New Zealand Law Society - Recording and implementing settlement agreements

Recording and implementing settlement agreements

Recording and implementing settlement agreements

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Mediation allows parties to exercise self-determination. The parties involved create both the outcome and the terms of settlement. This normally means the parties take psychological ownership of the outcome, and are more likely to comply with an agreement reached during mediation.

In order to reap the benefits of a mediated outcome, it is important that the agreement is recorded in writing at the conclusion of the mediation process, and that the terms can be implemented on a practical level.

I have seen agreements that were not recorded on the day take a further 10 months of negotiation to conclude, and I have seen agreements fail because implementation was, in fact, impossible. The ability to implement what has been agreed is essential. It is pointless reaching agreement today for it to fall over in the months that follow.

An effective written settlement is less likely to be created late in the day when the parties are tired. The risk of an ineffective agreement is even greater when the terms are complex and implementation is multi-faceted. As always, preparation is key. Consider:

  • Preparing a draft agreement before you mediate. Cover as many of the likely terms and problems as possible. It may be helpful to circulate this for feedback ahead of time.
  • Where there are multiple facets to a relationship or dispute, preparing a diagram or other summary document that captures the big picture as well the details that will need to be tied up. This may assist in identifying contingencies and a workable process.

If the parties are unable to conclude a comprehensive and detailed agreement at the end of the day, at least record the essential terms in a binding heads of agreement. This provides a useful reference point should there be any differences of opinion or detail to fill in regarding implementation.

Where the implementation process is complicated – say in the unwinding of a complex joint venture involving numerous assets, share transfers, restraints of trade etc – the agreement should provide for contingencies that may arise as the parties work through that process. Effective monitoring of such agreements will depend on the ability to define the standards by which compliance will be monitored. For example, the parties should:

  • Agree upon the criteria for monitoring compliance with the agreement, as well as a mechanism for resolving any disputes regarding compliance,
  • Clearly define the steps required to implement the agreement and the resources that may be needed,
  • Identify who needs to be involved in the implementation process and ensure that they are engaged,
  • If anything is required of outside parties, then this should be explicitly agreed and objectively measured,
  • Accommodate future changes in the terms of the agreement (if any are contemplated because of the nature of what needs to be implemented),
  • Agree a procedure to manage any unintended or unexpected problems that might arise during implementation.

Auckland barrister Paul Sills specialises in commercial and civil litigation. He is also an experienced mediator.

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