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
C) 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 B: 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 D: The dispute must go to binding arbitration instead of court
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
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