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(A revised version of this article appears in The Construction
Lawyer, Volume 24, No. 3, Summer 2003, published by
the American Bar Association's Forum on the Construction
Industry.)
By John W. Ralls
An
owner and contractor used an AIA contract for a home improvement
project. The contract incorporated by reference AIA general
conditions requiring the parties to submit disputes to the
project architect for decision. The contract provided that
the architect's decision was "final and binding on
the parties subject to arbitration." Under the contract,
either party could demand arbitration of the dispute by
filing "notice of demand for arbitration… with
the other party to the Agreement…, with the American
Arbitration Association… and… with the architect."
The contract also provided that failure to demand arbitration
within 30 days would result in "the architect's decision
becoming final and binding…."
A
dispute arose between the owner and contractor, and the
architect issued a written decision in favor of the owner.
The contractor faxed a demand for arbitration to the architect's
office 29 days after receiving the decision. The contractor
did not send the arbitration demand to the owner or to the
AAA.
The
owner applied for confirmation of the award and moved for
entry of judgment. The trial court treated the architect's
decision as a final and binding arbitration award under
the Uniform Arbitration Act and entered a judgment in favor
of the owner. The contractor appealed. The Idaho Supreme
Court affirmed. Martel v. Bulotti, 65 P.3d 192 (Idaho
2003).
The
Idaho Supreme Court agreed with the contractor that the
architect's decision was not an arbitration award, subject
to confirmation. However, the court concluded that the facts
were undisputed and that the owner was entitled to judgment
pursuant to the terms of the contract.
The
court rejected the contractor's argument that it had "substantially
complied" with the contract clause regarding filing
for arbitration. The court said that it "need not decide
whether faxing constituted filing under the contract or
whether the substantial or strict compliance applies to
determining whether one properly demanded arbitration under
the terms of a contract; even assuming findings favorable
to [contractor] on these issues, [contractor] nonetheless
failed to substantially comply with the terms of the contract
governing demands for arbitration…. Notice to the architect
-- or even the architect and [owner] -- would do, and did,
nothing to trigger the arbitration process. Rather, the
trigger for the arbitration process was filing with the
AAA."
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