Construction Law Toolbox : Mississippi Construction Lawyer & Attorney : Biggs, Ingram, Solop & Carlson, PLLC : MS & Southeast Construction Law Toolbox

During the course of construction, contractors will sometimes find that the owner and/or architect are demanding more work than the contractor reasonably interprets the plans and specifications to require. The typical owner and/or architect solution to the dispute is simply to tell the contractor its interpretation is incorrect and direct the contractor to proceed with what the contractor considers additional work. Later, the owner may attempt to rely upon the lack of a written change order authorizing the performance to deny compensation and/or time for performance of additional work.

Does the contractor walk off the job or proceed with the additional work notwithstanding this dispute? Most contracts require contractors to proceed with the work notwithstanding the existence of a dispute; otherwise, the contractor might be subject to a default termination. However, such provisions also typically require the owner to continue payments under the contract for undisputed work. The idea is to keep the project moving forward—i.e., to prevent the contractor from bringing the project to a halt pending resolution of disputed items and to prevent the owner from holding the contractor’s funds hostage pending the resolution of the dispute.The contractor must therefore generally proceed with the performance of additional work without immediate compensation for that work.

However, it does not mean that the contractor is performing the work gratuitously. The refusal of the owner to issue a change order for the additional work may not insulate it from liability. "[U]nder Mississippi law, where the owner orders the contractor to perform extra work outside the contract, the contractor is entitled to compensation for that work, despite the fact that no change order was issued." See Sentinel Industrial Contracting Corp. v. Kimmins Industrial Service Corp. In Sentinel, the Mississippi Supreme Court recognized the inherent inequity in allowing the contractor to demand a subcontractor perform extra-contractual work without a change order and then deny compensation because a change order had not been issued.

This same rationale should apply to the situation where an owner directs the contractor to perform work without a change order. When this occurs, the contractors must place the owner and/or architect on written notice of its objection to the additional work and reserve its right to recover the costs and/or time associated with the change order work. Simply stated, the duty to proceed does not entitle the owner to avoid paying for legitimate change order work even in the absence of a written change order.

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During the last several decades arbitration has become a valuable method for resolving disputes between parties in the construction setting. A simple arbitration provision might read as follows:

Claims and disputes not resolved shall be decided by arbitration which shall be in accordance with the Construction Industry Arbitration Rules of the American Arbitration Association currently in effect.  The locale of any arbitration shall be Jackson, Mississippi.

Simple and straightforward, but is it enough? It depends on what your expectations are for arbitration. An arbitrator is bound by the requirements of the arbitration clause. Therefore, if you are drafting an arbitration clause, you might want to consider including certain "bells and whistles" that will get you to the finish line faster. Here are some items you might want to consider including in an arbitration clause. 

• Location of the arbitration proceeding;
• Number of arbitrators and experience requirements;
• Limitations on discovery;
• Specific rules governing admissibility of evidence at hearing, i.e. state or federal rules of evidence verses the liberal rules for admissibility of the AAA;
• Time within which arbitration hearing must be conducted; and
• Payment of fees and costs.

Remember, it is your arbitration clause so draft it to suit your business objectives.

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The Mississippi Court of Appeals just released a decision addressing the scope of arbitration clauses. Although the case dealt with an employment agreement, the decision is certainly a warning sign for arbitration clauses in any contract.

At issue in the case was whether tort claims for assault and battery were included within the arbitrable claims of the employment agreement. The agreement required arbitration of "all matters directly or indirectly related to your recruitment, potential employment, or possible termination of employment, including, but not limited to, claims involving and/or against the Company, employees, supervisors, officers, and/or director of [Company] or any affiliates, as well as any other common law claims for wrongful discharge or other similar claims." Even though the Court determined that the foregoing language was broad and that the claims stemmed from a supervisor’s alleged actions while on a business trip, the Court nevertheless ruled that the arbitration provision did not include claims for assault and battery.

One judge disagreed with the Court’s majority. In a separate opinion, the dissenting Justice noted that in a case decided four years prior an agreement that required "any dispute under this agreement" to be arbitrated included intentional tort claims.

The current decision does not overrule the older court decision, and distinguishing factual circumstances can be found between the two decisions. However, the current decision at least constitutes a warning signal that the Court will look more closely when considering whether intentional torts fall within the ambit of arbitration provisions. A delicate balancing act will be required to make arbitration provisions broad enough to capture as much as possible, yet specific enough to include what might be considered more remote claims. Everyone should revisit the language of its contractual arbitration provisions or risk being in court to settle disputes rather than arbitration.

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