How Does Construction Arbitration Work in Texas?

Construction disputes can quickly become costly and disruptive. Payment disagreements, project delays, change orders, construction defects, cost overruns, and contract termination issues can affect contractors, subcontractors, developers, property owners, suppliers, architects, engineers, and other construction professionals.

Litigation is not always the only way to resolve these disagreements. Many Texas construction contracts contain arbitration provisions requiring certain disputes to be resolved outside the traditional courtroom process.

Understanding how construction arbitration works in Texas can help you prepare for the process and make informed decisions about protecting your business, project, and financial interests.

Patout, Fontana, and Dellis PLLC represents clients in construction arbitration and other alternative dispute resolution matters in Houston and throughout Texas. The firm's construction law attorneys assist contractors, property owners, developers, design professionals, suppliers, and other parties facing complex construction disputes.

What Is Construction Arbitration?

Construction arbitration is a method of resolving a dispute outside of a traditional court trial. Instead of presenting the case to a judge or jury, the parties generally present their arguments and evidence to an arbitrator or arbitration panel.

Arbitration shares certain characteristics with litigation. The parties may make opening statements, present documents and testimony, challenge the opposing party's position, and make arguments supporting their requested outcome.

However, arbitration can operate under different procedural and evidentiary rules than traditional litigation. The applicable procedures may be established by the parties' contract, the arbitrator, applicable law, or the organization administering the arbitration.

At the conclusion of the proceeding, the arbitrator issues an award resolving the dispute. When arbitration is binding, opportunities for judicial review are generally limited.

Patout, Fontana, and Dellis PLLC handles construction arbitration as part of its broader construction law and dispute resolution practice and can help clients understand what the process may mean for their particular dispute.

Why Are Construction Disputes Often Handled Through Arbitration?

Construction projects frequently involve detailed contracts connecting numerous businesses and professionals. Those agreements may include arbitration provisions that establish how certain disputes must be resolved.

Arbitration may also appeal to parties seeking an alternative to courtroom litigation.

Whether arbitration is appropriate or required depends heavily on the agreement and circumstances involved. Before assuming that a dispute must proceed to arbitration—or that litigation is available instead—the underlying construction contract should be carefully reviewed.

If you are uncertain about the dispute resolution provisions in your agreement, Patout, Fontana, and Dellis PLLC can review your construction contract and help you understand your rights, obligations, and available options.

Step 1: Review the Construction Contract

One of the first steps in a potential construction arbitration is determining what the contract says about dispute resolution.

An arbitration provision may address issues such as:

• Which disputes must be arbitrated
• Whether arbitration is binding
• How an arbitrator will be selected
• Where arbitration will occur
• Which procedural rules apply
• How arbitration costs will be handled
• Whether mediation is required first
• Notice requirements
• Deadlines for initiating the process
• Whether a particular arbitration organization will administer the proceeding

Contract language matters.

Texas Civil Practice and Remedies Code Chapter 171 addresses arbitration agreements and procedures under Texas law. Among other provisions, Texas law provides a process through which a party may ask a court to compel arbitration when an agreement to arbitrate exists and another party refuses to arbitrate.

Because construction agreements can contain detailed dispute resolution requirements, having a construction attorney evaluate the contract early can help determine how the dispute should proceed.

Patout, Fontana, and Dellis PLLC assists clients with construction contract drafting, negotiation, review, disputes, arbitration, and litigation.

Step 2: A Demand for Arbitration May Be Filed

When a dispute falls within an arbitration agreement, one party may initiate the process by submitting a demand for arbitration according to the applicable contractual and procedural requirements.

The demand generally identifies the parties, describes the dispute, and states the relief being requested.

The specific filing process will depend on the agreement and rules governing the arbitration.

Receiving a demand for arbitration should not be treated as routine correspondence. It signals that a formal dispute resolution proceeding is underway or being initiated.

If your company receives a construction arbitration demand, consider having an attorney review it promptly.

Patout, Fontana, and Dellis PLLC can evaluate the demand, review the underlying contract, identify important procedural requirements, and help develop a strategy for responding.

Step 3: The Arbitrator Is Selected

Instead of having a judge assigned to the dispute, arbitration generally involves selecting an arbitrator or panel.

The contract may establish how this selection occurs. In other cases, the applicable arbitration rules provide a process for choosing the decision-maker.

The arbitrator's role is significant because that person or panel will hear the parties' positions, consider the evidence, and ultimately decide the dispute.

Construction cases can involve technical documents, complicated contracts, scheduling records, engineering questions, payment histories, and multiple parties. The selection process therefore deserves careful attention.

Having legal counsel throughout this stage can help ensure that contractual procedures are followed and important considerations are not overlooked.

Step 4: The Parties Prepare Their Cases

Preparation can have a major impact on construction arbitration.

Construction projects often generate substantial amounts of documentation, and those records may become important when reconstructing what occurred.

Potential evidence can include:

• Construction contracts
• Subcontracts
• Plans and specifications
• Change orders
• Requests for information
• Project schedules
• Daily reports
• Photographs and videos
• Emails and text messages
• Invoices
• Payment applications
• Inspection records
• Notices
• Meeting minutes
• Correspondence between project participants
• Records concerning alleged defects
• Documents concerning delays or additional costs

The relevant evidence will depend on the dispute.

For example, a payment arbitration may focus heavily on contracts, invoices, payment applications, and documentation showing completed work. A delay dispute may require extensive analysis of project schedules and communications. A construction defect matter may involve plans, inspections, photographs, and evidence concerning workmanship or materials.

Patout, Fontana, and Dellis PLLC represents clients in disputes involving change orders, defects, project delays, cost overruns, contract termination, payment issues, insurance, and liability matters.

Step 5: Information and Documents May Be Exchanged

Arbitration does not necessarily mean the parties simply appear at a hearing without preparation.

Depending on the applicable rules and circumstances, the parties may exchange documents and other information before the arbitration hearing.

The process may be more streamlined than discovery in traditional litigation, but construction disputes can still involve significant amounts of evidence. Organizing project documentation early can therefore be valuable.

Businesses facing a dispute should consider preserving relevant electronic and physical records rather than waiting until the hearing approaches.

An attorney can help identify which materials may be important and prepare the evidence for presentation during arbitration.

Step 6: Preliminary Issues May Be Addressed

Before the final arbitration hearing, procedural questions may need to be resolved.

Depending on the case, these could involve scheduling, document exchange, witnesses, hearing procedures, the scope of the arbitration, and other matters affecting how the dispute will proceed.

There may also be disagreements about whether a particular claim is subject to arbitration in the first place.

Texas law provides mechanisms for addressing certain disputes concerning arbitration agreements, including circumstances in which a party seeks to compel another party to arbitrate.

Because these procedural questions can affect the direction of the case, early legal representation can be important.

Step 7: The Construction Arbitration Hearing Takes Place

The arbitration hearing gives each side an opportunity to present its case.

Although the exact procedure varies, the parties may present:

• Opening statements
• Documents
• Witness testimony
• Technical evidence
• Arguments concerning the contract
• Evidence regarding damages
• Responses to the opposing party's claims
• Closing arguments

The arbitrator evaluates the evidence and arguments presented by the parties.

Patout, Fontana, and Dellis PLLC notes that arbitration can resemble a trial because parties present evidence and arguments to an arbitrator or panel with authority to decide the dispute.

Construction disputes can involve significant financial consequences, so presenting a clear and well-supported case is important.

Patout, Fontana, and Dellis PLLC represents clients during construction arbitration and can prepare arguments, organize evidence, address opposing claims, and advocate for the client's interests throughout the proceeding.

What Types of Construction Disputes Can Go to Arbitration?

The types of disputes that may proceed through arbitration depend on the contract and circumstances.

Common construction disputes can involve:

Change Orders

Disagreements may develop over whether additional work was authorized, how much should be paid, or whether additional time should have been granted.

Construction Defects

Defect disputes may involve allegations concerning design, materials, workmanship, code compliance, or other deficiencies.

Project Delays

Owners, contractors, and subcontractors may disagree about what caused a delay and which party should bear the resulting costs.

Cost Overruns

Unexpected project costs can create disputes concerning contractual responsibility and additional compensation.

Contract Termination

Terminating a construction agreement before completion can create disagreements over payment, performance, damages, and responsibility for completing the work.

Payment Disputes

Contractors, subcontractors, suppliers, developers, and owners may disagree about unpaid balances, withheld payments, retainage, additional work, or other financial obligations.

Insurance and Liability Issues

Construction projects can also generate disputes involving insurance coverage and allocation of responsibility among project participants.

These are among the construction arbitration matters identified by Patout, Fontana, and Dellis PLLC in its Houston construction arbitration practice.

Arbitration vs. Mediation: What Is the Difference?

Arbitration and mediation are both forms of alternative dispute resolution, but they serve different purposes.

In mediation, a neutral mediator helps the parties communicate, negotiate, and explore a mutually acceptable settlement. The mediator does not generally decide which side wins.

In arbitration, the arbitrator acts as the decision-maker. The parties present their positions, and the arbitrator issues an award resolving the dispute.

Patout, Fontana, and Dellis PLLC handles both mediation and arbitration matters and also represents clients participating in these proceedings.

Determining which process applies often begins with reviewing the construction contract.

Arbitration vs. Construction Litigation

Traditional litigation generally takes place in court before a judge and, when applicable, a jury. Arbitration occurs outside the traditional court trial process before an arbitrator or arbitration panel.

Arbitration may offer different procedures for presenting evidence, exchanging information, scheduling hearings, and resolving disputes.

However, arbitration should not be viewed as informal negotiation. A binding arbitration award can have significant consequences, and the ability to challenge an unfavorable result can be limited.

For that reason, businesses should approach construction arbitration with the same attention to preparation and strategy that they would give significant litigation.

Patout, Fontana, and Dellis PLLC has experience with both construction arbitration and litigation, allowing the firm to assist clients with disputes regardless of the forum in which they proceed.

What Happens After a Construction Arbitration Hearing?

After the parties have presented their cases, the arbitrator evaluates the evidence and arguments and issues an award.

The award determines the outcome of the dispute and may address issues such as monetary damages or other relief depending on the claims and arbitration agreement.

When an arbitration award is binding, judicial review is generally much narrower than the review available after an ordinary trial. Patout, Fontana, and Dellis PLLC explains that a binding award may be enforceable through the courts and subject to challenge only in limited circumstances.

This makes preparation before and during arbitration particularly important.

If you receive an arbitration award and have questions about enforcement or your available options, Patout, Fontana, and Dellis PLLC can review the circumstances and explain potential next steps.

Do You Need a Construction Arbitration Attorney?

Construction arbitration can involve significant amounts of money, complicated contracts, extensive project records, and technical factual disputes.

A construction arbitration attorney can assist with:

• Reviewing arbitration clauses
• Evaluating claims and defenses
• Responding to arbitration demands
• Preparing arbitration filings
• Organizing project documentation
• Addressing procedural issues
• Preparing witnesses
• Presenting evidence
• Challenging opposing arguments
• Negotiating potential settlements
• Representing clients at arbitration hearings
• Evaluating issues involving arbitration awards

Getting an attorney involved early can also help ensure that contractual deadlines and procedural requirements are identified before they become problems.

Houston Construction Arbitration Lawyers Serving Clients Throughout Texas

Construction disputes can threaten project schedules, business relationships, cash flow, and profitability. Whether you are pursuing a claim or defending your company against one, understanding the arbitration process is an important first step.

Patout, Fontana, and Dellis PLLC represents contractors, subcontractors, developers, owners, architects, engineers, suppliers, and other construction participants in arbitration and related disputes. The firm's broader construction practice also includes contract matters, delay and scheduling claims, change-order disputes, defaults, payment disputes, defects, liens, and construction litigation.

With a Houston office and service throughout Texas, the firm can help clients evaluate their construction disputes and determine an appropriate strategy for moving forward.

Contact Patout, Fontana, and Dellis PLLC About Construction Arbitration

If you have received a demand for arbitration, are considering bringing a construction claim, or have questions about an arbitration provision in your contract, you do not have to navigate the process alone.

Patout, Fontana, and Dellis PLLC can review your construction agreement, evaluate the dispute, explain the arbitration process, and advocate for your interests from the initial stages through the hearing and resolution.

Call Patout, Fontana, and Dellis PLLC at 346-460-5528 today to schedule a consultation with a Houston construction arbitration attorney.