When Commercial Contracts Don’t Benefit From Mediation Provisions

Some businesses and individuals are now considering whether it makes sense to put a mediation provision in a commercial contract because the process has become more popular in a variety of industries for numerous reasons. When this clause is included in a contract, individuals and businesses in dispute would have to attempt to resolve the issues between them through mediation before pursuing litigation. At the outset, this might make sense: it is likely that at least some commercial disputes could be resolved through this method of Alternative Dispute Resolution (ADR), thus saving all involved parties time and money.

The downside is that mediation tends to work out the best for everyone when it is a voluntary process – engaging parties that do not wish to mediate in such a setting for alternative dispute resolution is setting them up for failure. While some parties might warm up to this idea eventually, the process is highly unlikely to succeed if it is not done on their own terms. When they are truly invested in getting to resolution, parties get to take advantage of mediation’s relatively less rigid structure and maximize their time and money.

Because one or both parties might not get what they expect out of it, mediation might not always be a good fit for a clause in a commercial contract. It is highly unlikely that a settlement can be agreed upon if not everyone at the table is invested in resolving the conflict through mediation. When parties spend time and money only to take the case to litigation anyways, they end up being more frustrated over the case and more resentful towards each other.

Another reason it might not be the best decision to pre-empt dispute resolution with a mediation clause is that not all cases may benefit from it. Such a clause assumes that all parties and all disputes are a good fit for ADR, but that is not true for every case and industry. In some cases, determining the best course of action in the event that a dispute arises should be left to parties.

Finally, making some people agree to mediation ahead of time may be troublesome because they are not actually familiar with what it entails. Although mediation is certainly gaining more traction in the commercial world, it is still not a one-size-fits-all resolution. More individuals will only be comfortable with their rights and responsibilities in the mediation process when it becomes more widely accepted either as a first plan of attack or as a strategy to remove a longstanding dispute from gridlock.