Why Your Contracts Should Include Mediation Clauses

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ADR, or alternative dispute resolution, clauses are some of the most useful clauses a company can put into their business contracts. This is especially true with mediation clauses, which require both parties to attempt to resolve their issues in front of a mediator before taking the matter to court.

Mediation is different from arbitration, which is closer to litigation. In mediation, you’ll get an ex-lawyer or judge who is trained in dispute resolution. This person’s sole duty is to remain neutral while working with each party to come to an arrangement both can live with. Each party pays a sum to the mediator to get the deal done, if possible. The process takes one day, and is very inexpensive compared to both arbitration and mediation. 

Mediation doesn’t always work, but it is usually worth trying. 

How the Process Works

Mediation begins with a general conference, also called a joint session. You and the other party meet in a room with the mediator and your attorneys. Each attorney gives a presentation about why their client should receive what they’re asking for, or why they shouldn’t. 

This is a great time to gauge the strength of the other party’s case as they will generally make basically the same case in front of the mediator as they’d make in front of a judge. 

The mediator then puts each party in separate rooms and moves between them, bringing questions, answers, demands, and offers until a deal is reached.

What happens when there’s no settlement?

It can happen. Mediation works when both parties use the process in good faith, but some parties will not want to settle. It’s still less expensive to have the option for the 85% of the times it does work and then save your litigation money for the 15% of the time when it doesn’t.

How Mediation Helps Your Business

In mediation, you retain a lot more control over the process and what happens then you’ll retain during the litigation process. You also spend a lot less money. 

If you make it required then you at least mitigate the risks of having to spend a lot of time in litigation with another party when something goes wrong. You can put a mediation clause into all kinds of contracts. 

It’s helpful to do this up front, when everything is still going well and everyone is still reasonably happy with each other. It will be harder to push for mediation when communication has broken down. 

Not sure whether this clause would work for your company? Contact Scott Richman Law today to discuss your most common contracts and how they should be set up to protect your company.

See also:

What Makes Incorporation So Necessary 

Don’t Sign on the Bottom Line: Contract Conundrums and Fine Print Pitfalls



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