In a global economy where complex contractual relationships are common, disputes may arise, leading to time-consuming and costly legal proceedings. Mediation is a popular alternative dispute resolution (ADR) method that resolves disputes quickly and efficiently. However, the question arises whether there is a legal obligation to refer disputes to mediation before arbitration.
Maxx Engineering Works v PQ Builders is a case study in which the parties had agreed to resolve disputes through negotiations, mediation, and arbitration if necessary. PQ Builders referred the dispute to arbitration without attempting mediation, prompting Maxx to seek an order for specific performance. The key issue was whether there was a legal obligation to refer disputes to mediation before arbitration.
The court found that there was a legal obligation to refer the dispute to mediation based on Clause 54 of the contract, which stated that the parties “shall attempt to resolve any disputes through negotiations and mediation.” The court also considered factors such as whether damages would be adequate and whether an order for specific performance would be just and equitable.
The case highlights the importance of carefully drafting dispute resolution clauses in contracts and the court’s willingness to impose a legal obligation on parties to refer disputes to mediation before resorting to arbitration. An order for specific performance may also be granted if it is just and equitable in the circumstances.