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Released 29 August 2008
Agreements reached in mediation are enforceable as contracts
if the requirements for a valid contract are satisfied. This means that parties
following mediation will seek to formalise the terms of mediation as a contract.
However when this is not done, one party may argue that no
binding contract was ever reached. In DMA Financial Solutions Ltd v Baan UK
Ltd 2000 WL, the question arose whether the negotiations during meditation
had resulted in a binding contract. One party argued that it did where as the
other submitted that there was no binding contract.
The outcome of the case lead the High Court ruling that the
following factors need to be considered when deciding whether negotiations
resulted in a binding contract:
1. The mediator/negotiator had actual or ostensible authority
to commit the parties to a contract.
2. The mediator/negotiator was such that parties might become
contractually bound before the execution of a written agreement.
3. Negotiations were not conducted on a "subject to contract"
4. There was no evidence that the parties would not be bound
until a formal written agreement was signed.
5. There was no usage in the industry in issue that
agreements were never binding until drawn up and signed.
6. The agreement did not omit any crucial element.
7. All the matters raised in the negotiations were agreed by
8. Performance was terms of the agreement has commenced.
Accordingly, statements or conduct can indicate that a valid
contract has been reached. If the above can be showed to exist a valid contract
will have been reached.
NOTE: To overcome these difficulties, most
standard form Mediation Agreements will provide that the parties will not be
bound until the agreement is signed. Mediators will encourage the parties to
sign an agreement, if one has been reached, before leaving the mediation. For
more information or guidance on mediation or settlement, contact me on
firstname.lastname@example.org or 023 8023 5979.
Jariwalla is a solicitor who specialises in intellectual property
law and commercial litigation.
About the Author
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Article Published/Sorted/Amended on Scopulus 2008-09-15 21:00:33 in Legal Articles