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

Orion Co and Vale Ltd reached a mediated settlement in which Vale Ltd agreed to pay 80,000 in instalments. The settlement was signed by both parties. Vale Ltd then fails to pay. What is the legal position of the settlement agreement?

The signed settlement is a contract between the parties, so Orion Co can sue to enforce it if the usual contract requirements are met. The mediator has no power to make awards, but the parties' own agreement creates binding obligations enforceable by court action.

  1. AIt is a contract between the parties and Orion Co can sue to enforce it if it satisfies the usual contract requirementsCorrect
  2. BIt has no legal effect because the mediator did not make a binding decision
  3. CIt can be enforced only by asking the mediator to issue an award

Explanation

The mediator has no power to decide, but the parties' signed settlement is itself a contract. If valid contractual elements are present, it can be enforced through the courts by a claim for breach. Bindingness arises from the parties' agreement, not from any mediator award.

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