A client recently suggested that I add a mediation provision to a master services agreement that I’ve been preparing for them. While pondering that idea, I happened upon this item in a newsletter by the law firm Smith, Gambrell & Russell, LLP. (Why no author specified?) It captures why I ultimately recommended that we not include a mediation provision. Here’s the relevant extract:
Mediation provisions are not often included in commercial contracts, although they appear to be an emerging trend.
The goal of mediation is to provide a forum for settlement negotiations before a lawsuit is filed or an arbitration is commenced. Parties may include mediation clauses in commercial contracts in an attempt to take advantage of this fundamental purpose. However, a mediation clause may not meet a party’s expectations. Mediation is beneficial when all parties participate voluntarily and are prepared to negotiate in good faith to resolve the dispute. Mediation will often fail if less than all parties are of this mindset. Unsuccessful mediation simply results in lost time and money and delays the parties’ ability to proceed to litigation or arbitration. Unfortunately, it is often difficult, if not impossible, to determine whether a mediation provision is appropriate for the parties and the future dispute that might arise.
Understanding that a mediation provision may not be desirable in every case, parties may elect to omit a mediation provision from their commercial contract. Even if a contract does not contain a mediation provision, settlement-minded parties can mutually agree to mediate at any time under any terms upon which they agree. It is much easier to evaluate the appropriateness of mediation when the dispute arises and the facts are known. Additionally, a pending lawsuit or arbitration proceeding may serve to increase the pressure to settle.
The client agreed with me, so no mediation provision, at least for the moment. If you think I’m missing something, I’d be happy to hear it. And note that I’m speaking from ignorance: I have no experience with mediation.