Construction contracts in New York often place the architect or engineer in the additional role of an initial impartial decider as to any disagreement or disputes between the contractor and the owner, in addition to their roles as the design professionals.

Such clauses make the architect or engineer an arbitrator for purposes of factual disputes on the project, and are typically valid and enforceable as conclusive and binding upon the parties.

Under such a dispute resolution clause, if the contractor accepts the decision of the architect on its dispute with the owner, the dispute is considered resolved. Where the contractor disagrees with the decision of the architect, however, contractor must provide prompt written notice to the architect and owner as to contractor’s disagreement with the decision of the architect, and contractor’s continuing performance of its contract work is being performed under protest. Failure of the contractor to issue such a prompt notice of disagreement can serve to bar the contractor in any subsequent efforts to pursue this claim through litigation or arbitration.

Where the construction contract requires certification from the architect to establish sufficient cause for termination of the contractor for cause, however, such certifications may or may not be binding upon the contractor.  The binding authority of certifications for termination from the architect or engineer are only binding to the extent that the architect’s agreement for services specifically provides for such binding authority, and the contract between the owner and the contractor vest such authority in the architect.

Both of the parties to be subject to the decision making of the architect must agree to be bound by the architect, and confirm the factual and legal authorities being provided to the architect for resolution of disputes. Depending on the extent of the architect or engineer’s powers under their contract, their decisions on whether sufficient cause exists for contractor’s termination for cause may or may not be binding on the contractor.

Where contracts do provide effective authority to the design professional to issue certifications for termination, such certifications will be binding and enforceable on the contractor as a matter of New York construction law unless the contractor can establish that the certification issued by the architect was issued in bad faith, fraud, or palpable mistake. Adsley Const Co., Inc. v Port Authority of New York and New Jersey, 54 N.Y.2d 876.

New York construction law also allows for the parties to appoint any person, even an employee of one of the parties, to serve as final arbitrator for all factual and legal determinations, including determinations of contract interpretation as final and binding.

“The requirement of explicit and unequivocal agreement when there is to be mutually binding arbitration before a neutral arbitrator obviously takes on even greater significance when resolution of all disputes is to take place before the employee of one contracting party, and bind only the other.” Westinghouse Elec. Corp v. New York City Transit Authority, 82 N.Y.2d 47

John Caravella Esq., is a construction attorney and formerly practicing project architect at The Law Office of John Caravella, P.C., representing architects, engineers, contractors, subcontractors, and owners in all phases of contract preparation, litigation, and arbitration across New York and Florida. He also serves as an arbitrator to the American Arbitration Association Construction Industry Panel. Mr. Caravella can be reached by email: John@LIConstructionLaw.com or (631) 608-1346.

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