Mediation A difficult conversation Mark Whittell Mediate North - PowerPoint PPT Presentation

Mediation – A difficult conversation Mark Whittell Mediate North

Seminar outline The issues in a purchasing dispute – Battle of the Forms  Mediation - the principles and process  How to prepare - before the meeting, and on the day  Negotiating tactics  Using your mediator  Realistic settlements  The implications of refusing to mediate  Mock mediation 

Common issues in purchasing disputes

Why do disputes arise in contracts  The contract  Badly drafted?  Words are always open to interpretation  Cultural differences when dealing internationally

Battle of the forms  There is often no dispute as to the contract existing, but rather whose terms apply – buyer or seller?  Problems occur when each party sends the other its standard form of terms and these terms differ. This is the "battle of the forms".  See example of Butler Machine Tool v Ex-cell-o Corporation [1979] 1 WLR 401

Butler Machine Tool v Ex-cell-o Corporation [1979] 1 WLR 401  Facts The Butler Machine Tool Company quoted a price for a machine with specific terms and conditions for purchase outlined on the back. These terms included a price variation clause which allowed the seller to increase the price if there was an increase in the manufacturing costs. The purchaser sent back an order form outlining their own terms and conditions, which did not include a price variation clause. Attached to this order form was a tear off slip to be signed by the seller acknowledging their acceptance of the buyer’s terms. The seller’s returned the signed slip but when the machine was delivered in November 1970 they claimed an additional £2,982 under the price variation clause. The buyer disputed this arguing there was no price variation clause in the final contract.

Butler Machine Tool v Ex-cell-o Corporation [1979] 1 WLR 401  Issues  The main legal issue was to determine the effect of a counter-offer on an original offer thereby establishing whether the seller (Butler Machine Tool Co) could rely on a price variation clause which was present in the standard form.  Here the last offer rule was said to prevail. This rule was developed in Hyde v Wrench (1840) 3 Beav 334; 49 ER 132 and states that the effect of a counter-offer is to kill the original offer.

Where neither side’s Ts & Cs are incorporated - GHSP Inc v AB Electronic Ltd and Hertford Foods v Lidl (2001).  However, the "last shot" principle does not always work  The GHSP case concerned a continuing agreement for the supply of electronic sensors for use in motor vehicles. Some of the sensors supplied were defective and GHSP sought to claim damages from AB. If the contract had been formed on the basis of GHSP's standard terms AB would have unlimited liability, whereas if AB's standard terms governed the contract its liability would be significantly limited.  On the facts, the High Court held that neither party's standard conditions had ever been accepted by the other party. Instead, it was held that by proceeding to purchase and supply the sensors, the parties had by their conduct concluded a contract that was governed only by the terms implied as a matter of English law by the Sale of Goods Act 1979. The consequences of this for AB were significant, since it was unable to rely on the limitation of liability clause it had attempted to incorporate through its standard terms.

Hertford Foods v Lidl  A verbal agreement was made between the buyer and the supplier in December 1996 for tinned corned beef. The supplier delivered part of the order from March-April 1997, and invoiced for it, but failed to make any more deliveries after 25 April 1997 because of strikes in Brazil. The buyer then purchased the goods from another source. The supplier refused to resume deliveries until the invoice had been paid in full and sued. The buyer counter-claimed extra costs of purchasing the goods from alternative suppliers and other losses.  Both parties sought to rely on their own standard terms and conditions. The supplier's terms contained a force majeure provision that it was not liable for non-delivery caused by matters beyond its control. The buyer's conditions entitled it to cancel the order and charge any additional costs, losses or expenses to the supplier in the event of a failure to deliver the goods at the time agreed.

Hertford Foods v Lidl - Previous dealings  The parties had had previous dealings earlier in September 1996 with no issues arising as to terms.  The Judge held that the contract in September set the background to that in December. The seller had done enough to bring it to the buyer's attention that the seller intended to contract on its own terms in the future in the absence of any agreement to the contrary. As there was no agreement to the contrary, the Judge concluded that the seller's terms also applied to the December contract.  The Court of Appeal reversed the High Court's decision. It considered, first, that each party's terms stated that its conditions should override the conditions of the other; and second, that each party was aware that the other was only prepared to contract based on its own terms and that the other party's standard terms contained a clause to the effect that they should prevail. The court could not find any agreement that either set of standard conditions was applicable.  The only conclusion was that neither set of conditions applied. The consequence was that neither party could rely on its set of standard terms, which were drafted to give them the protection they needed in the situation. As a result, the general law applied. The seller could no longer rely upon the force majeure provision and the buyer was entitled to damages.

Avoiding disputes…checklist  Maintain an up-to-date set of standard terms and conditions that are ready for use.  Ensure that the standard form contains a clause making it clear that your terms prevail over any terms of the other party.  Implement a policy of only contracting based on the firm's own set of conditions.  Confirm any oral agreement in writing, making it clear that the contract is entered into on your own terms, which override those of the other parties.  Do fire back the "last shot".  However, this doesn’t always work…what then?

Mediation Overview

Mediation – principles  Definition of mediation (CEDR)  "Mediation is a flexible process conducted confidentially in which a neutral person actively assists parties in working towards a negotiated agreement of a dispute or difference, with the parties in ultimate control of the decision to settle and the terms of resolution."  Facilitative  Informal

Mediation - Process  Choice of mediator  Choice of venue  Exchange of position statements  The meeting before the mediation  The Opening Statements  The Private Meetings  The Settlement

Mediation – Negotiation Tactics  The content of the Position Statement  The initial advocacy  Knowing the strengths and weaknesses of your case  Who to take to the mediation

Using your mediator, or is he using you?  Am I your friend?  Should I tell him everything?  Testing strengths and weaknesses  Watching his body language  Deflecting the mediator’s pressure  costs

Realistic settlements  The tactics of making offers  True risk assessment of the merits  Make sure you have the decision maker in attendance or available  Dealing with client expectations  At the end of the day it is the client’s mediation

Refusing to mediate  The disadvantages of mediation  The costs sanction

Mock Mediation

Mark Whittell, Mediate North Any questions?   Feel free to contact us on any issue:  Mark.Whittell@mediatenorth.com Victoria.Greenwood@mediatenorth.com  www.mediatenorth.com   Twitter: @mediatenorth