Mediation on Contract Disputes

    Contracts, as long as they do not violate public policies, will be enforced by a court of law, and penalties will be imposed for failure to fulfill the terms of a contract, or for the "breach" of a contract.  In the past, most of the people in Hong Kong would resolve a contract dispute by filing a lawsuit against the party with whom they disagree.  However, the Civil Justice Reform ("CJR") in Hong Kong and Practice Direction 31 ("PD31") of the Judiciary (2 January 2010) encourages litigants to explore mediation to resolve differences among themselves.  Mediation has been used to a much greater extent since the implementation of PD31 in Hong Kong.  There is also an international trend to use Mediation to resolve disputes.

    Mediation is a flexible and voluntary process of dispute resolution other than going to courts and arbitration. The parties in dispute may not be able to resolve on their own, or through the efforts of their lawyers.  Mediation is low risk. If the case settles, it’s over.  It is also cost effective and could saving lots of time and costs compared to litigation. Bringing a case to trial in court is expensive!

    It is also found that mediation on contract disputes has shown some impressive results. Over 80% of the disputes that are voluntarily submitted to mediation are satisfactorily resolved.

    A business contract may contain a mediation clause. By using such a clause, the parties to the contract agree to mediate first in case of disputes.  A mediation clause could be:

    "All disputes, controversies, or differences arising out of or in connection with this agreement shall first be submitted to the Hong Kong Professional Mediation Association for resolution. The disputes, controversies or differences shall be referred within [No. of days] days from the time they arose.  The parties agree to participate in mediation in good faith and undertake to abide by the terms of any settlement reached."