s) in your contract.  What does the provision(s) say? (There could be more than one provision.) Do you need to mediate first? Are disputes decided via arbitration or litigation? Is there a venue provision? Is there a waiver of jury trial? Is there an attorney’s fees provision? Is there a choice of law provision?  You want to know this BEFORE you proceed with escalating the dispute. Not following the dispute resolution provision(s) can have consequences. Below is an example.

In Pesantes v. Kelley, 50 Fla. L. Weekly D519a (Fla. 3d DCA 2025), a residential buyer and residential seller were in a dispute. The parties entered into an as-is residential contract. The contract included a dispute resolution provision that required the parties to mediate their disputes and if they were unable to settle through mediation, then the parties could litigate their dispute. There was also a prevailing party attorney’s fees provision that stated, “In any litigation permitted by this Contract, the prevailing party shall be entitled to recover from the non-prevailing party costs and fees, including reasonable attorney’s fees, incurred in conducting the litigation.” Pesantes, supra.

The buyer filed a lawsuit against the seller for negligence without complying with the pre-suit mediation requirement. The seller did not move to compel mediation. The seller, instead, responded claiming the dispute was governed by the contact and demanded prevailing party attorney’s fees per the contract. Months later, the buyer dismissed the lawsuit and the seller moved for prevailing party attorney’s fees. The trial court denied the motion. The appellate court confirmed based on the language in the dispute resolution provision(s):

[T]he right to prevailing party attorney’s fees in litigation of a claim ‘arising out’ the Contract is triggered, (i.e., ‘permitted’) only where the parties have participated in the pre-suit mediation required by paragraph 16 and have reached an impasse (i.e., “not settled’) at such pre-suit mediation.

In other words, the Contract specifically limits fee entitlement to the prevailing party in lawsuits ‘permitted by’ the Contract. Had the Contract’s drafters intended for a broader application of fee entitlement – that is, for a prevailing party in any lawsuit ‘arising out’ of the Contract to be entitled to fees—the drafters would have included the same, broad “arising out of’ language that the drafters employed in paragraph 16. They did not, and this Court is powerless to rewrite the parties’ agreement.

Pesantes, supra (internal citations omitted).

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

 

UNDERSTAND THE DISPUTE RESOLUTION PROVISION YOU ARE AGREEING TO

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When negotiating a contract, do not overlook the dispute resolution provision.  It is one of the more important provisions in your construction contract.   This provision will come into play and have ramifications if there is a dispute, which is certainly not uncommon on a construction project.

In dispute resolution provisions in subcontracts on federal projects, it is not unusual for that provision to include language that requires the subcontractor to STAY any dispute that concerns actions or inactions of the owner pending the resolution of any dispute between the owner and prime contractor relating to that action or inaction.   A provision to this effect should be included for the benefit of the prime contractor.  For instance, the provision may say the subcontractor agrees to stay any such claim against the prime contractor or prime contractor’s surety pending the outcome of any pass-through claim (or otherwise) submitted under the Contract Disputes Act.

For example, in U.S.A. f/u/b/o Ballard Marine Construction, LLC v. Nova Group, Inc., 2021 WL 3174799 (W.D. Wash. 2021), a prime contractor hired a subcontractor to perform a scope of work at a naval shipyard.  A differing site condition was encountered and the subcontractor was directed to continue performance and track its costs.  The subcontractor completed its work and submitted its approximate $13 Million claim from the prime contractor and its Miller Act payment bond surety.  The prime contractor and surety refused to pay until the resolution of the pass-through differing site conditions claim to the federal government.  The prime contractor had submitted a claim under the Contract Disputes Act to the federal government.  The subcontractor was not interested in waiting until the resolution of the Contract Disputes Act claim and filed suit against the prime contractor and Miller Act payment bond surety.  The prime contractor and surety moved to stay pending the outcome of the Contract Dispute Acts claim.  The trial court agreed with the prime contractor explaining, “It is not fruitful to require [the prime contractor] to fend off [the subcontractor’s] claim against it, and the [Miller Act] sureties [the prime contractor] agreed to indemnify, while simultaneously advancing [the subcontractor’s] claim for additional payment from the government through the ongoing CDA process.  [The subcontractor] agreed to such a dispute resolution procedure, and it does not claim that the increased costs were [the prime contractor’s] fault.”  Nova Group, supra, at *8.

A subcontractor with such a provision is still required to timely perfect and preserve its rights by timely filing a lawsuit against the Miller Act payment bond surety.  However, the subcontractor is now beholden to the Contract Dispute Act procedure which requires an initial decision by the contracting officer and, then, certain appeal rights.   This is not what the subcontractor wanted because it elongates any potential resolution.  However, this is what the subcontractor agreed to in the dispute resolution provision and benefits the prime contractor so that it does not have to fight the fight on two fronts, particularly when it is supporting the pass-through claim under the Contract Disputes Act claim process.

Remember, the dispute resolution provision in your contract is important and should not be overlooked; the provision has ramifications as shown in the above case!

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.