User blog comment:Thedoucheinthenorth/The Civil War - Why it is great/@comment-5469467-20121101051603/@comment-3492791-20121102204022

Both sides were weak, but the Dominion still held the upperhand. Mede could have chosen to continue fighting, but it would have only lead to a crippled the Dominion and a destroyed Empire. Mede accepted the terms after realizing the inevitability in continuing the conflict, and choose rather to wait and bide their time and rebuild their army. Eventually when they could regain a strong enough military capability to compete against the Dominion they would strike at them while they still believed the Empire was under their thumb. This might very well take a long time, as the Thalmor are watching the Empire very closly and raising an army too quick will draw attention.

If the Empire was destroyed they would not have any possibly of defeating the Dominon, but if they surrended and waited for the right moment they could attack again and hopefully win the next time.

Nord culture however considers a "warriors death" to be honorably, while surrender is considered very dishonorable. This cause many of the Nords of Skyrim to be opposed to the treaty.