Imagine your business finds itself in a difficult situation with a client. The goods you sent have not met the client’s expectations and the client is demanding replacement. Worse, they say your faulty goods have caused them to lose a valuable contract and they are claiming compensation from you.
Chances are, most businesses will immediately turn to their lawyer in a situation like this. This makes sense. Lawyers understand rights and obligations and can assist in telling you what your chances of success in resolving the dispute are.
This can lead to a problem though. The law is an adversarial process. It is all about determining which party is right and which party is wrong. The law attributes blame. Now, the human psyche doesn’t like to be wrong. It doesn’t like to be found at fault. When we hear from a client’s lawyer, it sets up an automatic stress reaction and can very easily lead to an adversarial response and heightening tension. Likewise, if we hear from our lawyer.
Imagine that your relationship with the complaining client is valuable to the business. Through legal action, the relationship is likely to be severely strained and will probably break down. Imagine that you have gone through a costly, slow legal process and had a decision in court. Regardless of who wins, what are the chances that you and your client will want to continue working together?
Mediation looks to resolve business disputes and protect the business relationship. In a mediation, an independent neutral facilitates a conversation between the businesses to assist them in breaking down the dispute to its core elements. The mediator helps the parties recognise the underlying needs and objectives they have and working solutions that are acceptable to both businesses.
In a litigation scenario, it can over 12 months to reach resolution. Both businesses will spend significant amounts of money on the dispute. The dispute also takes a huge amount of time away from management that could be better spent running the business. Not only that, but ultimately, the decision in their case is left in the hands of it unrelated third party who may not be familiar with the industry and does not know the businesses involved in the dispute.
Mediation can be held relatively quickly. This limits costs. The businesses are ultimately in control of any decision that is made. The mediator is not in a role that forces either party to accept any decision.
Lawyers should generally be involved in the mediation process. Their key role is to ensure their client knows the realistic outcomes of litigation. Any potential settlement should be weighed up against the likely litigation outcome as well as the cost of business disruption and stress. The lawyer also has an important role in documenting settlements to make sure they are enforceable.
We are now seeing more areas of commercial practice where mediation is a compulsory requirement before proceedings can be issued. Franchising and Retail Leases are examples of this. The data is showing us that over 80 per cent of cases in these industries which are mediated settle without any requirement for proceedings being issued. If this is working in franchising and leasing, there seems to be no reason why it can’t work in a much wider range of commercial disputes.
So, if your business has the unfortunate position of being involved in the dispute, perhaps it’s an option to consider calling the mediator before going down the path of litigation.
