Drafting Effective Mediation Clauses in Construction Contracts

ConstructLaw reports that a recent decision by the US District Court for the Eastern District of Pennsylvania demonstrates the importance of clear language in construction contracts when attempting to make mediation a mandatory step before litigation.

In Healy Long & Jevin, Inc. v. CQSA Construction, LLC, the court ruled that the dispute resolution clause at issue did not create a binding condition precedent to filing suit, despite the general contractor’s arguments that mediation should have been completed first.

The ruling underscores the need for precision when drafting mediation requirements to ensure enforceability and avoid premature litigation.

The underlying dispute arose from a mixed-use retail and residential project in South Philadelphia. Subcontractor Healy Long & Jevin, Inc. sought nearly $14 million in delay damages and outstanding payments from the general contractor, Post General Contracting, LLC, whose contractual interests were later assigned to CQSA Construction, LLC.

CQSA sought dismissal, asserting that the subcontractor failed to mediate as required by the contract’s dispute resolution clause. The provision stated that parties “shall endeavor to resolve their Claims by mediation” and permitted mediation requests “concurrently with the filing of binding dispute resolution proceedings,” with a 60-day stay if litigation was filed simultaneously.

The court denied the motion to dismiss, finding that the use of “endeavor” and the allowance to file concurrently showed that mediation was not a mandatory condition precedent.

The court imposed a 60-day stay to allow mediation to proceed, but clarified that failure to mediate first did not preclude litigation. The court contrasted this with other contracts where mandatory language, such as litigation being permitted “only if a reasonable attempt at mediation is unsuccessful,” created enforceable preconditions.

For construction practitioners, the decision emphasizes the need to draft mediation clauses with precise language, define when mediation is complete, and establish consequences for noncompliance. Clear provisions can prevent premature litigation, reduce disputes over procedural obligations, and protect parties’ interests in time-sensitive construction projects.

Reviewing and updating contract templates will ensure that mediation requirements function as intended and mitigate the risk of protracted legal proceedings.