MEDIATION AS AN OPTION IN CONTRACT DISPUTE 

Mediation-Resolving Contract Disputes-An Alternative Dispute Resolution Technique

Author: Bhumika Grover

Introduction-   Mediation as an option in Contract Disputes

In our daily lives, we engage in different contracts with each other. When we buy groceries from a grocery shop, we enter into an implied contract with the shopkeeper for making payment as a consideration after buying goods. 

In simple words, a contract is an agreement between two or more persons which is legally enforceable by law. A contract specifies the costs, payment schedules, and details of how the agreement can be performed, dissolved as well as the rights and obligations of parties. It can be oral or written but written contracts are reliable as far as business dealings are concerned. 

There was a time when people honored their words but now in the 21st century, everyone is aware of all the deal-breaking and lawsuits that have occurred all around them. Hence, one should know the proper mechanism to resolve the disputes which may arise due to the non-obligation of contracts.

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What are Contractual Disputes-Mediation-Resolving Contract Disputes-An Alternative Dispute Resolution Technique

Contract Dispute means disagreement or conflict between two or more persons who are involved in a contract. When they do not perform the terms and conditions of a contract it may lead to contractual disputes. It may occur due to various reasons such as when information has been shared against the terms of a confidentiality agreement or nondisclosure agreement, breach of contract, non-enforcement of a contract provision, wrong interpretation of terms of the contract, etc.

There are two important types of contract breach:

Material Breach: It breaks the contract from its core or root. It is a complete breach of contract in which parties are no longer expected to perform their obligations and may decide to take legal action against the breaching party and claim damages. 

Minor Breach: In a minor breach, the terms and conditions of a contract are not entirely rescinded by a minor breach of contract. For example, in a case of a confidential information agreement, a breach by a minor may cause certain damage for which a party may file a suit. The breaching party is still required to fulfil the obligations that were outlined in the agreement.

There are certainly other types of contract disputes such as non-disclosure agreement disputes, consumer-contract disputes, partnership disputes, and sale of goods disputes.  

If any dispute arises in any commercial organization due to a breach of contract by one party, there are different methods available to resolve that contractual dispute such as litigation, negotiation, mediation, and arbitration but mediation as an alternate dispute resolution system is generally the best option for resolving the contract if parties want to keep working together and retain their professional relationship.

Mediating Contract Disputes-Mediation-Resolving Contract Disputes-An Alternative Dispute Resolution Technique

Mediation is a voluntary, neutral, and systematic method of dispute resolution in which the parties to a dispute come together by signing a written agreement and appointing a mediator who helps them come to a mutually agreeable resolution. There are two types of mediation:

Court-referred mediation- It is the process by which a court matter is sent to mediation, instructing the parties to report to a specific mediator or a committee formed for that purpose and continue the negotiations for resolving the conflict. 

If the conversation with the help of a mediator results in a settlement, the mediator will refer it back to the court with a report, and the court will issue an order outlining the conditions of the settlement. 

According to Section 89 of the Civil Procedure Code, which outlines mediation as an alternative dispute resolution (ADR), the court that receives a case is required to determine whether the dispute can be resolved through a process other than a trial and if they can refer it to one or more forms of ADR. 

Private mediation- In private mediation, the mediator must be chosen by the parties once they have both agreed to participate. There are many mediators out there, each with unique backgrounds and professional focuses. 

The choice of the appropriate mediator is crucial and can influence whether the mediation is successful. When consulting a private mediator, you can arrange the mediation at a time that works for both parties' schedules, but the mediator's time must be paid for. 

It is recommended that each party pay half of the mediation fee when employing private mediation to make sure that both parties have a financial stake in the process and desire to reach an agreement.

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Mediation as a preferred method to resolve Contract Disputes-    Mediation-Resolving Contract Disputes-An Alternative Dispute Resolution Technique

Mediation is an informal and flexible method of resolving contractual disputes. It does not involve any formal procedures and rules; rather it is an impartial process that focuses on the parties. 

Confidentiality is one of the main characteristics of mediation. Any information shared during the mediation will remain private between the mediators. 

The sessions are not recorded on tape or written down. Since all information and evidence offered during mediation are kept private, no outside parties are permitted to see the mediation process. The information provided to the mediator may only be utilized to assist in reaching a fair settlement. 

If the parties did not come to a fair settlement, the mediator is not allowed to disclose anything which the parties had disclosed to him. Even the court could not ask the mediator to do so. Thus, it prevents anyone's reputation from being harmed.

Although mediation typically takes less time to complete, a resolution might be reached sooner than a thorough investigation. Thus, it is a cost-effective and inexpensive method that involves minimal cost. 

Moreover, the mediator's decision is not binding on the parties as his job is only negotiating and helping the parties to come to a fair conclusion and parties have the right to decide and come to an outcome. Parties are free to leave the mediation process at any time without stating a reason.

Mediation helps to restore the relations between parties which further brings harmony to society. This makes mediation, the most flexible of all the other methods.  

Mediation over Litigation-Mediation-Resolving Contract Disputes-An Alternative Dispute Resolution Technique

Litigation is a formal method of solving disputes through courts. In other words, It is a process of solving or settling disputes through legal action and filing a lawsuit in court.  This is a very long and complicated process as it takes years to come to a conclusion or judgment. 

Hence, Alternate dispute resolution (ADR) such as mediation is preferred over litigation. In litigation, the outcome is decided by a jury or a judge rather than the parties themselves. Moreover, lawsuits and legal action damage relations between the parties and rob their professional and personal relationships whereas mediation protects their relationships and there is also a chance of building future relations. 

The decision of the judge is binding on the parties and they can only appeal that judgment in the higher courts whereas, in mediation, the mediator only assists the parties to come to a final decision. The cost involved in litigation is far more than the mediation as lawyers and court fees eat up a lot of money. That's why mediation is a cost-effective and alternative method in contractual disputes over litigation. 

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Conclusion-Mediation-Resolving Contract Disputes-An Alternative Dispute Resolution Technique

A contractual dispute arises when one party does not fulfill his obligation in a contract or when there is a breach of contract by one party. If the parties prefer litigation and approach a court, the court can ask for compensation for loss or damage suffered by the party or specific performance of a contract or repudiation but this could take a lot of time as already there is a backlog of cases in a court. 

But, if the parties prefer Alternate Dispute resolution(ADR) such as mediation, the parties can themselves decide about the contract and reach a conclusion. The mediator only assists them to come to a fair decision. 

This prevents the piling up of cases in a court and the court can resolve more important matters. Moreover, mediation is a cost and time-effective method of resolving contractual disputes which benefits both parties. 

If the parties are not able to reach an agreement, they can anytime leave the mediation process and approach the court. Therefore, mediation is considered a desirable and preferred method to resolve contractual disputes.