A mandatory mediation provision dictates that the parties must mediate a dispute before resorting to litigation. In some cases, courts will dismiss a complaint initiating litigation if the parties failed to mediate before filing. And while a mandatory mediation provision could be futile if the parties truly do not want to mediate (because they would not be mediating in good faith), mediations can provide substantial value for the parties involved.

When considering whether to include a mandatory mediation provision in the contract, consider the values below.

Early mediations force the parties to prepare

Preparing all aspects of the claim for a mediation can provide huge value. It forces the contractor to find support for each portion of the claim before a lawsuit is even initiated and forces consideration if each position is justified. This process usually includes a full accounting of the claim, which ensures it is accurate and supported from the outset of the dispute resolution process.

Unfortunately, in litigation, it is not uncommon for parties to prepare the support for their claim years into the process and then realize a portion of their claim is inflated, which made settling their claim more difficult and expensive than it needed to be. So preparing early and thoroughly can help present the most accurate and supported claim from the beginning, which usually encourages a more efficient dispute resolution process.

Early mediation provides the parties with an early opportunity for settlement

When the parties are at the point of considering dispute resolution options, tensions are high and rationality can be low. An early mediation has the opportunity to settle tensions and bring both sides to the table by involving third parties such as lawyers and mediators. Lawyers and mediators are usually able to provide an objective evaluation of the claim, its support and its chances of success. This sort of unbiased advice can help determine if there is any middle ground for settlement.

Thoughtfully discussing settlement early provides an opportunity to resolve the claim before it turns into litigation.

Once formal litigation is initiated, each contractor will be spending money complying with court formalities instead of being exclusively focused on resolving the claim.

Early mediation could provide valuable time savings

Litigation can span years. During this time, the contractor’s management team and project team are routinely assisting the litigation team with fact investigation, document requests, interviews, timeline creation, deposition preparation and the list goes on and on. The value of the management and project team’s time is lost during litigation and is never truly recovered in any sort of litigation award. A successful mediation means that the management and project teams get back to their real jobs as quickly as possible.

Early mediation could save costs

Litigation costs can be astronomical. Routine costs include filing fees, process servers, copiers, court reports, expert fees and attorneys’ fees. Successful mediation means the costs associated with any litigation are saved.

Mediation could help maintain relationships

Participating in mediation before proceeding to litigation could help facilitate a better relationship with the opposing party. Mediation is usually viewed as less adversarial than litigation.

Mediation does not necessarily require counsel, but they do not force the parties to spend fees on court formalities or experts and do not usually create rigid deadlines. The more collaborative nature of mediation could help maintain a relationship that otherwise would have been strained by years of litigation.

Early mediation provides utility even if the case is not fully resolved

A number of construction claims involve several complex components, parties and documents and require the parties to obtain additional information to make further attempts to fairly resolve the claim. Given the amount of information involved, not all claims are resolved in a mediation. But even if the whole case is not resolved, the parties could still make meaningful progress by: understanding the other party’s position, resolving portion(s) of the claim, agreeing what information needs to be gathered in order to facilitate any further settlement or even agreeing which portions of the claim would need to be litigated. Each piece of agreement saves the parties time, effort and attorney’s fees even if the case does proceed to litigation.