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What is a Mediation Settlement?

By Christy Bieber
Updated May 16, 2024
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A mediation settlement is an agreement that two feuding parties arrive at during the mediation process. The mediation process can be formal or informal. The settlement agreement once signed, is usually binding.

When two parties have a legal dispute, one party often files a lawsuit against the other. If this occurs, both sides begin preparing a case to present at a trial. Although many lawsuits are filed, the vast majority of legal disputes are settled out-of-court before a trial ever begins.

Mediation is one way in which many disputes are settled out-of-court. Unlike arbitration, which is mandatory and binding in some situations, mediation is a voluntary process. Two disputing people or companies may agree to go to mediation in an attempt to arrive at a mediation settlement in order to save on court costs.

The parties who agree to mediation then meet with each other while a licensed mediator is present. The mediator works with these opposing sides using a variety of negotiation techniques and tactics. The goal of this meeting is to arrive at a mediation settlement that both parties agree to.

Neither party is required to agree on a settlement, and each party can walk away from the table at any time. Generally, however, people are willing to speak to each other and try to find some middle ground. This often works as long as there is not too much divergence between what the plaintiff is hoping for and what the defendant is willing to give.

If the parties are open to discussion, and the mediation process works properly, often they are able to come to an agreement in which the plaintiff receives some compensation. Both the plaintiff and the defendant usually have incentive to settle out of court, as when they resolve their differences in this manner, they get to determine what will happen. If they go to court, a jury decides, which is much riskier for both sides since the plaintiff could end up with nothing or the defendant could end up paying much more than he expected.

When the parties agree, this agreement is a mediation settlement, a binding agreement. The documents are written up and the plaintiff agrees to waive his right to sue the defendant in exchange for the amount of money, or other compensation agreed upon in the mediation settlement. These written legal documents become binding, and neither party can deviate from the mediation settlement agreement once they have signed the documents.

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Discussion Comments

By anon317680 — On Feb 03, 2013

The plaintiff agreed to settle a car accident case. Our lawyer handed out the settlement agreement about 10 days ago. How long could this take for the plaintiff to sign it? Is there a time limit in California or can he take all his time? Thanks.

By Monika — On Sep 02, 2011

@Azuza - I think a confidentiality clause is part of a lot of settlements reached in mediation. I know I've read in the news a lot that things were settled for an "undisclosed amount" or settled with a confidentiality agreement.

I think it would take a lot of skill to be a mediator. Imagine dealing with upset and stressed out people who are arguing with each other every single day! I don't know if I could handle it, but my hat's off to those who can!

By Azuza — On Sep 02, 2011

Although mediation is generally voluntary, I've seen some contracts and user agreements that stipulate mediation will be used in the event of a dispute.

I think it's a good idea to at least attempt mediation before going to court. Mediation is a lot cheaper than hiring lawyers. It also sounds like a good option for people who want to keep the proceedings confidential. Most courtroom proceedings are public record, but I think things that go on in mediation could be kept private. I bet a lot more big companies settle things in mediation than we realize!

By SkyWhisperer — On Sep 01, 2011

@NathanG - I agree, and personally think that a lot of so called small claims court cases should be resolved through mediation. A lot of these cases seek damages that are in the hundreds of dollars or so at the most. Why bother taking it to court?

You incur court expenses and may wind up paying more than what you hoped for (if you are the defendant) or getting less than what you wanted (if you are the plaintiff).

When both parties enter mediation, I think they agree that they are willing to compromise. Both sides realize that there will be some give and take in the final outcome, which I believe will be cheaper than a court case.

By NathanG — On Aug 31, 2011

I remember watching the movie The Social Network which was all about how Facebook was created. The founder was sued by several people he knew from college who thought he stole the idea for Facebook from them.

In the end of the movie (spoiler alert) there was discussion of settlement agreements, because apparently the defense thought their client would lose in a courtroom trial.

I remember being blown away at the mediation settlement amounts that were mentioned in the film. You’d think court would have been a better option, but I guess that in court the sky could be the limit for the amount of damages sought.

I think in general settlements tend to be better than lawsuits, unless you’re sure that you have an airtight case.

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