Mediation is a common step, and sometimes a required step, in litigation because it is way for the parties to resolve their dispute. At mediation, the outcome is a settlement that will not be possible unless all the parties agree. It is the opposite of a contested outcome in court where a judge makes the decision because the parties cannot and do not agree.
What then are the essential legal elements for there to be a binding settlement?
The Court of Appeal in Olivieri v. Sherman, 2007 ONCA 491, has stated that,
“[41] A settlement agreement is a contract. Thus, it is subject to the general law of contract regarding offer and acceptance. For a concluded contract to exist, the court must find that the parties: (1) had a mutual intention to create a legally binding contract; and (2) reached agreement on all of the essential terms of the settlement: Bawitko Investments Ltd. v. Kernels Popcorn Ltd., 1991 CanLII 2734 (ON CA), [1991] O.J. No. 495, 79 D.L.R. (4th) 97 (C.A.), at pp. 103-04 D.L.R.”
To break this down even further in the estates and trusts context, the parties to a mediation must also have the capacity to contract, i.e. the capacity to, firstly, form the intention to create a legally binding contract, and, secondly, to understand and appreciate its essential terms.
In Ontario, no settlement of claim made by or against a “person under disability” (i.e. people who are under 18 years of age, those who are mentally incapable of managing property and/or making personal care decisions pursuant to the Substitute Decisions Act, 1992, and absentees pursuant to the Absentees Act) is binding on the person without the approval of a judge.
Rule 7.08 of the Rules of Civil Procedureapplies even where a proceeding has not been commenced.
Accordingly, you will often see as a term in the settlement agreement at mediation that the settlement agreement is subject to court approval where minors or incapable persons are involved. It is also a good idea to sort out who will be responsible for bringing the motion for court approval and the costs of that step.
Thanks for reading!