How can my neighbor and I write a really solid mediation settlement agreement?

Make sure you come out of mediation with a clear agreement whose terms you can both understand.

Question

My neighbor and I were arguing over his home construction project, which is taking about a month to complete. There were a variety of issues, including property destruction and noise levels. We went to mediation to resolve everything, and for the most part, have agreed on solutions. Now the mediator would like to draft a settlement agreement. How can I make sure my settlement agreement is as strong as possible?

Answer

There is no singular definition of what makes a mediation settlement agreement “good” or “bad.” What matters is whether both parties are able to 1) understand its terms, 2) willing to follow them, and 3) able to improvise in un-contemplated situations.

First, if you are mediating common issues with your neighbor like noise and relatively small property damage, the settlement agreement need not be written in obtuse legalese. Although it can be enforceable as a contract once you both sign the document, there is no need to dress up the words with jargon and legal terms that neither of you fully understand.

Use plain English. “I agree to pay John $3,500 by next Wednesday” might be preferable to “Party A hereby warrants, represents and covenants that it shall remit payment to Party B in the amount of not less than three-thousand and five hundred USD on or before the 21st  Day of June, 2015.” The legalese might look more “official” but it can easily result in confusion and ambiguity – the exact opposite of what you want in a settlement agreement.

Second, make sure that you are both able to follow the terms of the agreement before you both sign. This involves what is called “reality testing”; you should each be honest with yourselves and one another about your ability to perform the terms required. It’s easy for your neighbor to say that he agrees to pay you $3,500 by next Wednesday,” but you should both ask yourself: can he? Does he have this money in his checking account or in cash? If not, how quickly could he realistically liquidate money from a savings or investment account? Avoid potential breaches of the agreement by ensuring that the terms are reasonable and likely to be met by both parties.

A crucial detail is that you and your neighbor cannot bind third parties to your agreement, unless you bring them into the process and have them sign. For example, in this example of a construction project, you might want your neighbor to promise that his general contractor will treat your family with respect. Your neighbor can promise that he will  talk to  his general contractor about this, or even fire him if there is noncompliance, but your neighbor cannot compel another man to change his behavior.

Third, another feature of a solid mediation settlement agreement is the ability to take into account unanticipated situations. How can you possibly consider unanticipated situations, you might wonder? In our example here, we have a major home construction project that is anticipated to last one month. It wouldn’t take much imagination to envision a scenario where construction runs late, or the contractors need to return in a couple months to fix part of the project. Do the terms of this agreement apply in such future scenarios?

A nice catchall provision to the settlement agreement is a simple clause indicating that, at the request of either or both parties in the future, you will both return to mediation to resolve future disputes. This will ensure accountability if circumstances change – particularly if you’re able to have the same mediator.

Like any contract, a mediation settlement agreement can be broken or bended by either party. But making the agreement realistic, concrete, and flexible will surely mitigate your chances of winding up back in mediation, or worse, in court.

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