Best and final offers are a useful device in a mediation when the negotiations appear to be reaching an impasse. But the device needs to be used with caution. If it is used too early in the mediation, and the offers are a long way apart, a barrier to further negotiation has been created. On the other hand, if it suggested after the parties are losing the will to continue, they may not be willing to take up the idea and lose the chance of reaching agreement.
There are no rules about how best and final offers are put forward. The protocol that follows sets out one approach to the process that can easily be adapted to the needs of any mediation. Using a written protocol has the advantage that the mediator can talk it through with each party; and there is no doubt about the process that has been agreed. It also covers the tricky position if the offers cross (the paying party is offering more than the receiving party is willing to accept!) or the offers do not match but are very close.
However informal mediation may be, the parties need to understand the process. They can tailor the process and use it with confidence.
1. The parties to the mediation agree each to make a best and final money offer in good faith with a view to concluding an agreement. This approach may not be suitable if there are multiple parties or money is not the principal component of a settlement.
2. Each party agrees to provide the mediator with their best and final offer to settle together with any crucial terms about payment such as the date or a proposal about instalments and other essential elements of the offer.
3. The offers will be given in writing to the mediator by the deadline set by the mediator.
4. The offers will be subject to contracts; a written agreement will need to be signed by all parties.
5. If the offers match, or the paying party’s offer is less than 5% lower than the receiving party’s offer, the mediator will tell both parties the result of the best and final offers and invite the parties to conclude a written agreement.
6. If there is a significant difference between the offers, the offers will only be revealed to the parties if both parties agree. In that event, the mediator may invite the parties to split the difference between the two offers. Example: the paying party offers to pay £0.9m and the receiving party offers to settle at £1.1m. The mediator will invite the party to agree to a settlement at £1m.
7. If one party does not agree to the best and final offers being revealed, the mediator will decide what steps should follow in their absolute discretion.
8. If the offer from the paying party is larger than the offer from the receiving party, it is agreed that the parties will settle at the mid-point between the offers. Example: the paying party offers to settle at £1.1m and the receiving party offers to settle at £0.9m, the settlement figure will be £1m.