Preventative Dispute Mechanism
Mediation Amidst Contractual Negotiations
Usually, mediation is called once a dispute erupts. However, at times, the most suitable timing for mediation is during negotiations preceding contract signing.
Mediation during contractual negotiations serves several purposes.
Mediation during contractual negotiations may resolve matters, that if left untouched, may lead to unresolvable disputes. In this respect it is similar to preventive medicine.
Early contractual mediation may increase the coordination of legitimate expectations of the parties thus providing a contractual basis for such expectations.
Early contractual mediation can also prevent hidden obstacles from emerging, at the least convenient times.
Mediation can harness the most suitable professional advisers, at the contractual negotiation stage. Often, parties to a contract refrain from using the necessary experts when the contract is being drafted.
The mediation process can bring to the surface taxation issues, insurance matters, realistic business plans, and more. Subjects which if handled correctly and professionally at the pre-contractual stage, could save significant resources and hardship later down the path of the contractual relationship.
This is especially so when the parties to the negotiations are not large corporations but business persons facing transactions of importance or complexity.
Furthermore, mediation process can facilitate signing agreements which have commercial and economic sense, but the parties, for various reasons, have reached deadlock in the pre-contractual negotiation process.
The opposite is also true; in pre-contractual mediation, the parties may discover that they are negotiating a deal that is not viable. Thus, for instance, in the pre-contractual mediation process, at the stage of clarifying the legitimate interests, the conclusion may be reached that some of the parties’ interests cannot be bridged, and that the parties are better off searching for an alternate contractual solutions. At times no deal is far better than a bad and expensive deal.
Alternatively, during the pre-contractual mediation process, the parties may understand that the nature of the agreement must be modified to more accurately reflect both parties’ interests.