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

Harrowgate Co and Duneth Co used a mediator, who helped them reach a settlement. They signed a written settlement agreement. Later Duneth refuses to comply. Which statement is correct?

The settlement agreement can be enforced as a contract. A mediator cannot impose or enforce a result, but once the parties have signed terms they agreed, those terms bind them contractually and a court can enforce them if one party breaches.

  1. AThe mediator can enforce the settlement because mediators have binding powers
  2. BThe settlement is not enforceable in any way because mediation outcomes are never binding
  3. CThe agreement can be enforced as a contract, since the parties themselves agreed its termsCorrect
  4. DThe dispute must be resolved again by arbitration, because mediation cannot lead to agreement

Explanation

A mediator has no power to impose or enforce a decision. However, once the parties sign a settlement agreement, it operates as a contract between them and can be enforced through the courts if breached. Saying mediation outcomes are never binding is wrong because the agreement itself binds them.

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