FAILURE TO DEMAND ARBITRATION IN ACCORDANCE WITH CONTRACT IS FATAL TO SUBCONTRACTOR CLAIMS.

Court’s in many jurisdictions, including Oklahoma, strictly interpret and apply time limits in contracts. This is especially true when satisfying those time limits is a precondition to a contractor’s right to exercise certain rights under the contract.

One subcontractor in Florida learned this the hard way. In that case the subcontractor made a claim for additional compensation to the general contractor. The general contractor denied the subcontractor’s claim. The subcontract provided that arbitration was the only method of dispute resolution for claims under the subcontract. The subcontract also provided that the general contractor’s decision as to claims was “final and conclusive” unless the subcontractor made demand for arbitration within twenty days after the general contractor denied subcontractor’s claim.

Subcontractor failed to make demand for arbitration within the required twenty day time frame and, as a result, the general contractor refused to submit the subcontractor’s claims to arbitration. Subcontractor then filed a lawsuit asking the trial court to compel arbitration, which the trial court did. The general contractor appealed the trial court’s order compelling arbitration. The appellate court saw things differently. Concluding that a demand for arbitration within the time established in the subcontract was a condition precedent to the subcontractor’s right to arbitrate its claim, the appellate court ruled that the subcontractor lost its right to have its claim resolved by arbitration by failing to comply with the 20 day time requirements in the subcontract for demanding arbitration. See Hubbard Construction Co. v. Jacobs Civil, Inc., 969 So.2d 1069 (Fla. App. 2007).

This case is but another illustration of the importance of knowing your contract and complying with its terms. An even better outcome would have resulted had the subcontractor sought help in negotiating the terms of its subcontract before signing it, including eliminating the strict time limits for demanding arbitration.

Steven K. Metcalf