Orlofsky ADR Services

Making Sure Your Mediation Settlement Is Binding

It is not uncommon in a complex case for the parties to reach a settlement during a mediation, reflected in a written, signed, settlement term sheet, but also intend to later draft and sign a more formal and comprehensive document. The law is clear that if the agreement reached during the mediation includes all the “material” terms, the settlement is binding, even if the parties intend to execute a more formal document. I have nonetheless always included language in mediation settlement agreements specifically stating that the document is intended to be binding, even though the parties intend to later execute a formal settlement agreement.

A court in California recently cited just such language in rejecting a challenge to a mediation settlement, Mullahey v. Feldman (Cal. App., 2018):

“Parties agree to be bound by the terms set forth herein, and agree that the terms shall be further reduced to writing in a more comprehensive and complete settlement agreement to be executed at a later date, but such further agreements shall not detract from or impair the enforceability of this Agreement.” The parties’ stated intent to enter into a more formal agreement at a later date does not preclude enforcement of the mediation agreement.

Language this this effect cannot make a truly unenforceable agreement (i.e. one lacking a material term) enforceable, but such language may well give that last needed push to get a court to enforce a settlement agreement in a close case.