Mediation Agreements Explained
A mediation agreement is a document drafted by the mediator, as one of the outcomes from mediation. Its purpose is to summarise the matters that have been identified and are agreed as part of the solution for the dispute, as well as any other matters that the parties are happy for the mediator to confirm in writing, which may include matters that have previously been discussed during the course of settlement negotiations.
The agreement is sometimes called a ‘heads of agreement’ or ‘minute of settlement’. It is drafted by the mediator to ensure that there is a complete record of the parts of the mediation that are relevant to its outcome, namely the settlements reached by the parties. The mediator may also draft other parts of the agreement such as the preamble to it.
Although the settlement may be ‘agreed’ it will be subject to the parties’ legal advisers preparing a written settlement agreement which will need to be signed before the mediation day is completed. In this way the two or more binding contracts that are commonly needed in any transaction of significance are still able to be created. Not all mediation agreements lead to a legally enforceable contract. Sometimes they will be nothing more, or less, than an agreement to agree.
An example of a typical situation where a mediation agreement is used is in disputes between a landlord and a tenant where a settlement relates to a rent review. Even if there is a binding settlement of the terms of the new rent, the parties will still want their legal advisers to draft and complete an appropriate deed of variation .
A mediation agreement does not have to be a single document. It may include correspondence, written notes, a discussion note drafted by the mediator, a chronology prepared by the parties, a timeline prepared by the parties, or other documents that the parties have agreed are to be included in the overall bundle of documents creating a complete record of what happened at the mediation.
However, a mediation agreement may still have some of the characteristics of a contract, and thus be binding, even where it is incomplete, or where only part of the totality of the documentation of what has been agreed is described in one document.
As is common with documents that contain contractual or binding descriptions, a mediation agreement might contain a representation about the future, with some hope expressed that the commitment will be kept. For instance, "the landlord agrees that it will do all that it can to make sure that the premises rented by the party are fit for occupation by the date stated". Whilst the statement is intended to be a binding commitment to do something it is not a description of the parties’ obligations for the purpose of the law of contract. Where there is already a binding contract between the parties, such as a lease or an option to purchase, it is to be construed in that context. The mediation agreement in that example has some of the elements of a contract, but without the other key ingredients to create that complete agreement. So it is a contract, sort of, but not a legally binding agreement.
In England, mediation agreements may be enforceable as though contained in a consent order of the court.
Legally Binding Mediation Agreements
Mediation agreements are binding contracts between the parties. On signing any such agreement, it becomes a legally binding contract. In case of a dispute, either signatory can enforce the terms of the mediation agreement in court. Once a mediation settlement agreement is signed, the mediator does not have any further role to play. It will be for the parties or the relevant signatories to enforce the terms of the mediation agreement.
A mediation settlement agreement will be automatically binding unless there is an issue where it lacks consideration or there is a misrepresentation in its execution or a party is under duress. It is, therefore, very important to reflect the understanding of the parties in the mediation settlement agreement. It is paramount that the use of language should reflect the intentions of the parties.
Agreements take many forms and they can be bilateral or multilateral, in writing or oral. What is important, however, is that an agreement must set out legally binding obligations on the parties. Oral agreements can be enforced, but if they want to be used as prime evidence, the party wanting to enforce such an agreement has a burden of proving alongside issues of statute of frauds which make specific agreements unenforceable if they are not in writing. Whereas a written agreement is, in general, presumed to be the true expression of the parties’ agreement. Parties can, therefore, expect to succeed in enforcing the terms of their written agreement.
The principles which apply to the enforcement of agreements also apply to mediation agreements. The position is that a written mediation settlement agreement provides prima facie evidence of obligations contained within it and it is up to the other party to prove otherwise.
Other types of agreement, such as settlement agreements, have different enforcement mechanisms. A settlement agreement is a legally binding contract between parties resulting in a consensual resolution of all disputes identified in the agreement. A typical settlement agreement will contain an obligation to pay a sum of money and confidentiality provisions to keep the settlement confidential, and prevent further claims.
It is important to understand that a settlement agreement does not formally, automatically or as a matter of law, bring the underlying dispute to an end. It requires action by the parties to terminate the dispute, for example, entering into a consent order in court or filing a joint stipulation to terminate legal proceedings issued in court or by a regulatory body.
Factors Impacting Enforceability
The enforceability of any contract is a recognised issue in common law jurisdictions. The legal essentials for a valid contract are acceptance, consideration and a commitment to do or not do something. While there may be some jurisdictional differences within the broad requirements for these three fundamental essentials, the requirement of consideration and consent is generally a strict necessity for enforceability under any court of law. Mediation agreements will also need to conform to these given requisite values. The parties must therefore be shown to have accepted the mediated settlement, or at least the terms of the mediation. There should also be consideration offered by one party to another that compels acceptance of the agreement. Something of value must be paid or something of worth done by one party in order to compel response from the other. In this way, the mediated settlement can be accepted or rejected by any one of the parties. For an agreement to be enforceable in court, the consent of both parties is essential. A third relevant factor for establishing legal binding worth is in relation to the specific terms of the mediated settlement. There must be clarity in the terms used for describing the intent of the agreement, otherwise the court may find it helpful to interpret the terms on the basis of the content of other previous contractual agreements. The conditions of a mediated settlement must therefore be accurate and precise so that the court may appropriately enforce a mediated settlement. In some jurisdictions, the court may not require the mediation settlement to be in writing, but other jurisdictions may only allow the enforcement of settlements that are in writing. This can cause some problems if both parties reside in different jurisdictions and the laws of one country do not match up with those of the other. It is important to make sure that the mediation settlement made is appropriately drafted and checked so as to ensure accuracy and precision in terms of the language and use of words for the conditions of the agreement. If the issues being addressed through mediation are also subject to a separate legal statute, then the substance of such a statute will also be relevant for assessing the enforceability of the mediated settlement. The performance of the parties in accordance with the mediated settlement would also need to be established otherwise the court may look at prior actions to determine what the intent of the parties were or whether there was a change of intent somewhere in the future. Again, this is an issue for the particular jurisdiction and how it deals with such circumstances. In some jurisdictions, a court will only agree to enforce a mediation settlement if it has gone through a particular process and such processes vary from place to place. These processes may include such things as the requirement for review and drafting by a designated official or authority, signing by the concerned parties, and having notarisation by a legal professional. Again, depending on the particular jurisdiction where the mediation agreement is made or upheld, the court will consider whether or not a settlement can be enforced. As long as the legal fundamentals are appropriately addressed, the court will consider whether the parties wished to make the settlement binding and enforceable in the first instance. If the court is convinced that the intention of a party was to make an agreement binding, it may go ahead and enforce even where the approach taken by a party has not been followed through, although most judicial bodies will actually impose the requisite fetters to ensure that the parties are made responsible in some respect for the fulfilment of the agreement.
Transforming The Mediation Agreement Into A Court Order
While not always mandatory, converting a mediation agreement into a court order can have advantages for enhanced enforceability. A mediation agreement’s enforceable nature often depends on whether it was drafted properly and whether the issues covered by the mediation were resolved, at least in principle. Generally, if a mediation agreement fails to achieve an enforceable settlement due to problems with its drafting or substance, the parties will be unable to convert it into a court order. However, if a mediation agreement has been thoughtfully drafted and the substance is a resolution of the parties’ issues, converting it into a court order is a fairly straightforward process. To do this, one party submits the mediation to their family court case and requests that a trial be set to hear the mediation. By filing a simple application, the other party may be compelled to attend this hearing. At this hearing , the parties will typically present the mediation agreement settlement to the court. With both sides agreeing to the mediation agreement, the court will have no problem in approving an order that both parties agree to in principle. The mediation agreement can then be incorporated by reference into the order, potentially easing compliance and enforcement down the road. While mediation agreements are most common in family law, it is possible for a mediation agreement to be had in multiple different areas of the law. In all circumstances, having a resolution (in principle) of the issues in the case, a thoughtful agreement, and having both parties attending at the hearing should make conversion of a mediation agreement into an enforceable court order a relatively painless process. For anyone not having a well drafted agreement or who has significant issues converting a mediation agreement into an enforceable court order, engaging a lawyer may be warranted before, during or after the mediation.
Common Issues and Misunderstandings
Within the realm of mediation agreements, several common challenges and misconceptions can arise regarding their binding and enforceable nature. Some individuals entering a mediation may believe that a mediation agreement is either not legally binding or that it can be easily set aside without any real consequences. These misconceptions can lead to confusion and disputes, underscoring the importance of understanding the enforceability of mediation agreements in Pennsylvania.
One challenge is the failure to fully understand the implications of signing a mediation agreement. Parties may assume that a mediation agreement is merely a template or an outline of intent that will not bind them to its terms. However, in Pennsylvania, once parties voluntarily enter into a mediation agreement and it is signed, the terms become binding and enforceable in a court of law just as any other contract would be.
In certain cases, parties may challenge the validity of a mediation agreement on the basis that the agreement was not consistent with public policy. Public policy challenges typically involve claims that the terms or provisions of a mediation agreement are in violation of statutory law, legal precedent, or the like. However, it is important to note that broad public policy challenges are often rejected by Pennsylvania courts and parties may even waive their right to a public policy challenge if they initially failed to uphold the public policy they claim was violated.
Another misconception is that parties can easily reform a mediation agreement after it is signed and approved by a judge. This misconception typically arises out of a misunderstanding of the law in Pennsylvania and what it means to reform a contract. Pennsylvania courts will only agree to reform a contract if it is absolutely necessary to correct a mistake in the terms of the contract. The mistake in terms must be mutual (both parties are at fault) and it must be a mistake of fact rather than a mistake of law. Most people also do not realize that the burden of proof falls on the party moving the court to reform a contract.
Parties should also be aware that there is no guarantee that even if a court agrees to reform a contract that it will be done in the manner the parties expect. If a court agrees to reform a contract, it will be based upon the circumstances and evidence presented at the time of the hearing and can even depend on what is in the best interest of justice. It is perhaps this broad discretion of the court that makes such remedies appealing, given that the party moving the court to reform the contract does not have to prove that it would be equally fair to provide such relief to the other party.
One final misconception is the belief that mediation agreements cannot be modified once they are signed. In reality, parties to a mediation agreement are free to modify their agreement at any time without approval from the court. Parties can also mutually agree to either withdraw or void a mediation agreement without the permission of the court. It is only when one party seeks to void the agreement unilaterally and court intervention becomes necessary that courts will usually consider whether to allow a withdrawal of the contract or void the agreement altogether. As with reformation of contracts, the burden of proof is upon the party seeking such relief and will be determined on a case-by-case basis.
Despite these challenges and misconceptions, it is still possible to enter into binding and enforceable mediation agreements that can be upheld in a court of law. Parties should consult an attorney experienced in both mediation and litigation to help ensure that the mediation agreement adopted is comprehensive and their rights under the agreement can be fully enforced. An experienced attorney can also help parties understand how to handle any legal challenges or potential challenges to the terms of their mediation agreement that may arise following the entry of the agreement.
Pros Of Legally Binding Mediation Agreements
A legally binding mediation agreement offers several tangible benefits to the parties. It serves as a solid framework guiding future conduct and relations between those parties. Legally binding agreements can be especially useful in long-term relationships involving contracts that can continue for years even decades such as leases, franchise agreements, supply agreements, equipment leases, and distribution agreements. Where the parties are in competition, or one is significantly larger than the other, the law’s contract interpretation rules will provide a more level playing field. It becomes more difficult for a party to renegotiate away the deal that it had agreed to without having had to go through the mediation process once again.
From a practical standpoint, there are compelling reasons for entering into a legally binding mediation agreement. Litigation typically consumes much more time and money for both parties than mediation. For example, the average time from filing a statement of claim to proceeding through to trial in the Court of Queen’s Bench for the most commonly used action procedure (Action Procedure 5A) in Calgary is approximately 16 months. On top of that, it takes an additional 4 – 12 months in many cases to get the matter on the court’s trial list docket. Then, mediation will take an average of at least four months where the Court’s judicial mediator (where available) conducts the mediation. One then has to wait perhaps a few weeks for the judge’s written decision. This means that it can take three years or longer for business people to resolve their disputes after a trial has started – and this does not count the time it can take to litigate the matter through a series of pre-trial motions, appeals and collections efforts. In contrast, mediation commonly yields resolutions within 90 days (or much faster) of the initial mediation date. When your business has been interrupted by a dispute, how much time could you save if you could resolve your conflict early?
Similarly , the cost of litigation to businesses can be mind-boggling. First, litigation is expensive in court now and for mid and large corporations in the future it will become even more so. The regulators are substantially increasing the filing fees to take a matter through to, and if necessary, past a trial. At the same time, lawyers are responding to this increase by charging higher hourly rates by as much as 50% or more. It is now common for larger businesses in Calgary Court to pay tens of thousands of dollars just to have their discovery completed. This is only Step 8 of 15 steps in the typical litigation process. Second, the true cost of litigation is probably far higher than the costs to the parties themselves. There is substantial evidence that the productivity and creativity of people is diminished as they are caught up in the stress and demand of litigation. This lost productivity costs companies millions of dollars. Additionally, each year countless hours are spent by company staff to compile a document production; organize and attend conferences with lawyers, expert witnesses and opposing clients; attend examinations for discovery; attend court hearings; appear at trial; and gather information for lawyers to write motions, affidavits and statements of counsel. Lost productivity in addition to lost opportunities to expand, innovate and develop products not only costs money but it can result in damage to reputation and loss of market presence.
Last, a legally binding mediation agreement will contribute to the parties’ bottom line by better ensuring the parties comply with the agreement they have made. While mediation agreements are not binding, the enforceability of confidentiality agreements and settlement agreements can be enforced by way of contempt motions and injunctions. As well, a binding settlement agreement at mediation will trigger the parties’ contractual responsibilities to indemnify and hold harmless other parties for breaches of such settlement agreements.