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business disputes

Business Disputes – The 7 Golden Keys to Mediation Excellence

April 22, 2021 By Eddie Senatore

business-disputes-7-golden-keys

Business Disputes and Conflicts Are Never Fun

I’m going to make a bold statement. Not all mediators are equal.

Some of you have already learnt this the hard way. I hope many of you never have to discover this at all. Business disputes and conflicts are never easy, nor fun, but happen.

If you find yourself having to deal with business disputes, it’s always best to do this with confidence, and clarity, and sooner rather than later.

To help you to make a clear decision upon mediation or court, I’m sharing with you my top 7 golden keys to achieving good outcomes through excellent mediation. Good mediation will get the job done, but great mediation will touch you at your core and stay with you as peace and gratitude.

What are the Key Things that Make Mediation Unique and So Powerful?

Confidentiality
Mediation is a strictly confidential process. Your mediator may only speak about your mediation to other people with your permission. Therefore, only your mediator’s authorised advisors or close and immediate support people may be privy to any discussions in mediation.

Release of Information
Your mediator may only release information at the completion of mediation as instructed and agreed to, by both parties unless obligated to by law or permission is given to do so.

Ground rules
Mediation is a respectful discussion and free from any threats or abuse. This is achieved by the facilitation of all parties agreeing upon a set of ground rules. This will outline clearly how you will treat each other during mediation. These ground rules will be maintained and upheld by your mediator.

Neutrality of Mediators
Your mediator must always be neutral and impartial. They will not benefit from a specific outcome of the dispute. A mediator will not be bias towards any party, and must not have any real or potential conflict of interest. Any real OR potential conflict of interest must be disclosed and discussed immediately. This allows you to raise any concerns you have if you become aware of any.

Mediators are NOT your Advisor
Your mediator assists you to reach an informed and voluntary agreement. As such, they will not provide legal, other advice or judgement under any circumstances. Your mediator may however, assist you to make an informed decision and may suggest/refer you to independent advice or counsel.

Inadmissibility
Offers made, information shared, and the things discussed and considered in mediation are not admissible as evidence in court. This allows you to carefully and clearly consider your options without fear or force to do something you haven’t fully agreed to.

Agreements
Mediated agreements are done so freely. If not, you may speak privately with your mediator to share your concerns with them. If the agreement is written, signed and dated it will have some legal weight and can be admitted and presented as evidence in court. Ultimately, in this event, the judge decides if they will order you to follow the agreement you reached.

If you are experiencing, or wish to prevent, conflicts and business disagreements, contact me directly for mediation counselling on 0448 000 010; or hello@eddiesenatore.com or browse my website www.eddiesenatore.com to read some real life stories.

Tune into our video to learn about the 7 Golden Keys to Mediation Excellence

Filed Under: Blog, Business Mediation, Mediation Tagged With: business disagreements, business disputes, business issues, great mediation, mediation counselling, mediation or court

A Complete Contract – Why Disputes Happen

March 7, 2020 By Eddie Senatore

Why Disputes Happen

Economists define a complete contract as one that eliminates opportunities for shirking by stipulating each party’s responsibilities and rights for each and every contingency that could conceivably arise during a transaction (Economics of Strategy, Dranove D, Besanko D, Shanley M and Schaefer M, 7th edition, p105).

A complete contract therefore sets out courses of action during a transaction, providing rewards when objectives are met and penalties when they are not. The idea of a complete contract comes from the notion that the activities, actions and outcomes under a complete contract would mimic all the steps that a firm would undertake if it conducted that activity inhouse. With a complete contract you would be indifferent if you did the activity yourself (make) or you outsource the activity (buy).

The agreement must be enforceable such that an outside party, such as a judge or an arbitrator, must be able to observe which of the contingencies occurred and whether each party undertook their responsibilities. Finally, any specified damage must be capable of being met by the shirking party, otherwise what’s the point, right.

Suffice to say in a commercial context a complete contract does not exist. All relevant contingencies must be covered off, all actions agreed, rewards and penalties clear. During the contract negotiation process, parties must agree on what makes for satisfactory performance and parties must be able to measure this.

So then most contracts must be incomplete – check out the Lululemon controversy.

There are a number of reasons why contracts are incomplete.

Problems with complexity – how is it possible to consider every contingency in every transaction, a concept otherwise known as bounded rationality.

There are also problems with specifying or measuring performance just like in the Lululemon case. Was the see through yoga pant due to lack of specificity of the sheer or a design issue? How many times have you seen the word ‘reasonable’ or ‘best endeavours’ in an agreement. See this Lululemon summary.

Then there is the old chestnut of asymmetry of information, where parties to an agreement do not share or do not have equal access to all contract relevant data or information. A caveat emptor for example or quality control for example; did the supplier of the Lululemon yoga pant follow specifications, was the sheer even specified?

A well-developed body of contract law such as in Australia or the USA makes it possible for transactions to occur smoothly when contracts are incomplete. Some agreements specify standard provisions, for example real estate transactions. Even within these transactions there are broadly defined terms which make matters contentious. Just what is reasonable notice? So we have to create guiding principles outside agreements to help what’s in the agreement.

Matters escalate to litigation which is a costly way of “completing” contracts, not to mention time delays, uncertainty and more often than not relationships, which cannot be mended.

Relationships are developed by way of interactions in the market place. For example, when goods are produced or services delivered they are provided on the basis of some key performance measures – timing for example, sequencing, technical competencies, colour, condition, quality etc. Contracts tend to manage these relationships. Some contracts may even enable assignment of certain activities others may not.

Confidential or private information adds another layer of complexity. Patents go some way to help with protecting processes or intellectual property, but they also suffer from similar issues such as bounded rationality or what detail the patent actually intends to cover or protect. Employees for example may be trained or educated and this cannot be taken back, so they are managed through non-compete agreements. Again for reasons noted these agreements are also incomplete.

Economists describe these interactions as transaction costs.

Take transactions between parties which involve relationship specific assets, that is assets required specifically to complete a transaction. These assets could be technically trained staff in a specific area to manage client demands or geographically positioning a business, or assets acquired or developed either specifically for a client, for example specific plant to fulfil a special client order or you create an asset to serve a specific client, say the casting of a particular mould. In this setting you can see how business disputes arise pre, during and post contract development.

complete contract

A number of possible outcomes exist. One outcome could be that both parties attempt to negotiate safe guards into contracts. The upshot is parties enter into time consuming and costly contract negotiations and re-negotiations.

Parties could take up post contractual bargaining positions. For example either party may enter into plan B’s – a buyer may hedge against a contract hold up (deliberate or not) or a supplier may bargain with a standby provider. Both options create market inefficiencies.
Distrust may arise in so far as more and more safeguards are written into a contract or information is withheld impeding information sharing and raising the issue of asymmetry of information, creating further costs.

Finally, parties may reduce exposure or risk by under investing in facilities and relationship specific assets. For example, a supplier may not invest in maintenance of its plant, again reducing efficiencies which efficiency was the reason for using the supplier in the first instance.

The issue with market inefficiencies is that it reduces productivity which will in and of itself escalate conflicts.

There you have it, some reasons why dispute resolution steps need to be followed, when disputes come about.

Filed Under: Blog, Education Tagged With: business disputes, complete contract, contract negotiation, dispute resolution steps

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Eddie Senatore
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