Case Problem

The case is between two business parties about their commercial dispute on an alleged breach of

contract over the supply of goods. They had been working successfully together over the years.

The claimants told their story which was in effect that they had ordered goods from the

respondent (machine parts) to the value of about €100k – the goods were supposed to be

delivered on a particular date and in good condition.

Firstly, all of the goods didn’t arrive and the due date and secondly some of the goods were

defective. As a result, the claimants manager withheld payment of the whole of the order. The

fact that all of the goods hadn’t arrived and that some were defective meant that the claimant had

problems fulfilling orders to their customers which were to have included the parts. The contract

for the supply of the goods contained a clause stating that in the event of a dispute the matter

would go in the first instance to mediation.

The respondents refuted what was being said by the claimants. They agreed that they hadn’t

delivered all of the goods on the day in question due to difficulties in their production system but

they had delivered the balance within 2 weeks of the due delivery date. They disputed that the

goods were defective but they hadn’t been given an opportunity to inspect them despite requests

to do so. The claimants had not paid for any of the order and this was putting the cash flow of the

respondents in jeopardy. They are entitled to be paid. The relationship was fractured and they

were getting no further orders from the claimants which was adversely affecting their business.

The reason for the breakdown in the relationship seems to have been a rather aggressive manager

in the claimant’s company who had now left. It was he who had decided not to make any

payment and he had decided to give no further orders. [CITATION EMS \l 1033 ]
Solution

The issue of this case is breach of contract over the supply of goods between two business

parties. This type of commercial dispute can be resolved by Alternative Dispute Resolution

(ADR). There are different types of ADR among which negotiation, conciliation, mediation and

arbitration must be mentioned. As the contract for the supply of the goods contained a clause

stating that in the event of a dispute the matter would go in the first instance to mediation, there

is no chance of negotiation and the issue must be resolved through mediation. Mediation is a

method of ADR through which the parties to a dispute meet with a neutral third-party to settle

their differences.

The Process

Selection of the Mediator: The mediation process must start with selection of a third-party

known as Mediator. The mediator should not have a conflict of interest and should be selected

by the solicitors acting for both parties and agreed to act. The Mediator can submit a draft

Agreement to Mediate to the solicitors of the parties. Then, upon approval of the draft submitted

by the Mediator, each solicitor can give the Mediator a single page outlining their client’s case.

Pre-mediation Meetings: The pre-mediation meetings can be held on the mediation day. In pre-

mediation meetings, the Mediator will meet the plaintiff and the defendants separately. Both

parties should ensure that their solicitors are present at the pre-mediation meetings.

The Mediation: The actual mediation will occur after the two private pre-mediation meetings

and the claimants (plaintiff) and the respondent (defendants) has signed the Agreement to

Mediate.
The Mediator must ensure these requirements to be fulfilled during mediation which are stated

below:

 Listen to the evidence

The claimants and the respondents will present their evidence respectively. The claimants

should specify the details of the sales order and how the contract was breached according

to their viewpoints. The respondent will have the equal opportunity to present their

evidence and defend their ground against the claimants.

 Help litigants come to understand each other’s viewpoints

The Mediator must ensure that it should improve, or not damage, the relationship

between parties involved in the case. It should involve a “win/win” situation for both

parties. As we know that, the parties had been trading successfully over several years and

by analyzing the positions of the parties which had been outlined in the case, we can

conclude that both parties wanted to maintain a good working relationship. The Mediator

must make understand the parties that the reason for the breakdown in the relationship

seems to have been a rather aggressive manager in the claimant’s company who had now

left. It was he who had decided not to make any payment and he had decided to give no

further orders to the respondent.

 Facilitate the negotiation of a resolution

The Mediator must work separately with the parties and make them reach an agreement.

What must also be understood is that the role of the Mediator is not to reach a decision.

Rather, the Mediator just helps the parties to formulate their own decision. According to

Erwin Mediation Services Ltd, a leading mediation practice specialising in helping

parties to resolve their disputes, possible agreement the Mediator can suggest to resolve
the difficulties arose in the case in a quick, creative and practical way maintaining the

business relationship is stated below:

 The aggrieved party (plaintiff) can agree to make a payment to the defendants

(respondents) immediately for those goods (machine parts) that had arrived before

due time and is working in a proper manner.

 An independent third party can be appointed to examine the allegedly defective

goods (machine parts) and to report to both parties. 50% of the fee will be

provided by the plaintiff and other 50% will be provided by the respondent.

 Any goods (machine parts) found to be defective will be removed from site by the

respondents. After the repairment of those defective goods, it will be redelivered.

The claimants will pay full price for the items redelivered if they work in proper

order. The respondents will pay for the cost of collection of the defective parts.

 A sufficient amount of compensation can be paid to the buyer (claimant) for the

difficulties they had suffered due to the failure of the supplier (respondent).

However, from the case, we know that the claimants had not paid for any of the

order and this was putting the cash flow of the respondents in jeopardy which can

result into inability to pay that sufficient amount immediately.

 To overcome the issue of respondent’s inability to pay the cash the parties can

come into a new agreement. The claimants will place new orders with the

respondent according to an agreed price list and the respondent will fulfill these

orders. After the order fulfillment, the claimants will pay the respondents for each

new order. After receiving the payment, the respondent will pay as sum

equivalent to 10% of the order to the claimant in order to repay the agreed
 compensation. This 10% payment will continue until the specified compensation

is paid off.

 If, in future, issues arose again between them, primary steps will be the meetings

between the CEO of both parties in an attempt to resolve things. Failure to

negotiation between CEO’s will result into mediation.

Commercial dispute such as the dispute we found in the case above must be resolved quickly. By

applying the possible commercial solutions, the parties may be able to remain on good terms and

the aim of ADR is to find a compromise solution which is acceptable to both parties.  If the

matter goes to court, the relationship between both parties can be hampered as the court

proceedings create a winner and a loser. 

Using mediation to settle a dispute means businesses can remain on good terms and continue to

trade with each other once their dispute is resolved. It is far cheaper than taking a case to the

court which saves the government’s money and stops the courts being over burdened with cases.
Conclusion

Alternative Dispute Resolution (ADR) mechanism can help us as to enhance the promotional

activities of many rule of law and other development objectives as well as economic and social

objectives. By using appropriate ADR mechanism in proper condition, as we did in the earlier

case of breach of contract, we can fuel the reformation of court, decrease the cost of settling

disputes, enhance the satisfaction of outcome by ensuring win-win situation for both, increase

the flexibility of parties involved by maintaining confidentiality, encourage others of the

community to engage by preserving the relationship between disputants. Additionally, ADR

mechanism can give birth to community leaders, increase public engagement, decrease the

community tension, and settle development conflicts. [ CITATION MdM08 \l 1033 ] Also, there

are some problems that can be found by analyzing different ADR cases. These problems arise

from people’s lack of trust, biasness in outcome, extreme interference by powerful parties,

failure to maintain confidentiality. It should be kept in mind that ADR cannot be a substitute of

traditional court system. Criminal matters cannot be resolved through any of the ADR

mechanisms. Finally, to ensure the effectiveness, extensiveness of pro-activeness of ADR, we

should create awareness about ADR among general public by spreading the success story of

ADR, encouraging people to engage in ADR, providing professional training for mediators and

arbitrators.