An owner and contractor have a dispute over $45,000 in additional work. The contract specifies that disputes under $50,000 must first go to mediation before litigation. The contractor wants to file a lawsuit immediately. What should happen?
Correct Answer
B) The court will likely require mediation first per the contract terms
When a contract specifies a dispute resolution process such as mandatory mediation before litigation, courts typically enforce these provisions and require parties to follow the contractual dispute resolution procedures before allowing litigation to proceed.
Why This Is the Correct Answer
Courts generally enforce contractual dispute resolution clauses as written, viewing them as valid agreements between parties. Since the contract specifically requires mediation for disputes under $50,000, and this dispute is $45,000, the mediation requirement applies. Courts will typically stay litigation proceedings until the contractual mediation process is completed, as parties are bound by the terms they agreed to in their contract.
Why the Other Options Are Wrong
Option A: The contractor can proceed directly to litigation since the amount exceeds $40,000
This option incorrectly suggests there's a $40,000 threshold that allows bypassing mediation, but the contract clearly states disputes under $50,000 must go to mediation first. The $45,000 dispute falls below the $50,000 threshold, so mediation is required regardless of any other amount.
Option C: The dispute must go to binding arbitration instead of court
The contract specifies mediation, not arbitration. These are different dispute resolution methods - mediation is non-binding facilitated negotiation, while arbitration results in a binding decision. The contract terms control what process must be followed.
Option D: Either party can choose between mediation and litigation
When a contract contains mandatory dispute resolution language (like 'must first go to mediation'), neither party has the choice to bypass this requirement. The contractual obligation is binding on both parties, and courts will enforce the agreed-upon sequence of dispute resolution.
Memory Technique
Remember 'Contract Controls Courts' - when contracts specify dispute procedures, courts typically enforce them rather than allow parties to skip agreed-upon steps.
Reference Hint
Florida Construction Law - Chapter on Contract Dispute Resolution and Alternative Dispute Resolution (ADR) provisions
More Contract Admin Questions
A project experiences a 30-day delay due to unusually severe weather. The contract includes a liquidated damages clause of $1,000 per day for delays. If the weather delay is excusable but not compensable, what liquidated damages apply?
A commercial project requires a total of 12 inspections. The building department charges $85 per inspection for the first 5 inspections, $65 for inspections 6-10, and $45 for any additional inspections. What is the total inspection fee?
What document must be posted at the job site before a Certificate of Occupancy can be issued for a commercial building?
A mixed-use development requires a variance for reduced setbacks. The property is located within 500 feet of a hospital. What additional consideration must be addressed?
A LEED project requires tracking of regional materials. Materials are considered regional if they are extracted, harvested, or recovered, as well as manufactured within what distance of the project site?
People Also Study
Business & Financial Management
120 questions · 70% to pass
Project Management
60 questions · 70% to pass