In family law, as in other areas of civil law, it is possible to negotiate out-of-court settlements that can be read into a final Order of the Court. The obvious advantage of proceeding by way of out-of-court process, which could be by mediation or negotiation (settlement), rather than litigation, is that the process is shorter and usually less costly to the parties.
There are, however, criteria that, if not met, will probably foil any attempt to mediate or negotiate a settlement between potentially adversarial parties. Using a family circumstance as an example, if the parties are not emotionally ready to engage in settlement discussions aimed at finalizing the matter, the process will likely fail. By emotional readiness, I mean that both sides are resolved to the fact that the relationship is over and they simply want to bring it to a conclusion. The parties must also be evenly matched in terms of bargaining power, such that one party does not have more influence on a settlement than the other, which will lead to unfairness, a negative response from the other, and breakdown of the process. Both parties must be of even temperament and of flexible attitude. Mediated or negotiated settlements require giving, on both sides, and it is likely that neither party will feel totally satisfied with the end result. Both parties must be willing to accept this fact.
The parties must be good listeners and hear the other side's concerns, be prepared to respect those concerns, and than accommodate them in the settlement arrangement. Again, there is a component of giving to the other side in this. If the parties do not trust each other, this process will fail. It is based on trust, good faith, and on positive motivations. A good facilitator, who is competent and respected by both parties, can help ensure that trust is preserved.
The outcomes of a mediated or negotiated settlement must not be contrary to law -- they cannot be illegal. For example, in family settlement, it is unacceptable for parties to negotiate away children's rights such that any dependent child(ren) of the relationship is/are not provided for financially. The settlement where children are involved must be child-centered, and aimed at the best interests of the child(ren).
Negotiated or mediated settlements tend to be quicker than litigation, which quickness is often a goal for parties. Moreover, the parties control the outcome for themselves and are not subject to a disposition by a third party, such as a Judge, who really does not know the ins and outs of the family's life. It is possible to craft a resolution and reduce the risk of a poor outcome for either party. For example, if cultural factors, including religious differences, are at issue, the parties themselves are really in the best position to craft a resolution to preserve certain cultural features of the relationship. Judges probably will not spend much time focusing on the cultural aspects of any relationship.
It is important to note, however, that mediated or negotiated settlements are often part of the litigation process itself and that litigation does not preclude the use of mediated or negotiated settlements. The two can be combined and the rules of the court actually encourage settlement.