Form and Validity of a Mediation Agreement Under Mediation Act, 2023

A mediation agreement forms the legal foundation for referring disputes to mediation. It records the parties’ intention to attempt an amicable settlement with the assistance of a neutral mediator. Its form, scope and validity determine whether the mediation process rests on genuine consent. The Mediation Act, 2023 lays down detailed requirements for mediation agreements and for settlement agreements resulting from mediation.

What is a Mediation Agreement?

A mediation agreement is an agreement through which parties decide to submit certain disputes to mediation. The disputes may already have arisen or may arise between them in the future.

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Under Section 4 of the Mediation Act, 2023, a mediation agreement must be in writing. It may be made between the parties themselves or may bind persons claiming through them. The agreement may cover all disputes arising from a particular legal relationship or only specified categories of disputes.

The central purpose of a mediation agreement is to record the parties’ consent to use mediation as a dispute resolution process. It does not compel the parties to settle the dispute. It only creates an agreed framework within which an attempt at settlement may be made.

The mediator has no authority to impose a decision upon the parties. Any final settlement must result from the voluntary consent of the parties themselves.

Mediation Agreement and Mediated Settlement Agreement

A mediation agreement must be distinguished from a mediated settlement agreement. Although both documents are connected with mediation, they operate at different stages and perform different functions.

Mediation Agreement

A mediation agreement is entered into before the mediation process begins or before a particular dispute is referred to mediation. It expresses the intention of the parties to attempt resolution through mediation.

It may be:

• A mediation clause included in the original contract;
• A separate agreement entered into after the main contract;
• An agreement made after the dispute has arisen; or
• An agreement recorded through correspondence, electronic communication or pleadings.

Mediated Settlement Agreement

A mediated settlement agreement is the final agreement reached as a result of mediation. It records the terms upon which the parties have resolved some or all of their disputes.

Under Section 19 of the Mediation Act, 2023, such an agreement must be in writing, signed by the parties and authenticated by the mediator. Once the statutory requirements are satisfied, it is intended to become final and binding upon the parties and persons claiming through them.

Thus, the mediation agreement begins the consensual process, while the mediated settlement agreement records its successful outcome.

Form of a Mediation Agreement

Section 4 recognises several ways in which the requirement of writing may be satisfied. A formal agreement bearing physical signatures is not the only acceptable form.

Mediation Clause in a Contract

A mediation agreement may appear as a clause in the principal contract between the parties. Such clauses are common in commercial, employment, construction, partnership, service and supply agreements.

A mediation clause generally states that disputes arising from or relating to the contract will first be referred to mediation. It may also specify the manner of appointing a mediator, the mediation institution, the place of mediation, the language to be used and the allocation of costs.

The clause should clearly identify the disputes covered by it. Vague language may create uncertainty about whether mediation is compulsory as a preliminary step or merely optional.

Separate Mediation Agreement

The parties may execute a separate mediation agreement instead of including a clause in the principal contract. This may be done either before or after a dispute arises.

A separate agreement is particularly useful where the original contract contains no dispute resolution clause or where the parties decide to attempt mediation after litigation, arbitration or another proceeding has already begun.

Such an agreement may contain detailed procedural terms suited to the particular dispute.

Document Signed by the Parties

The writing requirement is satisfied where the mediation agreement is contained in a document signed by the parties.

The document should identify the parties, state their intention to refer disputes to mediation and describe the disputes or legal relationship covered. Signatures provide evidence that the parties accepted the terms.

Where a company, partnership, trust, government body or other organisation is involved, the person signing should possess proper authority to bind that entity.

Exchange of Communications or Letters

A mediation agreement may also arise from an exchange of communications or letters. It is not always necessary for the parties to sign the same physical document.

For example, one party may propose mediation in a letter and the other may accept the proposal through a written reply. Read together, these communications may establish a written mediation agreement.

The communications must clearly show a common intention to refer the dispute to mediation. Mere discussion about the possibility of settlement may not be sufficient.

Electronic Communications

Section 4 recognises communications made through electronic form in accordance with the Information Technology Act, 2000.

Emails and other legally recognised electronic records may therefore establish the existence of a mediation agreement. Electronic communications are especially important in online commercial transactions, cross-border dealings and disputes involving parties located in different places.

The electronic record should identify the sender, indicate clear acceptance and remain capable of being stored and reproduced. A casual or uncertain message may not reliably establish consent.

Agreement Recorded Through Pleadings

A mediation agreement may be established through pleadings filed in a suit or another proceeding. This applies where one party alleges the existence of a mediation agreement and the other party does not deny it.

The rule prevents a party from later disputing an agreement that was expressly asserted and left unchallenged in formal proceedings. However, the pleadings must contain a sufficiently clear assertion regarding the existence of the mediation agreement.

Incorporation by Reference

A contract may refer to another written document containing a mediation clause. Such a reference can constitute a mediation agreement where it is sufficient to make the mediation clause part of the contract.

A general reference to another document may not always be enough. The wording should indicate that the terms of the referred document, including its mediation clause, are incorporated into the agreement between the parties.

Existing and Future Disputes

A mediation agreement may cover disputes that have already arisen as well as disputes that may arise in the future.

A pre-dispute mediation clause is generally included in a contract before any disagreement exists. It provides a predetermined method for handling future disputes.

A post-dispute mediation agreement is made after the controversy has arisen. It may define the actual questions to be mediated with greater precision.

Section 4 permits both forms. The parties may agree to mediate a dispute either before or after its occurrence.

Essential Requirements for a Valid Mediation Agreement

The requirement of writing is important, but writing alone does not make a mediation agreement valid. The agreement must also satisfy the general principles governing contracts.

Competent Parties

The parties must have legal capacity to enter into the agreement. Under the Indian Contract Act, 1872, contractual capacity generally requires majority, soundness of mind and absence of legal disqualification.

Where an agreement is signed on behalf of a company or institution, the representative must possess authority. Lack of authority may affect the binding nature of the agreement.

Free and Genuine Consent

Consent must be voluntary and genuine. It should not result from coercion, undue influence, fraud, misrepresentation or mistake of a kind that affects contractual validity.

Voluntariness remains a fundamental principle of mediation. Even where parties are referred to mediation by a court or are required to attempt mediation under a contractual clause, they cannot be compelled to accept particular settlement terms.

Lawful Object and Consideration

The object of the agreement must be lawful. Parties cannot use mediation to validate an illegal transaction, conceal unlawful conduct or achieve an outcome prohibited by law.

Although a mediation agreement primarily concerns the choice of a dispute resolution process, it remains subject to ordinary contractual requirements.

Certainty of Terms

The agreement should clearly express an intention to submit disputes to mediation. It should identify the legal relationship or category of disputes covered.

Expressions such as “the parties may consider mediation” may operate only as statements of intention. A carefully drafted clause should clarify whether mediation is mandatory before litigation or arbitration can begin.

Dispute Capable of Mediation

The subject matter must be legally fit for mediation. Section 6 of the Mediation Act, 2023 read with the First Schedule identifies categories of disputes that are not considered suitable for mediation under the statutory framework.

A mediation agreement cannot make a legally non-mediable matter suitable merely because the parties have consented. Public policy and statutory restrictions continue to apply.

Intention to Create a Binding Arrangement

The language must show that the parties intended to adopt mediation as an agreed dispute resolution method. Preliminary negotiations, general expressions of cooperation or informal proposals may not amount to a concluded agreement.

Courts and tribunals may examine the language, surrounding correspondence and conduct of the parties to determine whether a definite agreement exists.

Important Contents of a Mediation Agreement

Section 4 does not prescribe an exhaustive format. However, a properly drafted mediation agreement may address the following matters:

• Names and identifying details of the parties;
• Description of the contract, transaction or relationship;
• Scope of disputes covered by mediation;
• Whether mediation is required before litigation or arbitration;
• Procedure for selecting and appointing the mediator;
• Choice of institutional or independent mediation;
• Place and language of mediation;
• Method for issuing notices;
• Confidentiality obligations;
• Allocation of mediator’s fees and administrative costs;
• Time period for commencing or completing mediation;
• Use of physical, online or hybrid mediation;
• Authority of representatives attending the sessions; and
• Procedure following settlement or failure of mediation.

These terms reduce procedural disagreement and help the mediation begin efficiently. At the same time, the agreement should preserve sufficient flexibility because mediation is less formal than adjudicatory proceedings.

Validity of a Mediated Settlement Agreement

The validity of the final settlement requires separate examination. Section 19 provides that a mediated settlement agreement must result from mediation and may settle some or all disputes between some or all parties.

Its terms may extend beyond the disputes originally referred to mediation. This allows parties to resolve connected issues and create a comprehensive settlement.

Agreement Must Be in Writing

An oral understanding reached during mediation does not satisfy the statutory form contemplated by Section 19. The settlement must be reduced to writing.

The document should state the obligations of each party in precise language. Payment amounts, timelines, transfer of property, withdrawal of proceedings, confidentiality duties and consequences of default should be clearly recorded.

Signatures of the Parties

The mediated settlement agreement must be signed by the parties. A signature confirms acceptance of the final terms.

Where representatives sign on behalf of organisations, their authority should be verified. If only some parties settle, the agreement should clearly identify those parties and explain how the settlement affects the remaining dispute.

Authentication by the Mediator

Authentication by the mediator is an essential statutory requirement. Authentication confirms that the document represents the settlement reached during the mediation process.

In institutional mediation, the mediator must authenticate the signed agreement, forward it with a signed covering letter to the mediation service provider and provide a copy to the parties.

In other forms of mediation, the mediator must authenticate the agreement and provide a copy to all parties.

Authentication does not mean that the mediator becomes a party to the settlement or guarantees performance. The substantive obligations remain those of the parties.

Compliance With the Indian Contract Act, 1872

Section 19 expressly provides that a settlement agreement which is void under the Indian Contract Act, 1872 is not a lawful mediated settlement agreement.

The settlement must therefore involve competent parties, free consent, lawful consideration, lawful object and terms capable of being performed. A settlement involving an unlawful object, impossible obligation or void arrangement cannot gain validity merely because it resulted from mediation.

Clear and Enforceable Terms

The terms must be certain and capable of implementation. Ambiguous obligations may create fresh disputes and make enforcement difficult.

The settlement should avoid leaving essential matters for future negotiation unless a clear mechanism for resolving those matters is included.

Registration of a Mediated Settlement Agreement

Section 20 provides an optional registration mechanism for certain mediated settlement agreements. Registration is intended primarily to create an official record.

A qualifying settlement may, at the option of the parties, be registered with an authority constituted under the Legal Services Authorities Act, 1987 or another body notified by the Central Government.

The agreement may ordinarily be registered within 180 days from receipt of the authenticated copy. Delayed registration may be permitted upon payment of the specified fee.

Registration is not stated to be a condition for enforcement or validity. The statutory explanation clarifies that non-registration does not affect the right to enforce or challenge the agreement.

Separate laws relating to stamp duty and registration of documents may still apply where the settlement itself creates, transfers or extinguishes rights for which compulsory registration is required.

Enforcement of a Mediated Settlement Agreement

Section 27 provides that a mediated settlement agreement signed by the parties and authenticated by the mediator is final and binding upon the parties and persons claiming through them.

Subject to the permitted grounds of challenge, it is intended to be enforced under the Code of Civil Procedure, 1908 in the same manner as a judgment or decree of a court.

The agreement may also be relied upon as a defence, set-off or otherwise in legal proceedings. This gives the settlement a stronger statutory status than an ordinary private promise.

Challenge to a Mediated Settlement Agreement

Section 28 limits a challenge to specified grounds:

• Fraud;
• Corruption;
• Impersonation; or
• Mediation conducted in relation to a dispute or matter not fit for mediation under Section 6.

An application must be made before the court or tribunal having competent jurisdiction. The ordinary period for filing the challenge is 90 days from receipt of the settlement agreement.

A further period of up to 90 days may be allowed where sufficient cause prevented the applicant from filing within the original period.

The restricted grounds support finality and prevent parties from reopening a voluntary settlement merely because they later consider its terms unfavourable.

Effect of Online Mediation

The Act recognises online mediation and includes settlements resulting from it within the definition of mediated settlement agreements.

Online mediation may be conducted with the written consent of the parties through electronic mail, secure chat rooms, video conferencing, audio conferencing or other computer networks.

Electronic mediation does not reduce the need for certainty, consent and authentication. The integrity of the proceeding and confidentiality of communications must be protected. Secure electronic signatures and reliable records can help establish the authenticity of the final agreement.

Commencement of the Statutory Provisions

The Mediation Act, 2023 permits different provisions to be brought into force on different dates. The notification dated 9 October 2023 commenced only specified provisions of the Act.

The principal provisions directly governing the form of a mediation agreement, mediated settlement agreements, registration, enforcement and challenge were enacted by Parliament but were not among the provisions commenced through that notification.

Therefore, the statutory framework under Sections 4, 19, 20, 27 and 28 must be studied as the scheme enacted under the Mediation Act, 2023, while its operative application depends upon the relevant commencement notifications.

Until all relevant provisions are brought into force, existing laws, contractual principles, court-referred mediation rules and sector-specific statutes may continue to determine the legal effect of particular mediation arrangements and settlements.

Difference Between a Valid and Defective Mediation Agreement

Conclusion

The form and validity of a mediation agreement are central to the credibility of the mediation process. Section 4 of the Mediation Act, 2023 adopts a broad understanding of writing and recognises contractual clauses, separate documents, correspondence, electronic records, pleadings and incorporation by reference.

A valid agreement must also rest on competent parties, free consent, lawful purpose, certainty and a dispute capable of mediation. Where mediation succeeds, the settlement must be written, signed, authenticated and valid under the Indian Contract Act, 1872. Careful drafting at both stages protects consent, reduces procedural disputes and supports effective enforcement.