In Martel v. Bulotti, 65 P.3d 192 (Idaho 2003), the Idaho Supreme Court affirmed a decision against a contractor because the contractor did not substantially comply with the arbitration provisions of the contract with the owner. Michel Martel, a homeowner, contracted with John Bulotti to build an addition to Martel’s home. Martel and Bulotti entered into a written contract that incorporated general conditions for resolving disputes. These conditions provided that the parties were to submit disputes to the project architect for decision. The architect was to provide a written decision, and the decision was to be “final and binding on the parties subject to arbitration.” After the architect submitted a final decision, either party could demand arbitration by filing notice with the other party, the architect, and the American Arbitration Association (“AAA”). The failure to demand arbitration within thirty days would result in the architect’s decision becoming final and binding upon the parties.

 

A dispute arose between Martel and Bulotti, and they submitted the matter to the project architect. The architect issued a written decision awarding Martel damages and stating that the decision was final but subject to a demand for arbitration. Bulotti faxed a demand for arbitration to the project architect, but neglected to send a demand to Martel and the AAA. Martel applied to the district court to confirm the architect’s award, so that the court would enter a judgment which could be legally enforced if Bulotti failed to satisfy the award. The trial court confirmed the architect’s award and entered judgment; Bulotti appealed.

 

The Idaho Supreme Court held that the architect’s decision became final and binding, and therefore subject to the court’s confirmation, because Bulotti failed to substantially comply with the contract’s dispute resolution provisions to initiate the arbitration process. Although Bulotti sent the project architect a demand for arbitration, Bulotti failed to provide notice of his demand for arbitration to the AAA, the one entity that could have triggered the arbitration process and prevented the project architect’s decision from becoming final. Substantial compliance means that despite deviation or omission by one party to a contract, the other party receives the important and essential benefits of the clause of the contract at issue. The court noted that giving notice to the architect did nothing to trigger the arbitration process; however, if Bulotti had filed a demand with the AAA, the AAA would have initiated the arbitration procedure. Bulotti’s failure to trigger the arbitration process, the procedure for reviewing disputed decisions under the contract, denied Martell an essential benefit under the contract. 

 

This case demonstrates the importance of being familiar and complying with a contract’s dispute resolution provisions in order to protect one’s rights under a contract. Alternative dispute resolution procedures can vary greatly and parties are free to enter into agreements which provide for various forms of informal dispute resolution procedures. Consequently, contracting parties need to thoroughly consider dispute resolution provisions during the negotiation of a contract and be aware of what rights and procedural protections one might be contracting away.