Should You Sign a Mediation Provision?
You may be presented with a business or employment agreement that includes a mediation provision. Below are the things you should consider before signing a contract that requires mediation procedures.
What is Mediation?
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Mediation is a form of alternative dispute resolution. Generally it is a voluntary process, but if you sign a contract with a mediation clause, you may be binding yourself to engage in the process before going to court to get relief under the contract. Read more about what mediation is and how it works.
Is the Mediation Provision Enforceable?Generally anything you agree to in a contract is enforceable unless it is against law or publicly policy. That means if you agree to participate in mediation that is most likely a binding promise.
You can't, however, be forced to accept a settlement you do not agree to in mediation. If the parties agree to a mediation process in the contract, you should be prepared to participate and attempt to settle the dispute in good faith. Understanding the Mediation Provision in Your ContractAn agreement to mediate in a contract can take many forms.
Sometimes it is as simple as a statement that the parties will attempt to mediate before bringing a lawsuit if disputes arise. In that case you may or may not be required to engage in a formal mediation process, and it may be enough to attempt informal negotiations directly between the parties or through your lawyers. The contract may be more specific, and explicitly require submitting the dispute to a mediator. If the agreement does not say anything else, the parties generally will have to agree on a qualified mediator and engage in the process more formally. Sometimes the contract actually identifies a mediation service that must be used. In that case, you will have to engage that service. Occasionally a contract will have both a mediation clause and an arbitration clause. This typically involves a two-step process beginning with mediation and then moving to binding arbitration. Often these provisions include some very specific time limits that you should pay attention to. There are also separate and important considerations in deciding whether to agree to arbitrate. |
Need Help With a Mediation Provision?
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Things to Consider When Agreeing to Mediation
Here is what you need to know to decide if a mediation provision is the right choice for your business:
- Agreeing to mediate does not mean agreeing to settle your dispute. Mediation is still a voluntary process, and you can participate without accepting what is offered.
- The obligation to participate in mediation can delay your right to go to court. This can be a problem if you have an immediate or pressing need, like a need to seek a preliminary injunction from the court.
- There may be situations where it is to your benefit not to have a full and frank discussion with the other side before seeking relief in court. This can be hard to predict when deciding whether to agree to a mediation provision.
- There is an initial out of pocket cost involved in paying the mediator. This can tend to favor the better-financed party.
- Some disputes are hard to settle before the parties have had a chance to take discovery and understand each other's view of the facts. If you agree to a mediation provision you may have to spend time and money mediating without a real chance of resolving the dispute.
Beware of Boilerplate Dispute Resolution Provisions
Most business contracts you can download from the internet contain some kind of alternative dispute resolution procedure. These are often incomplete, inconsistent and/or ambiguous. They are never tailored to the unique needs of your business and specifics of the agreement you are trying to document.
The best practice is to have a business lawyer draft an agreement that is tailored to your needs in the first place. If that is not feasible for whatever reason, you should at least have a lawyer review the provisions and discuss the pros and cons with you.
The best practice is to have a business lawyer draft an agreement that is tailored to your needs in the first place. If that is not feasible for whatever reason, you should at least have a lawyer review the provisions and discuss the pros and cons with you.
How We Can Help
We have worked with all sorts of these provisions, from reviewing and assessing a dispute resolution procedure in contracts to representing individuals and businesses in mediation and arbitration proceedings. We can help you understand what you are agreeing to and how to make the most of the arbitration rules or mediation procedures. Give us a call at (781) 784-2322 or use the button below to schedule a free consultation. We look forward to hearing from you!
