Deal Points Can Be Critical
So when is a deal not a deal? The answer is, it depends.
Sometimes it seems like half of the law is tying down loose ends. And sometimes it seems like the other half consists of getting written commitments so people don’t change their minds.
Here’s a good example.
A Seller sold a house to a Buyer. After the sale was completed, the Buyer filed a lawsuit against the Seller, claiming breach of contract, misrepresentation, negligence and negligent misrepresentation by the Seller.
Both of the parties were represented by attorneys. The attorneys agreed, with court approval, that the claims would be submitted to “binding arbitration.”
Binding arbitration is a substitute for trial. In binding arbitration, an arbitrator makes a decision or renders an award in favor of one of the parties. This arbitrator isn’t usually a judge. It can be an attorney, but it’s not necessary that an arbitrator be an attorney. The arbitrator can be anybody the parties agree to.
The matter was decided by an arbitrator at “binding arbitration” and the arbitrator rendered an award of $55,475 in favor of the Buyer. The Buyer asked the Court to make the award enforceable, but the Seller objected. The Seller claimed that he had never agreed to binding arbitration. The Seller apparently may have agreed to non-binding arbitration, but not to binding arbitration.
The Court had to make a decision whether or not the binding arbitration award was valid and enforceable. In order for the award to be valid, it was necessary that the parties have agreed to submit the matter to binding arbitration. The Seller claimed that he had never agreed to binding arbitration, and the Buyer wasn’t able to provide the court with definite proof that the Seller had agreed to binding arbitration. The Court held that an attorney’s agreement to binding arbitration is insufficient to commit the client to binding arbitration. Because the Seller’s attorney had agreed to binding arbitration, but because there was no proof that the Seller himself had agreed, the Court found the arbitration award unenforceable. Giving up a right to trial is a substantial right, and the Court wasn’t satisfied that the Seller had ever actually given up his right to a trial. The case is reported as Toal v. Tardif (2009) 178 Cal. App. 4th 1208.
That’s a tough spot for the Buyer. The Buyer had spent all of the time, money, and attorneys fees necessary to get through arbitration and receive an award, only to find out that the award was no good. As far as the Buyer was concerned, this was a done deal. But due to an uncertainty, this Buyer lost his entire award.
Sometimes legal proceedings seem like a ponderous, complex, over-the-top process. But it’s exactly these types of situations that cause lawyers to spend so much time confirming every arrangement, crossing every “t” and dotting every “i”. It can be surprising, frustrating and disappointing to think that you’ve got a solid deal in place, only to later find out there’s an infirmity.
The foregoing article is provided for general information purposes and should not be used in connection with any specific legal matter. Persons with legal issues or matters should consult competent legal counsel.
Robert B. Jacobs is an attorney, mediator and arbitrator with over 30 years of litigation experience. He mediates business, real estate, construction, personal injury, wrongful death, employment, trust and probate cases. He is a designated Super Lawyer and holds an AV rating with Martindale-Hubbell. He was the 2020 chair of the ADR section of the Contra Costa County Bar Association and the co-chair of the ADR section of the Alameda County Bar Association. Since 2018 he has been an update author for the CEB treatise Real Property Remedies and Damages. He is an adjunct law professor at Hastings College of the Law in San Francisco. Reach him at [email protected]