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

Echo Ltd and Faro Ltd reach a settlement through mediation and sign a written agreement setting out the terms. Faro Ltd later refuses to comply. Assuming no further special arrangements were made, what is the legal position?

The settlement is enforceable as a contract, so Echo Ltd may sue for breach. Although mediation is non-binding as a process, a concluded written settlement creates contractual obligations that the courts will enforce, while the mediator has no power to enforce it.

  1. AThe mediator can enforce the settlement directly
  2. BThe settlement is enforceable as a contract, so Echo Ltd may sue for breachCorrect
  3. CThe settlement has no legal effect because mediation is non-binding
  4. DThe settlement can only be enforced by a new arbitration award

Explanation

Mediation itself produces no imposed decision, but a signed settlement is a contract between the parties. Breach can be pursued in court like any other contract. The mediator has no enforcement power, so A is wrong.

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