Mediation clause: a required attempt at settlement before litigation

Sample clause

a shareholders agreement between the three founders of Lantana Clinics, a fictional group of physiotherapy practices on the Sunshine Coast, drafted with the expectation that disagreements about expansion will arise

30. Mediation 30.1 If a Dispute is not resolved under clause 29 within 15 Business Days, any Shareholder may by written notice refer it to mediation administered by the Coastal Mediation Centre under its mediation guidelines current at the date of the notice. 30.2 The mediator is the person the parties to the Dispute agree within 5 Business Days of the notice or, failing agreement, the person nominated by the Coastal Mediation Centre. 30.3 The mediation must start within 21 days of the mediator's appointment and be held on the Sunshine Coast or by video conference. 30.4 The mediator's fees and venue costs are shared equally by the parties to the Dispute. Each party bears its own legal costs. 30.5 Each party must attend through a representative with authority to settle. 30.6 If the Dispute is not resolved within 20 Business Days of the mediation starting, any party may end the mediation by written notice.

Sample wording, not legal advice.

Variants

What to negotiate

• Who picks the mediator

  Naming a mediator in the contract rarely works because people retire or conflict out. A nominating body is more durable. Parties negotiate which body, whether the mediator must have industry experience, and how long they have to agree before the fallback applies. Five to ten business days is the usual window before the nominator steps in.

• Cost sharing

  Equal sharing of the mediator's fees is standard and keeps the process neutral. A party with far fewer resources sometimes asks the other to fund the mediator and recover half only if the dispute proceeds, which removes cost as a reason to refuse. Legal costs are almost always borne by each side.

• Authority to settle

  A mediation attended by someone who must ring head office for every offer rarely settles. Requiring attendance by a person with authority to settle, sometimes within a stated amount, is a common and reasonable request. Larger organisations push back on unlimited authority, so the practical compromise names a senior role rather than a dollar figure.

The risk of leaving it out

Without a mediation clause a party can still suggest mediation, and courts often order it, but nothing obliges the other side to attend before proceedings begin. The parties then spend money on pleadings and discovery before anyone has tested a settlement, and a court ordered mediation happens later, when positions and costs have both hardened.

What a mediator does and does not do

A mediator is a neutral third party who helps the parties identify the issues, explore options and negotiate. The Attorney General's Department classes mediation as a facilitative process, alongside conciliation and facilitated negotiation, as distinct from advisory processes such as expert appraisal and determinative ones such as arbitration. That distinction drives the drafting. Because the mediator imposes no outcome, the clause has to deal with how the process starts, who attends and when it stops, and it has to require any settlement to be written and signed, since an agreement reached in principle late in the day is easy to dispute next morning.

Institutional rules or bespoke terms

A clause can adopt an institution's published guidelines, which fill gaps about preparation, confidentiality and the mediator's role, or it can set every term itself. ACICA, for example, publishes Mediation Rules and a model mediation clause alongside its arbitration services. Adopting rules keeps the contract short and gives an administrator who can nudge a slow party. Bespoke terms suit small disputes where institutional fees are disproportionate. Either way the contract should say which version of any rules applies, usually those current at the date of referral.

Where it sits in a generated document

Mediation usually follows the negotiation steps inside a dispute resolution section, or stands as its own clause in partnership and shareholder agreements. A generated document numbers each clause, so the mediation clause can refer back to the negotiation clause that precedes it. The appointment body, the timeframes and the cost split all come from the description, and the draft carries no citations to any rules it names.

Documents that carry this clause

Shareholders agreement templateA veterinary diagnostics company has just taken $1.5 million from one seed fund. The founders keep 80 percent between them, so the whole agreement turns on a single number: the 75 percent consent threshold that puts the investor on one side of every decision that matters.Founders agreement templateTwo people in Fremantle are building a tide and swell planning app and have not registered a company yet. There are no shares to issue, so this agreement fixes the split, records why it is 55/45 while the memory is fresh, and turns itself into shares on the day the company exists.Partnership agreement templateThree physiotherapists have run one Newcastle practice together since 2024 without anything in writing. This agreement records what the handshake never covered: uneven capital sitting beside uneven hours, the six decisions no partner can make alone, and what a leaving partner is owed.Cleaning services agreement template with a room by room scope tableAlmost every argument about commercial cleaning is an argument about what was in the scope, so this agreement puts the scope in a table with a room, a task list and a frequency on every line. It then settles what a dental practice worries about: who holds the keys, who has been police checked, and what the consumables cost.

Questions people ask