Sometimes it is a race to the courthouse and dispute resolution for construction disputes can take many forms: litigation, mediation, arbitration, med-arb, dispute review boards, flip-a-coin, etc. Every now and then, I will review a construction contract where one of the parties . . . “at its sole option” . . . has the right to demand arbitration.  This can be a good provision if you are the party who has that option.

In Archer Western Contractors, LLC v. Holder Construction Company, the Georgia Court of Appeals recently affirmed the trial court’s decision to grant a contractor’s motion to compel arbitration with a “sole option” provision. The main subcontract included the following disputes clause:

[All disputes] arising out of or related to the Work or the [Phase 3] Subcontract or any breach thereof…shall be decided, at the sole option of [contractor], by binding arbitration in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association then in effect.

The contract also contained a venue provision, which stated that “all matters relating to the validity, performance or interpretation of this Subcontract shall be governed by the laws of the state where the Project is located [Georgia].”

The subcontractor argued that the provision relating to venue and jurisdiction of any legal proceeding supplanted the arbitration provisions, but the Court of Appeals disagreed, finding that the provision merely provided for venue and jurisdiction if the contractor decided not to submit to binding arbitration.

While the decision did not turn on the “sole option” language, it is important to review carefully the disputes clause in your construction contract to fully understand who has the right to demand arbitration and what rules will apply.