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ACCA Applied Skills · Corporate and Business Law (Global) · Alternative dispute resolution mechanisms

A contract between Gantry Co and Holm Co contains a clause requiring the parties to attempt mediation before starting any court proceedings. Gantry Co sues immediately without mediating. Which statement is most likely correct?

The court may stay the proceedings until the agreed mediation step is attempted, provided the clause is clear and certain. Parties are free to agree a mediation step before litigation, and courts commonly give effect to it, even though settlement itself is never compelled.

  1. AThe court will always hear the case because parties cannot limit access to courts
  2. BMediation clauses are void because mediation is voluntary
  3. CThe court may stay the proceedings or refuse to hear the claim until the agreed mediation step is attempted, if the clause is clear and certainCorrect

Explanation

Courts in many jurisdictions give effect to clear, certain multi-step dispute clauses and may stay proceedings. Mediation is voluntary in outcome, but an agreed obligation to attempt it can be enforced. Options 0 and 1 overstate the position.

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