Is A Subcontractor Bound By The Arbitration Clause in the Main Contract?

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Is an arbitration clause in the main contract between the owner and the contractor incorporated into a subcontract between the contractor and subcontractor? If that incorporation occurs, then the subcontractor's court claim must be stayed and the subcontractor must assert its claim by way of arbitration. The Nova Scotia Supreme Court dealt with this contentious issue May 6, 2011.

There is logic and a lesson to be learned from this case. The parties to a subcontract may well intend to be bound by the conditions in the main contract relating to the actual nature and performance of the work. After all, they need a common road map to get the project built that is consistent with the main contract. But it is quite another thing for them to agree to be bound by consequential, remedial and procedural matters found in the main contract. There is no inherent reason why the parties to the subcontract cannot agree to a different regime for those matters. For a court to find that they made an agreement to be bound by the main contract about those matters, there should be specific provisions in the subcontract to that effect.

Arbitration - Construction Agreement - Subcontract

Sunny Corner Enterprises Inc v. Dustex Corporation 2011 NSSC 172

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Thomas Heintzman, Arbitration Place | Attorney Advertising

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