Should Mandatory Mediation be Included in Your Business Contracts?

If you look at a lot of business contracts, you may see a provision for mandatory mediation. By mandatory, we mean a provision that says that before anybody can go to court for any type of business or commercial litigation dispute, they must attend a mediation with the other side. Only then, if the mediation is unsuccessful, is the party able to then file a lawsuit.

Should You Include Mandatory Mediation?

This begs the question of whether or not mandatory medication is good for you, and whether or not you should include such a provision in your business contracts. There is no one answer—mandatory mediation is not always good or always bad. Rather, it depends on who you are and what type of contract that it is.

The Benefits

One big benefit of mediation (in all cases, not just commercial litigation) is that it gives parties the chance to sit down, hear the other side’s argument, and have a neutral mediator try to get all sides to come to some resolution.

By doing this, you may be able to reach an amicable resolution to your case that works for everyone, for a nominal expense—much cheaper (and quicker) than full blown in-court litigation.

Mediation also can avoid “surprise lawsuits,” that is, those lawsuits where you thought you were doing everything right, and out of the blue with no warning comes a lawsuit that you didn’t expect, alleging something you never would have guessed would be alleged against you.

What About the Negatives?

But mandatory mediation can have drawbacks as well, the primary one being time. It takes some time to coordinate and attend a mediation.

That means that if you have a contract where time is of the essence, you can’t just run to court to get resolution as quickly as possible. Mediation could be seen as a hurdle to get through before filing a lawsuit.

For example, if you are a landlord and a tenant is violating your lease, you may want that corrected, or the tenant out of the property, ASAP. But you can’t do that with mandatory mediation—you’ll have to set up and attend the mediation first.

If the mediation is unsuccessful, you can then still sue. But that would mean that the time that you spent coordinating and attending mediation as well as the expense related to it, would have been for nothing, as it never resulted in a resolution, and you had to sue in court anyway.

Mediation for Some, But Not All Things

You also do have the option of mediation for some contractual provisions and not for others. For example, mandatory mediation if there is a dispute in interpreting a term or condition of the contract, but no mediation for non-payment under the contract.

What should be in your business contracts? Ask us. Contact the West Palm Beach commercial litigation lawyers at Pike & Lustig today for more information.

Source:

fynk.com/en/clauses/mandatory-mediation/#:~:text=Mandatory%20mediation%20clauses%20require%20parties,costs%20associated%20with%20court%20proceedings.