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Court Considers Whether Arbitration Can Be Compelled Under AIA Contract When No Architect Is Named
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June 7, 2010
By Andrew M. Argyris
Tillman Park, LLC contracted with Dabbs-Williams General Contractors, LLC to build a condominium project in Statesboro, Georgia. After completion of the project, Dabbs-Williams sued Tillman Park and its owner, T. Holmes Ramsey. It sought to recover the cost of extra work and changed work that it alleged it had performed pursuant to oral agreements with the developer.
Tillman Park and Mr. Ramsey responded by moving to compel arbitration, relying on the arbitration clause in the construction contract.
In opposing the motion, the contractor asserted that the agreement’s arbitration provisions were unenforceable because they required the parties to submit disputes to the project architect as a condition precedent to arbitration. The construction contract, however, did not name an architect. Instead, “N/A” was entered in the space in the contract for designating the architect’s name.
The contract was a 1997 edition American Institute of Architects’ standard form agreement. The appeals court wrote that the contract incorporated AIA’s standard form general conditions into it.
The contractor based its condition precedent argument on a provision in the general conditions that provides:
| An initial decision by the architect shall be required as a condition precedent to mediation, arbitration or litigation of all claims between the contractor and owner arising prior to the date final payment is due, unless 30 days have passed after the claim has been referred to the architect with no decision having been rendered by the architect.
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Two hearings were held on the motion to compel arbitration. At the first, the developer offered evidence that it did not employ an architect to administer the contract as a cost-saving measure. At the second, the developer offered testimony from its construction lender that it had required use of the AIA forms as a condition of providing financing. And, a Wayne Ramsey testified that he was the architect for the project and that although he did not administer the contract, he was “on call” and available for dispute resolution during the project.
Wayne Ramsey testified that it is common practice in the construction industry for owners to use standard-form AIA contracts while not employing a project architect to administer the contract. Wayne Ramsey asserted that, without a designated architect, the general industry practice and understanding is to consider all contract provisions relating to the architect to be waived in order to maintain the validity of the contract’s other terms. Otherwise, because of the architect’s central role in the standard form agreement, the entire contract would be invalidated. Wayne Ramsey testified that as a result of this, the general industry practice is for dispute resolution to proceed directly to mediation and arbitration when no architect has been appointed.
The contractor offered no evidence on this issue, having received the affidavits only the night before the hearing.
The Superior Court denied the motion to compel arbitration, holding that the contractor was correct in asserting that there had been a failure of a condition precedent to arbitration because no architect was named in the agreement.
On interlocutory appeal, Court of Appeals affirmed the trial court’s denial of the motion to compel T. Holmes Ramsey to arbitrate.
As for the developer limited liability company, the Court of Appeals wrote that the issue was “whether impossibility of compliance with a condition precedent to arbitration vitiates the agreement’s arbitration requirement.” Tillman Park, LLC v. Dabbs-Williams General Contractors, LLC, 298 Ga.App. 27, 679 S.E.2d 67 (2009).
The appeals court considered a Florida case relied upon by the trial court, The Auchter Co. v. Zagloul, 949 So.2d 1189 (Fla.App.2007), which held that the lack of a designated architect in AIA general conditions made submission of a dispute to an architect an impossibility and, therefore, not a condition precedent to arbitration.
Although the appeals court agreed that Auchter was consistent with industry-wide interpretation of the AIA general conditions, it held that the contract was ambiguous, that the ambiguity could not be resolved by legal analysis and that fact-finding was needed to determine the intent of the parties.
| In our opinion, whether failure of the owner to name an architect in a standard-form AIA agreement results in failure to meet a condition precedent thereby dispensing with the agreement’s arbitration requirement, or whether it results in an impossibility to satisfy the condition precedent thereby dispensing with the condition-precedent requirement, is a question that the agreement does not unambiguously answer and which statutory rules of construction do not resolve. The meaning of the contract and intent of the parties therefore becomes a question for the trier of fact, which is the trial court in this case.
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The appeals court reversed the Superior Court’s denial of the developer LLC’s motion to compel arbitration and remanded the case to the trial court. To ascertain the intention of the parties, the appeals court directed the trial court to decide whether the contractor and the developer intended the arbitration clause to apply under the facts the court finds to have been present. The court wrote that parol evidence should be considered in determining the parties’ contractual intentions:
| Unquestionably, failure of the agreement to name an architect in the blank space provided for designation of the architect, while making continuing references to the role of the architect in the standard-form provisions, created an ambiguity explainable by parol evidence.
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