ACHRNEWS

March 23, 2007: Appeals Court Upholds Contractors' Right to Require Arbitration

March 23, 2007

WASHINGTON - Siding with the Associated General Contractors of America (AGC) and its Greater Florida Chapter, the Court of Appeals for the First District of Florida has held that the arbitration clauses embedded in standard contracts widely used throughout the construction industry survive contract termination. The court found it "well established that the duty to arbitrate does not necessarily end when a contract is terminated" and stated that, at least in Florida, such clauses apply to "disputes arising after the cancellation of the underlying contract unless … specifically excluded."

"Both project owners and their contractors are entitled to know what they are agreeing to do," said AGC CEO Stephen E. Sandherr. "We cannot have the courts reinterpreting standard language which owners and their contractors have chosen specifically to stabilize their relationship."

Before the court was the 1997 version of the "A201," a standard form construction contract that the American Institute of Architects (AIA) has published and that continues to govern the construction of many projects. The case arose very near the contractor's completion of the project that its contract covered, and after the contractor had secured a certificate of occupancy. At that late point in the process, the owner unilaterally terminated the contract and then filed a lawsuit against the contractor. In response, the latter filed a motion to compel the owner to arbitrate its dispute, and to dismiss or stay the lawsuit pending arbitration. The trial court denied the contractor's motion. The appellate court has now reversed the lower court's decision.

In the friend-of-the-court brief filed in "The Auchter Company v. Fouad Zagloul," AGC and its chapter had stressed that the trial court's "misinterpretation of well worn language" threatened to throw "an enormous number of contracts incorporating A201 into a state of uncertainty."

Publication date: 03/19/2007