Given that the purpose of mediation is to ideally achieve a negotiated resolution, it is somewhat perplexing that the settlement agreement reached as a mediation – be it oral or in writing – is not admissible as evidence and is thus not enforceable in California unless special contracting prerequisites are satisfied.

The “special rules” for oral agreements are set forth in Evidence Code section 1123(c), which provides that an oral settlement agreement may be admissible IF it satisfies the requirements of Evidence Code section 1118. Under Section 1118, an oral agreement made in mediation must satisfy ALL of the following conditions:

  1. recorded by a court reporter or reliable means of audio recording;
  2. the terms must be recited on the record in the presence of the parties and the mediator, and the parties must express on the record that they agree to the terms so recited;
  3. the parties expressly state on the record that the agreement is enforceable or binding; and
  4. the recording is reduced to writing and the writing is signed by the parties within 72 hours after it is recorded.

Written term sheets and settlement agreements created and signed at mediation are a different story. Evidence Code section 1119 makes inadmissible as evidence in any proceeding a writing prepared during the mediation. A written settlement agreement or term sheet memorandum prepared with respect to the settlement is such a writing unless it contains an express waiver. Evidence Code section 1123 sets forth the ways in which a waiver of mediation confidentiality can be accomplished:

  1. the agreement provides that it is admissible or subject to disclosure or words to that effect;
  2. the agreement provides that it is enforceable or binding or words to that effect;
  3. all parties to the agreement expressly agree in writing to its disclosure; or
  4. the agreement is used to show fraud, duress, or illegality that is relevant to an issue in dispute.
To read more on California’s special contracting requirements CLICK HERE

For a template of a written Memorandum of Understanding that includes the appropriate “waiver” and “BEEF” provisions, CLICK HERE