The use of arbitration as a method of dispute resolution has grown over the years. Arbitration proceedings appeal to parties on private construction projects as an expeditious way to resolve disagreements. Legislatures and courts view it as an effective means of reducing crowded dockets. Statutes and case law strongly favor enforceability of arbitration clauses and arbitration awards.

Binding arbitration sometimes throws curveballs, however. This was illustrated in two recent cases. In one, a contractor arbitrated a claim against a project owner for unpaid retainage. The contractor prevailed and received an arbitration award. The contractor then went to court seeking attorney fees under the state's prompt payment statute. The owner said "too late," the claim should have been submitted to arbitration. The contractor argued that entitlement to attorney fees was established by the statute, not by the construction contract, which contained the arbitration clause, so it was not subject to arbitration. But in the end, the owner won the argument.

The other case involved the sometimes tricky interplay between mandatory arbitration and mechanic's lien rights. A mechanic's lien cannot be perfected and foreclosed without a lawsuit, yet the contractor has committed to arbitration of all disputes. An Indiana court showed that with proper procedure, these remedies are not mutually exclusive.

The third case reported this week considered whether the competitive bidding statutes applied to a lease-to-purchase agreement for a custom designed municipal facility.