When is A Mediated Settlement Enforceable?

Is your mediated settlement agreement binding? Yes, maybe -- or no. It depends.

In a mediation session, parties in dispute use a neutral facilitator to help them negotiate agreement on terms by which they can settle their disagreement(s). Not all mediators run their meetings the same way and not all outcomes are the same. The skill of your mediator is key, just like the skill of your lawyer and doctor are key to outcomes in those arenas. 

In some mediations, the parties who disagree take notes about the items negotiated. Sometimes, only the mediator takes notes. The parties’ lawyers may take notes for them. Other times it’s an “all skate” and everyone takes notes. It is rare that no one takes notes, but if that’s the case, one might be concerned.

Once the parties reach agreement to the terms, there are mediators who end the meeting. The parties leave the mediation session with their notes of the transaction and a handshake or verbal agreement to abide by the terms. This is not a “best practice”. Nothing to enforce and can often result in continued fighting over what the agreement was. The “handshake” method only works if all parties sincerely want the dispute to end and are on the same page about the terms -- they all have the same understanding of what and how the items of agreement are to be carried out, by whom, and when. That action is seriously risky and I never, ever recommend it. Their level of trust must be extremely high for this to work well. My experience as a mediator tells me that there would not be a dispute in the first place if there were enough trust between the parties. 

In many cases, that type of mediation will not be binding or enforceable. The parties must be willing to honor their agreement. With a handshake or verbal agreement, people often walk away from it and simply don’t do what they agreed to do.

Generally, people who disagree do so because they don’t understand each other’s position in the first place. Maybe they don’t want to understand, they don’t believe in what the other wants, what the other wants is not clear or is simply not important to them. Sometimes simple meanness and cruelty is driving the dispute. Other times the driver is power, revenge, or any of the other terrible human emotions.

So What’s The Point of Mediating?

Wait… I didn’t say mediation agreements were never upheld! I said that sometimes they aren’t. Let’s talk about the other kind of mediators – the ones who assure the mediation is enforceable. These mediators follow the rule that “the job isn’t done until the paperwork is finished.” They insist on a written, signed settlement document. This can happen in various ways.

1)   There are mediators who write the agreement themselves and present it to the parties for their approval and signatures. This does allow for continued negotiation of the details on how the agreement terms will be fulfilled. Of course, that may take some time to complete and the parties may not remain satisfied, if getting the documentation written and signed drags on for too many hours.

2)  Some mediators write up a temporary agreement or outline the essential terms of the agreement in the mediation session. They may use the notes taken, or the mediator might be the initial draftsperson. When attorneys are present, they often do the drafting at the direct instigation of the mediator – if not on their own. Then the mediator asks the disputing parties to sign the temporary notes. Sometimes they’ll add a statement that the signatures indicate agreement pending the formal written document to come.

[Please note: The chief difficulty with that method is that so many other things can get in the way while waiting for the formal agreement to be drafted. The parties may not be available for resolving details or misunderstandings. The mediator or attorneys could be called to other priorities. The parties may begin to have second thoughts. Worse, if a party becomes dissatisfied and decides not to follow the agreement after all, the question arises as to whether what they have in writing is enforceable. Was it the legitimate agreement? Who interprets the intention of the notes? Was there enough detail to determine? Who makes the determination? The mediator? The lawyers? A judge? Already it costs more and takes even more time…]

I never recommend paths 1 and 2. That leaves the only practice I promote in my mediations. This is considered "best practice" and is designed to stop the dispute permanently. So here is path 3:

3)  Keep the mediation session going, until a signed formal document spells out all the terms of the agreement with assignments and due dates for action and penalties for failure to comply. I am one of these mediators because this is my style. I explain before beginning the mediation that one primary rule for participation is that no one leaves until there is a formal document – a written, signed mediation settlement agreement. When the agreement is in writing, signed and dated by all participants, and it has explicit detail to clarify the terms of each item of the settlement, it is definitely enforceable. It is binding by Court, if necessary. However, on the preventive side of arguments, if the penalties for failure to comply are well drawn, no one fails to comply.

Why Is the Written Agreement Enforceable?

Once signed by the parties, a mediated agreement becomes a legal contract. Contracts assure parties that their rights and responsibilities under those agreements are enforceable by law against all defaulting parties. Thus, the law recognizes the mediation agreement as a binding contract and the parties have recourse, if one or more of them fails to comply with the agreed terms.

The more thorough the written settlement agreement, the more secure your contract and the more enforceable it is. Specifying what is to be done, by whom, with dates for milestones and completion is the way to secure the agreement. There should be penalties for non-compliance. Serious penalties assure the agreement is upheld. They eliminate the need for trusting each other. It takes a mediator well versed in these techniques, of course, but rest assured – almost any action can be planned and carried out. Actions that are not planned or pose no consequence for failing to act are usually the ones that just don’t happen.

If a judge ordered the mediation, the written, signed mediation agreement is not only a contract, but also it must be approved by the court. In Oklahoma, the judge must find that the agreement is fair to all parties. On finding it fair, the judge orders that the agreement is valid and enforceable. The final decree may refer to the terms in the written mediation settlement or the judge may append the agreement document to the court order making it accessible to the public.

When the Court is not involved, all terms of the agreement remain private, including financial awards. If the Court is involved, the Judge alone decides whether the agreement becomes public. In Oklahoma, agreements most often are made public when a Court is involved. In other states, the privacy of the agreement is assured. 

One strong benefit of mediation is that it can be a private process. Except for Court-ordered situations as noted above, mediation assures the parties they can resolve their disputes without the attention of the media, extra people than those directly affected, competitors, or others. The entire process is confidential. Even if the Court is initially involved, the parties could agree to dismiss their case to avoid the possibility of the Court making public their agreement. This method works in most cases except divorce, child custody, guardianship, and other cases that require a court order.

What Should Be In The Written Agreement?

An enforceable mediated settlement agreement most often will include at least these 10 components:

1. Clearly identified parties to the agreement and a statement that each is of age and capacity to enter into such an agreement.
2. The purpose of the agreement – what situation(s) the agreement resolves.
3. Each specific disputed item and the solution(s) all parties agree resolve that item.
4. An action plan for what consideration (exchange of goods, services, money, activities) resolve the dispute. An enforceable action plan stipulates who is responsible for each action and sets specific achievement of steps to resolve it. It also includes a method to jointly resolve an unforeseen or changed circumstance that prevents a party from meeting the due date. (Typically, those methods include further agreements in writing or a return to mediation.)
5. A real penalty for non-performing parties for action items not completed by the due date. The penalty also applies when the parties did not use the planned method for joint resolution of a situation not foreseen by the parties.
6. A process for both parties to agree that an action or milestone has been completed.
7. A clear statement that this is the final agreement of the parties to address all aspects of their dispute.
8. The duration of the agreement, if applicable.
9. A statement that all parties mutually agree to abide by the settlement (be bound, or tied to it) and keep it confidential, when possible.
10. The names and dated signatures of all parties to the agreement, including the mediator and any attorneys who advised during the mediation.

If your mediated settlement agreement contains these elements an enforceable contract exists, and frankly why bother if you are not going to permanently and irrevocably settle your issues. Clearly, you must be careful in your selection of your mediator. The right mediator can facilitate the agreement that brings closure to the matter, which is what you sought by using the process.  

?????

You can join the discussion about mediating your business or family disputes, whether management, customer, partnership, divorce, guardianship, estates and trusts, or elder care. Submit your issue to our Mediation blog, Follow us on LinkedIn or Comment below.

Gale Allison, Mediator---Let's Make Peace!