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Resolving Contract Disputes Using Mediation

Date Posted: March 21, 2022 2:23 am

Resolving Contract Disputes Using Mediation

Contracts are Everywhere

Daily transactions and small business activities require people to engage in contractual relationships regularly. Whether you are charging on a credit card, ordering goods over the internet, or hiring someone to clean the carpets, there are expectations regarding the request and how it should be delivered. Some expectations are explicitly stated in written contracts, while others are enforceable by legal standards.

In any case, contracts are indispensable for the proper functioning of modern society. Engaging in inter-dependent transactions creates an atmosphere of trust because participants reasonably expect that the other party will uphold their part of the agreement.

What Are Contract Disputes?

Contracts are binding agreements with clients, employees, partners, and vendors that define the responsibilities of both parties. Executing contracts is crucial in performing everyday business operations.

Types of Contract Disputes

  • Disagreement on whether the contractor correctly performed a screen repair
  • Poor work done on an automobile repair
  • Failure to complete a job or deliver goods timely
  • Inability to pay a credit card bill or statement due
  • Partial payment for a construction remodel
  • Deficiency in pool repair
  • Water damage to a condo from another unit
  • Supply of incorrect materials for a new roof
  • Damage to property while performing services requested

When someone fails to meet expectations or follow the terms of the agreement, that is called a breach of contract or default of contract.

A breach of contract can occur when one person fails to pay the amount due or deliver the goods or services on time. Other disputes can arise when the parties disagree over the quality of the goods or services provided or whether one party complied with terms and conditions. There are two main types of breach of contract: non-material or material breach of contract.

A non-material breach is a minor breach that occurs when non-compliance with the agreed terms is not critical to the performance of the contract. The integrity of the contract is not compromised. On the other hand, a material breach is a crucial and irreparable breach of the agreement that goes to the heart of the ability to perform the contract. For example, when a seller abruptly decides not to sell the house, even though the buyer prepared the paperwork and paid the deposit on time, it could be considered a substantial breach of the contract between the parties.

Contract controversy

In addition, an anticipatory breach of contract can occur when one party notices that the other will not meet their part of the deal. The actual default may not have taken place yet.

In Florida, to argue that there is a breach of contract, the violation has to be material. That is why the anticipatory breach has no practical significance until the actual breach happens.

Options for Enforcement

When a breach of contract occurs, the most common way of enforcing the contract or recovering damages is by filing a lawsuit. Court litigation is expensive, time-consuming, and emotionally draining.

In court, the Plaintiff to a breach of contract action must prove that:

  1. the contract is a valid and binding agreement between the parties
  2. the other party failed to meet its contractual obligations, and
  3. such breach resulted in monetary damages for Plaintiff.

Demonstrating breach of contract allegations in a court requires going through an exhausting process of disclosures, discovery, opening statements, witness examination, and closing arguments. Hiring an expert witness and taking depositions is not uncommon.

Besides, litigation is a vindictive and adversarial process. The parties are focused on winning the case. Defeating your adversary is a goal of litigation, regardless of costs. The losing side frequently pays the attorney’s fees of the prevailing party,  causing deep dissatisfaction and further escalation of the conflict. Litigation is an all-or-nothing game. There is no genuine reconciliation in the vindictive atmosphere of the court environment.

Contrarily, as an out-of-court method, mediation brings acceptance and reconciliation among disputing contract parties. As a voluntary, neutral, and informal process, mediation enables the parties to address their grievances in an open discussion. The participants have an entirely different mindset compared to a litigated dispute. Instead of aiming to defeat their opponent, the parties in mediation seek to negotiate their differences. Mediation is a win-win game. Parties agree to make concessions. Reaching a mutually beneficial settlement is more likely when both parties abandon their initial positions and shift to meet in the middle. To succeed in negotiations, you have to put yourself in the other person’s shoes and understand their point of view.

If maintaining the business relationship between the disputing parties and keeping business secrets out of public sight is vital, mediation may be better. However, as an alternative dispute resolution method, mediation proves to be a more advantageous process for dealing with business contract disputes.

Resolving Contract Disputes Through Mediation

Mediation can be a much more effective and satisfying way to resolve a contract dispute.

Advantages of Mediation:

  • neutral and safe environment,
  • voluntary in that parties are not forced into an outcome,
  • Confidential for grievances
  • Time-saving and more efficient
  • cost-effective
  • allows parties to retain control of the resolution
  • skilled facilitator to guide discussion

IT’S PRIVATE:  One prominent feature of mediation is its confidentiality. Keeping contract disputes out of the public record is crucial in business circles because it continues business operations and protects reputations. Before beginning the mediation process, the parties and the mediator sign the mediation agreement. An integral part of the mediation agreement is a confidentiality clause. By consenting to the clause, everyone involved obliges themselves to keep secret everything shared during the process. The confidentiality clause applies to the future, meaning that the parties cannot use confidential information in potential litigation emerging from an unsuccessful mediation. The disputants are also prohibited from revealing the information learned during the mediation process to other people.

IT’S LESS EXPENSIVE: Most costs related to dispute litigation are absent in mediation. Court expenses and extensive attorney fees are not part of the mediation process. Unlike litigation, which consists of multiple strictly divided stages, mediation is informal and frequently occurs within one or two sessions. It lacks complex discovery, expert witness testimonies, and closing arguments. An absence of strict form contributes to incomparably lower costs. Besides, mediation is the most time-effective dispute resolution method, typically over in a matter of weeks or even days.

IT ALLOWS MORE INPUT AND CONTROL:  The parties decide the outcome. Unlike in litigation, where the jury acts as a referee of facts while the judge controls the procedure, there is no judge or a jury in contract dispute mediation. Instead, the mediator is a neutral third party who facilitates negotiations while allowing the parties to maintain control of the outcome. By creating a safe and friendly atmosphere, the mediator enables the free flow of information. Without strict rules and coercion, the parties are more likely to settle their dispute that benefits both parties.

IT IS MORE RELAXED:  The mediation process is informal, consisting of four typical stages: introduction, opening statements, and private and joint sessions. The mediator can decide to omit certain phases, depending on their case-by-case evaluation. After introducing themselves, the mediator allows the parties to give their opening statements regarding the dispute. In private sessions (caucuses), each party can talk to the mediator separately, offering their view on the dispute. Finally, the mediator listens to the perspectives of all parties.

IT ENCOURAGES THE DEVELOPMENT OF IDEAS:  Following caucuses, the mediator brings the differing views of each side to the other participants for clarification and expansion upon the ideas for a remedy. The mediator stays neutral throughout the negotiations while also assisting in developing outcomes that address the concerns of all parties based on the information received and the problem-solving skills of the mediator.   Finally, mediators facilitate talks to reconcile the parties and bring satisfactory outcomes.

IT SUPPORTS A WIN-WIN MENTALITY:  The mediation allows the participants more control by exploring the reasons for the dispute and considering other options for resolution. Reaching an outcome that addresses the needs of both parties and allows them to move forward is the ultimate goal of mediation. The agreement is possible only with the consent of both parties. An effective mediator will demonstrate patience, persistence, and practicality.

Successful negotiations lead to a settlement between the parties, executed as a binding contract that is enforceable in court.

As a Florida Supreme Court-certified mediator with years of experience, Kim Torres adheres to the highest ethical and professional standards in mediating contract disputes. Ms. Torres has facilitated negotiations in thousands of cases with individuals, small business owners, and corporate participants, utilizing skills of patience, active listening, compassion, and creativity while remaining practical. realistic and approachable.

If resolving a contract dispute in a highly-confidential and neutral manner is your top priority, do not hesitate to contact us today and schedule your mediation at kim@torresmediation.com.