Commercial Mediation

THE ISSUE

This mediation involved an alleged breach of contract over the supply of goods. I was selected by the solicitors acting for both parties and agreed to act. I checked to be sure that I didn’t have a conflict of interest and then I submitted a draft Agreement to Mediate to the solicitors, both of whom approved it. Each solicitor gave me a single page outlining their client’s case.

PRE-MEDIATION

The pre-mediation meetings were held on the mediation day – I met the claimants (Plaintiffs) on their own first and when that meeting was finished I met the respondents (Defendants). Both parties had their solicitors present.

THE MEDIATION

The mediation itself started after the two private meetings and all present signed the Agreement to Mediate.

The claimants told their story which was in effect that they had ordered goods from the respondent (machine parts) to the value of about €100k – the goods were supposed to be delivered on a particular date and in good condition. Firstly all of the goods didn’t arrive and the due date and secondly some of the goods were defective. As a result the claimants withheld payment of the whole of the order. The fact that all of the goods hadn’t arrived and that some were defective meant that the claimant had problems fulfilling orders to their customers which were to have included the parts. The contract for the supply of the goods contained a clause stating that in the event of a dispute the matter would go in the first instance to mediation and that is why the parties went forward with the mediation.

The respondents refuted what was being said by the claimants. They agreed (without prejudice in the mediation) that they hadn’t delivered all of the goods on the day in question due to difficulties in their production system but they had delivered the balance within 2 weeks of the due delivery date. They disputed that the goods were defective but they hadn’t been given an opportunity to inspect them despite requests to do so. The claimants had not paid for any of the order and this was putting the cash flow of the respondents in jeopardy. They are entitled to be paid. The relationship was fractured and they were getting no further orders from the claimants which was adversely affecting their business.

Once the positions of the parties had been outlined as above I met both parties separately. It was clear from both that they wanted to maintain a good working relationship. They had been working successfully together over the years and this was just a glitch. The reason for the breakdown in the relationship seems to have been a rather aggressive manager in the claimant’s company who had now left. It was he who had decided not to make any payment and he had decided to give no further orders to the respondent.

THE SOLUTION

By working separately between the parties agreement was reached :-

The claimants agreed to make a payment to the respondent immediately for those parts that had arrived on time and which they say are in proper working order.

An agreed independent third party was to be appointed immediately to examine the allegedly faulty goods and to report to both parties. Her fee was to be split 50-50. The parties agreed to abide by the decision of the independent expert. On the basis of the report full price would be paid for any parts that were said to be in good working order. Any goods deemed to be faulty would be removed from site by the respondents and repaired. Once they were redelivered and were in proper working order the claimants would pay full price for them. The costs of collection of the faulty parts would be paid by the respondents.

It was agreed that the sum of €10k was payable to the claimant for the difficulties they had suffered by not having the right goods at the right time. However because of their cash flow difficulties this sum couldn’t be paid at the minute. It was agreed that the claimants would immediately place more orders with the respondent on the basis of the agreed price list. These orders would be fulfilled and when the claimants paid the respondents in full for each order the respondent would the next day after payment pay as sum equivalent to 10% of the order to the claimant to reduce the sum owing of €10k. This would continue until the 10K was paid off.

The parties agreed that if issues arose again between them that their first way of dealing with it would be that the CEO of each organisation would speak to the other CEO in an attempt to resolve things. If that didn’t work then they would go to mediation.

It was agreed that the Mediator’s fees would be split 50-50.

As can be seen this solution was a commercial solution enabling the parties to resolve their difficulties in a creative, quick and practical way preserving the business relationship. If the matter had gone to court the relationship would have been sundered, there probably would have been a judgment against the respondent who by the time the matter came before the court might be in receivership or liquidation meaning the claimant would have got little or no recompense.