Don’t leave mediation without an enforceable agreement
Your mediation has become a long day. At times, progress seemed stalled. But now the mediator has announced the parties have reached agreement. Although you would prefer a comprehensive, formal settlement agreement, you are willing to finish the mediation today with an initial, "short form" or abbreviated term sheet confirming the settlement. Make sure it can be enforced.
First, even where parties recite their intent to later enter into a more formal settlement agreement, the term sheet should be enforceable. (See, e.g., Blix Street Records, Inc. v. Cassidy (2010) 191 Cal.App.4th 39, 48 [“When parties intend that an agreement be binding, the fact that a more formal agreement must be prepared and executed does not alter the validity of the agreement”].)
Second, to avoid having an agreement deemed unenforceable because of mediation confidentiality imposed by Evidence Code section 1119 (e.g., Simmons v. Ghaderi (2008) 44 Cal.4th 570, 578-582), you should include terms like the following in order to have the agreement qualify for a statutory exception to confidentiality (Evid. Code, § 1123, subds. (a) & (b)):
"This agreement is intended by the parties to be admissible and subject to disclosure, and to be binding and enforceable."
Third, a settlement agreement cannot be enforced if there is no "meeting of the minds"—in other words, where the parties fail to agree on a material term or where a material term is not reasonably certain. (See Civ. Code, § 3390, subd. (e); Weddington Prods., Inc. v. Flick (1998) 60 Cal.App.4th 793, 813, citing 1 Williston on Contracts (4th ed. 1990) § 4:28 [analyzing circumstances in which “minor matters” in elaborate contracts are left for future agreement and requirements for including all material terms in order to have an enforceable contract].) Before the mediation, prepare a draft agreement that includes all material terms and have it with you. Better yet, when possible, exchange and discuss the form of an acceptable term sheet with the other parties as part of your mediation preparation.
Fourth, all parties should sign the settlement agreement, particularly if you intend to include a provision for enforcement under Code of Civil Procedure section 664.6.. (Levy v Superior Court (1995) 10 Cal.4th 578, 585-586 [agreement not enforceable under § 664.6 where signed by attorney and not individual litigant ].) In the case of entity litigants, this “party signature” requirement may require a corporate officer sign the agreement. (Gauss v GAF Corp (2002) 103 Cal.App.4th 1110, 1118 [agreement not enforceable under § 664.6 where signed by agent and not corporate officer];.) Traditional agency analysis does not apply to satisfy the signature requirement of section 664.6. (Id. at p. 1119; Murphy v. Padilla (1996) 42 Cal.App.4th 707, 716.)
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