National Roofing Legal Resource Center

Contract provision addresses jurisdiction of dispute resolution

"Disputes involving Subcontractor and Contractor shall be governed by the law of the state and be resolved in the state where the project is located."

General contractor-drafted subcontracts often include provisions stating disputes shall be resolved in the state where the general contractor's headquarters office is located and the law of the general contractor's home state shall govern the subcontract, even though the construction project may be located in another state. General contractors include these provisions because they seek to enjoy the convenience of mediating, litigating or arbitrating disputes in their own "backyard" and having their regular attorneys (who may have written the subcontract) represent them in the dispute by applying law with which they already are familiar. These provisions are generally disadvantageous to subcontractors. For example, a Texas-based roofing subcontractor performing a project in Texas would be greatly inconvenienced by having to litigate a lawsuit or participate in an arbitration proceeding with a general contractor whose home state is Virginia.

In most cases, the roofing subcontractor will want to delete the general contractor's provision or delete the provision and insert the above-proposed provision stating the dispute would be resolved in the state where the project is located. Potential witnesses with firsthand knowledge of the project are far more likely to be located in the state where the project is located. Requiring the roofing subcontractor to travel to the general contractor's home state adds more expense for the subcontractor and is likely to require key personnel and principals of the roofing subcontractor to be away from their businesses for possibly a substantial period. If a general contractor chooses to do business in another state, the general contractor has made a decision to operate in that state.

In some instances, the "home state" contract provision may not be enforceable. Many states have enacted statutes requiring construction disputes pertaining to construction projects in their state be resolved in the state where the project is located. Currently, the following 26 states have enacted such laws: Arizona, California, Connecticut, Florida, Illinois, Indiana, Kansas, Louisiana, Minnesota, Montana, Nebraska, Nevada, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Utah, Virginia and Wisconsin.


7/28/2016



NRLRC and NRCA
    logos
NRLRC Home National Roofing Contractors Association