Should a Construction Dispute Go to Arbitration or Court?

Does the contract already answer the question?

Most of the time, yes. A written agreement to arbitrate is valid and enforceable under the Texas Arbitration Act (Civil Practice and Remedies Code § 171.001), and a construction contract that involves interstate commerce, which almost any project with out-of-state materials, lenders or parties does, is also governed by the Federal Arbitration Act, under which the clause is valid, irrevocable and enforceable (9 U.S.C. § 2). A party that files suit in the face of a valid clause will face a motion to compel arbitration and stay the case, and will usually lose it. Is the arbitration clause in my contract enforceable covers the arguments that sometimes defeat a clause.

Standard forms put the choice on the signature page. The AIA owner-contractor agreements ask the parties to check arbitration, litigation or another method; if nothing is checked, litigation is the default under the current edition. Subcontracts often incorporate whatever the prime contract chose, and sometimes choose differently. So the first step is to collect every contract in the chain and read each dispute clause, because the owner-contractor agreement may send a dispute to arbitration while the subcontract sends the same facts to court.

Where no contract says anything, the dispute goes to court. In Dallas–Fort Worth that means a state district court in the county where the property is located or where venue otherwise lies, or a federal court if the parties are from different states and the amount is large enough, or if the claim is a federal Miller Act bond claim, which must be brought in federal court.

How many parties are there, and did they all agree?

This is the question that decides most construction cases where there is a real choice. A payment or defect dispute rarely has two sides. The owner blames the general contractor, the general contractor blames a subcontractor and the architect, the subcontractor blames the supplier, and a surety stands behind one or more of them. Arbitration binds only those who agreed to it. If the owner-contractor agreement requires arbitration but the architect's agreement does not, the owner may end up arbitrating against the contractor while litigating against the architect, with each defendant pointing at the empty chair.

Standard forms try to solve this with consolidation and joinder provisions that allow related arbitrations to be combined and other parties to be joined when their contracts contain compatible terms. Those provisions work when the whole project was papered consistently and fail when it was not. A court, by contrast, can bring every party with a connection to the project into one case through third-party practice, and can apportion responsibility among them in one judgment. For a multi-party defect case with inconsistent contracts, that single forum is often worth more than any advantage of arbitration.

Does a lien or bond claim need a court?

Partly. A mechanic's lien may be foreclosed only on the judgment of a court ordering the sale of the property (Tex. Prop. Code § 53.154), and the suit to foreclose must be filed within one year after the last day the lien affidavit could have been filed (§ 53.158). An arbitrator can decide how much is owed and whether the lien is valid, but cannot order the sheriff to sell the property. The usual practice when the contract requires arbitration is to file the foreclosure suit in the county where the property is located within the one-year period, ask the court to stay it and compel arbitration, arbitrate the amount, and return to court to confirm the award and enter the foreclosure judgment. Filing suit to protect the lien is not a waiver of arbitration if the party promptly asks for the stay.

Owners have the mirror-image concern. The summary motion to remove an invalid lien under § 53.160 is a court procedure that moves quickly; an owner facing a defective lien will often want to be in court for that motion even if the merits of the payment dispute belong in arbitration. Payment bond claims on Texas public projects are brought in a court of a county where the work is located, and Miller Act claims in federal district court, though parties who agreed to arbitrate can still have the amount decided by an arbitrator and confirmed.

Example

Suppose a Plano subcontractor is owed its last three draws plus retainage, has filed a lien affidavit on time, and holds a subcontract that requires arbitration of all disputes. Its counsel files a petition in Collin County district court to foreclose the lien before the one-year deadline, with a motion to stay and compel arbitration attached. The arbitration decides that the subcontractor is owed the full amount with Prompt Payment Act interest and fees. The subcontractor then returns to the district court, confirms the award and obtains a judgment foreclosing the lien. Had it only arbitrated and let the year pass, it would have had an award against a general contractor with no assets and no lien to enforce against the property.

How much discovery and expert work does the case need?

Construction cases are document cases. Pay applications, daily logs, schedule updates, RFIs, change order logs, emails and photographs run to tens of thousands of pages on a mid-sized project, and the dispute is often decided by what the schedule analyst and the cost expert make of them. Court gives the fullest access: written discovery, depositions of every participant, subpoenas to third parties such as the lender and the inspector, and motions to compel. Arbitration gives what the arbitrator allows under the provider's construction rules, which is usually less, and a party that needs the other side's internal records to prove delay or defective work should weigh that. Discovery in arbitration describes what is typically available and what is not.

On the other hand, construction arbitrators are usually construction lawyers, engineers or architects who do not need a tutorial on critical path scheduling or the difference between a punch list and a defect. Expert presentations are shorter and evidentiary disputes fewer. For a two-party dispute over scope, delay or workmanship, that expertise is the strongest argument for arbitration.

Which rules apply in both places?

Several Texas statutes follow the dispute into arbitration. A claim against an architect, engineer or surveyor needs a certificate of merit in any action or arbitration proceeding (Civil Practice and Remedies Code § 150.002). The Residential Construction Liability Act's 60-day notice and offer procedure applies to arbitration because the chapter defines an action to include one. The Prompt Payment Act's interest and fee provisions, the lien deadlines and the Construction Trust Fund Act apply regardless of forum. Choosing arbitration does not avoid any of them; it only changes who decides.

Speed, cost, appeal, privacy and the jury

Court has its own fast and slow tracks. A claim seeking $250,000 or less may proceed as an expedited action under Texas Rule of Civil Procedure 169, with limited discovery and a trial setting within 90 days after discovery closes. The Texas Business Court, created in 2024, does not take claims arising under Property Code chapter 53 or suits to foreclose a lien on an individual's property unless they come in as supplemental claims, so most construction payment cases stay in the district courts; the Texas Business Court explains which commercial disputes do qualify. Arbitration versus court compares the two forums for business disputes generally.

Mediation comes first either way

Standard construction forms make mediation a condition precedent to arbitration or litigation, and Texas courts routinely order mediation in civil cases before trial. Whichever forum the dispute is headed for, a mediation with the pay application history, the defect reports and the schedule analysis in hand often ends it, and preparing for that mediation is the same work either forum will require. Will the court order us to mediate describes how court-ordered mediation works in Texas.

Tina Wysk represents owners, contractors and subcontractors in construction disputes in Dallas–Fort Worth courts and in arbitration, and advises on the forum question before the first filing.