Do I Really Need a Dispute Resolution Clause in a Construction Agreement?

A dispute resolution clause ('DRC') is sometimes regarded as a boilerplate term in construction agreements: something that's necessary, but that doesn't require the care or consideration given to the basic elements of the project. In fact, both aspects of this assumption are wrong. Sometimes, such clauses are undesirable and, in cases where they are used, they can be extremely important from a commercial perspective.

When considering a DRC in a draft construction contract, your first question must be, 'Do I need this?' A dispute resolution clause may well be undesirable. Sometimes, a dispute is best resolved by taking it straight to court, without formal mediations and arbitrations that could mean wasted time and money. In the absence of a dispute resolution clause, litigation can be commenced as soon as it becomes clear that negotiation will be fruitless.