Pandemic is no Excuse for Delay…Be Careful Drafting Mediation Agreements

Pandemic is no Excuse for Delay…Be Careful Drafting Mediation Agreements

In a recent case, Pinero v. Zapata, the District Court of Appeal, Third District, reversed a lower court decision permitting an extension of time under the terms of a mediation settlement agreement due to the Covid-19 pandemic.

Eugenio Pinero (“Pinero”) and Ysabel Zapata (“Zapata”) entered into a mediated settlement agreement (the “Agreement”) on Feb. 23, 2020 regarding a partition sale of 2 encumbered condominium units owned by Pinero and Zapata. The Agreement was entered into by the parties “freely and voluntarily” and with advice of counsel.

Under the Agreement, Zapata was to pay Pinero $200,000 by April 1, 2020 and acquire refinancing and relieve Pinero of any debt. If Zapata could not pay, then she received an automatic extension until May 1, 2020. If Zapata did not pay by May 1, 2020, then she had to quitclaim her interest to Pinero.

No provision regarding impossibility of performance or an inability to perform because of an act of God was included in the Agreement. The Agreement specifically included a merger clause which indicated the intention to exclude any other terms from the Agreement.

Unfortunately, Zapata asserted impossibility of timely performance because of the Covid-19 pandemic. In an emergency Zoom meeting, on May 7, 2020 the trial court granted Zapata’s emergency motion for relief from the Agreement because of “the dire circumstances present.” The trial court granted her an extension to pay and to obtain refinancing.

Pinero filed his own emergency motion to stay the case pending review of the trial court’s order. His motion was denied and the appeal followed. The appellate court noted that settlement agreements are contractual in nature and governed by contract law and “[w]here the contractual language is clear and unambiguous, courts may not indulge in construction or modification and the express terms of the settlement agreement control.”

The appellate court determined that the trial court exceeded its jurisdiction and effectively  rewrote the terms of the Agreement and noted “[i]t is well settled that courts may not rewrite a contract or interfere with the freedom of contract or substitute their judgment for that of the parties thereto in order to relieve one of the parties from the apparent hardship of an improvident bargain”.

ADVICE: “Boilerplate provisions” are in contracts for a reason. In the “heat” of a mediation there is often little time and much stress to clarify and insert all the provisions in an agreement. The mediator and/or the attorneys (depending on who is doing the drafting) should have a shell of an agreement prior to the mediation and include provisions such as these if they want them included in the agreement.  

WORD OF THE WEEK: Force Majeure is an event which is outside the reasonable control of a party and which prevents that party from performing its obligations under a contract.