Arbitration for small contract

2 weeks ago

Hello,

I have a standard arbitration clause in my construction contracts, and I am in a dispute with a general contractor who hired me decided to terminate the contract after the work was performed. The project was for one day of work, however, the site was in a different condition than he specified, and which I described in the contract, and was going to require another day of work. When I brought this up to him and stated that this was going to require more money, he insisted that I cease work, remove my materials and tools.

This was a small job of $6,325 and I want to sue the general contract in small claims court to get paid for the day of labor and the special order material I had to purchase for this job. Since arbitration requires anywhere between $750-$1,500 filing fee, can I take the general contractor to small claims court and waive the arbitration clause from my own contract?

Thank you,
Samantha Suter

Senior Legal Associate Levelset

Generally, an arbitration clause can’t be unilaterally waived. So, if the contract calls for the arbitration of all disputes, and if there’s no way around that arbitration clause within the contract, then a claimant likely would not be able to forgo arbitration in favor of small claims court.

Granted, it might be worth a shot to see if the contractor is willing to waive arbitration – often, a contractor won’t want to be bound by arbitration, either.

Mechanics lien rights may be available, even where an arbitration clause is present

An arbitration clause will block a lot of recovery options. However, a mechanics lien can be filed – even where a binding arbitration clause is present. So, if work was performed which permanently improved the project property, a claimant may be entitled to file a mechanics lien for the value of the work and materials that they provided to the improvement.

Mechanics liens tend to create more pressure to make payment than both arbitration and small claims court – meaning that could be a valuable recovery option on the table, especially considering how much cheaper it is to file a mechanics lien than it is to file arbitration.

Granted, a lien claim will only be allowable to the extent that work was actually performed and materials actually used – so, damages that may be allowable in a breach claim or arbitration might not be lienable.

A Notice of Intent to Lien could lead to payment, too

What’s more, because mechanics liens have such drastic implications, merely threatening to file a mechanics lien – with a document like a Notice of Intent to Lien – can work to compel payment.

When a potential claimant sends a Notice of Intent to Lien to higher-tiered project participants (like their customer, the owner, the GC – really anyone who’d be interested to know a lien might be filed), it lets everyone on the job know that a lien claim is on the horizon if payment isn’t made. Sometimes, that additional pressure may be all it takes to get a customer to do the right thing and get them to pay what’s owed.

More on that here: What Is a Notice of Intent to Lien and Should You Send One?

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