Orlofsky ADR Services

Make Sure Your Mediation Ends With A Signed Document

In Billhartz v. Billhartz, 2015 IL App (5th) 130580-U, the parties ended a mediation by reaching an agreement, which was reflected in a written memorandum of understanding, but which they did not sign. The Illinois Appellate Court ruled that there was no enforceable settlement agreement, overturning a trial court ruling that attempted to enforce the settlement based on the unsigned memorandum of understanding.

The issue was whether there was an enforceable oral settlement contract based on oral statements at the end of the mediation that the unsigned memorandum of understanding reflected what they had agreed to. The court ruled that there was no enforceable agreement two reasons. First, the court noted that the agreement to mediate provided that oral communications during the mediation would not be admissible for any purpose. Based on this, the court found that the parties only intended to enforce fully executed written agreements, not oral agreements. The court cited Illinois cases holding that oral agreements are not enforceable if the evidence shows that the parties intended execute a written agreement. Second, the court ruled that, from an evidentiary standpoint, it could not admit evidence that the parties orally agreed to a settlement because oral statements during a mediation are, under the Illinois Uniform Mediation Act, privileged and not admissible.

This case raises the question of what to do when the parties reach an agreement at the end of a mediation, but the complete document is too complex to prepare and execute at that time. My recommendation is that: (1) the parties sign a memorandum of understanding at the end of the mediation, and that (2) the memorandum of understanding should state that this document contains all the material terms of the settlement and constitutes a binding agreement, even though the parties intend to prepare and execute a formal settlement agreement.