Arbitration can be either voluntary or mandatory. Mandatory arbitration usually comes from a statute or a contract that the parties entered into, where they agreed to take all disputes to arbitration. Parties that agree to arbitration are bound by the agreement and must satisfy any award determined by the arbitrator.

Importantly, arbitration can be as formal or as informal as the parties agree. The parties can either choose an informal procedure or they can choose to have the procedure governed by California Code of Civil Procedure Section 1289.

There are different forms of arbitration. It is important to understand each form in order to make an informed decision about which method suits your situation.

Binding Arbitration
As stated above, arbitration is a proceeding whereby a neutral third party makes a decision about your case after considering arguments and evidence from both sides. Binding arbitration means that the arbitrator’s decision is final and binding. Courts in most jurisdictions will enforce the awards and there is little or no option for appeal.

Additionally, arbitration is subject to the legal doctrines of Res Judicata and Collateral Estoppel. Res judicata means that if a final judgment on the merits of the case is made, the same parties cannot later bring an action involving the same claim, demand or cause of action. Collateral estoppel means that when an issue in the case has been determined by a valid judgment, that issue cannot be relitigated between the same parties in future litigation. Thus, a final judgment in binding arbitration really is the end of the dispute for the parties.

Non-Binding Arbitration
Non-binding arbitration is where the arbitrator makes a determination of the rights of the parties to the dispute, but this determination is not binding upon them and is not enforceable in court. The decision is more of an advisory opinion of the arbitrator’s view of the merits of the case.

Many times parties use non-binding arbitration as a first step to settlement negotiations. Non-binding arbitration allows the parties to go into negotiations with a credible ruling on their respective positions with little cost and no risk on the merits.

In fact, non-binding arbitration is similar to mediation in that the arbitrator will act as a middle man, except that the arbitrator is not involved in trying to settle the case like a mediator. The arbitrator remains totally removed from the settlement process and will only give a determination of liability and, if appropriate, an indication of the amount of damages.

Should non-binding arbitration fail to resolve the dispute, the parties are still able to go to court. The award and reasoning in a non-binding arbitration is inadmissible in any subsequent action in the courts or in another arbitration hearing.

Baseball arbitration
Baseball arbitration is another type of binding arbitration. Each party to the arbitration submits a proposed monetary award to the arbitrator. After a final hearing, the arbitrator will choose one award from the submitted awards. The arbitrator will not make any modifications to the award.

Baseball arbitration allows the parties to limit the arbitrator’s decision. It gives each party to the arbitration an opportunity to offer a reasonable proposal to the arbitrator with the hope that his/her award will be accepted.

Baseball arbitration can be one of two types: night baseball arbitration or day baseball arbitration. In both, the parties shall submit their last best award to the arbitrator. In day baseball arbitration, the arbitrator is aware of the award and chooses the award that is considered the most appropriate. Whereas, in a night baseball arbitration, the awards submitted by the parties are kept confidential from the arbitrator. After the arbitrator makes his decision, the award that is mathematically closest to the arbitrator’s award is considered the binding award. Night baseball arbitration is mostly chosen when the parties have a strong belief about the reasonableness of their submitted award.

Hi/Lo Binding Arbitration
In Hi/Lo binding arbitration, the parties agree to an upper and lower limit to the award. The low number represents the lowest amount the Plaintiff is willing to accept and the high number represents the highest amount the Defendant is willing to pay. If the decision by the arbitrator is any number between the upper and lower limit, the decision is binding on the parties. If the arbitrator’s decision is outside of the limits, then the decision is not binding and the parties may proceed to court. The high and low numbers are typically confidential and not shared with the arbitrator.

The advantage of Hi/Lo binding arbitration is that it allows the parties to reduce the risk of extreme decisions by the arbitrator by agreeing before hand on numbers that are acceptable to them. Additionally, the plaintiff can be certain that he or she will recover at least the number at the low and the defendant caps his or her losses at a number he or she can deal with.
A lot of times, Hi/Lo arbitration makes sense when a plaintiff faces the possibility of a defense verdict and needs to cover some of his or her expenses, such as medical costs. For a defendant, Hi/Lo arbitration makes sense if the defendant needs to cap his or her losses at what his or her insurance will cover.

Conclusion
As discussed above, arbitration (in its many forms) can be an inexpensive alternative to resolving disputes. It is a method that is encouraged by our judicial system and one which everyone should consider. For more on the ins and outs of arbitration, please see an experienced attorney in your area.

Irvine Trial Lawyer Gregory G. Brown
Orange County Trial Lawyers Brown & Charbonneau, LLP
Irvine Trial Lawyers Brown & Charbonneau, LLP
http://www.bc-llp.com/Civil-Trial-Specialists/
http://www.bc-llp.com/Attorneys/Gregory-G-Brown.shtml
http://www.bcllpblog.com/trial/
http://www.bc-llp.com
Twitter: @OCTrialLaw
714.505.3000

In the last five years we’ve seen a huge decline in the housing market.  What does this mean for buyers and sellers?  More breaches of property purchase agreements.  If you are considering purchasing or selling a property or you are currently in litigation involving a breach of a purchase agreement, it is import to understand what remedies are available to you.  In this two part article, we first discuss the remedies available to sellers in case of a buyer breach.  In part two, we will discuss the remedies available to buyers in case of a seller breach.

A seller has two basic alternative remedies available to them in case a buyer breaches the purchase contract: a general damages action for breach of contract or specific performance.

General Damages

General damages are the difference between the contract price and the value of the property at the time of the breach.  Because it is sometimes difficult to determine when the contract was breached, courts will value the property at the time of the closing date specified in the contract.

What is important to remember about the general damages rule is that a seller can only really recover damages if:  (1) the purchase price in the contract was higher than the value of the property at the time the contract was entered into (meaning the buyer agreed to pay above the fair market value) or (2) if the purchase price in the contract was equal to the property’s fair market value at the time the contract was entered into, but the property depreciated in value at the time of the breach (closing date of the contract).  Thus in a stable or appreciating market, the seller is unlikely to have suffered general damages by the buyer’s breach.

Liquidated Damages

What can a seller do to protect him or herself from a breach in a stable or appreciating market?  A liquidated damages clause.  Parties to a contract sometimes choose to include a liquidated damages clause in the purchase agreement.  A liquidated damages clause provides for a fixed amount in damages in case one or the other party breaches the contract.  This is advantageous because the court will award the fixed amount of damages set forth in the contract instead of looking to the difference between the contract price and the value of the property at the time of the breach.

Specific Performance

As an alternative to general damages, a seller can seek specific performance.  Specific performance is where the court orders the buyer to perform as required by the purchase agreement.  There are certain requirements that must be met before a court allows specific performance as a remedy: (1)  an award of money damages will not adequately compensate the seller; (2) the buyer received adequate compensation (i.e. the property); (3) performance of the contract will not cause undue hardship to the buyer; (4)  the terms in the contract are certain enough for the court to be able to determine exactly what performance is required by the buyer; (5) the performance that the seller wants the court to order is similar enough to the performance required by the contract; (6) the contract is not illegal or the result of fraud, unfair practice or mistake; (7) the seller has performed his duties under the contract; (8) the performance does not require impractical or impossible supervision by the court.

While we have only discussed general damages and specific performance here, there is also a possibility for consequential damages and interest.  Please stay tuned for a discussion on consequential damages in my upcoming blogs.  Also please stay tuned for Part II of this article, where we discuss remedies available to a buyer in case of a breach by a seller.

Orange County Business Litigation Lawyers Brown & Charbonneau, LLP

http://www.bc-llp.com/Civil-Trial-Specialists/

http://www.bc-llp.com/Attorneys/Gregory-G-Brown.shtml

http://www.bcllpblog.com/trial/

http://www.bc-llp.com

Twitter: @OCTrialLaw

By: Orange County Business Lawyer Gregory G. Brown

A corporate distribution to its shareholders (or “dividend”) is the transfer of cash or property from a corporation to its shareholders, without consideration, by virtue of the fact that the shareholders own shares in the corporation. Corp. Code § 166.

Distributions are Discretionary

The most important rule underlying corporate distributions to its shareholders is that the distributions are discretionary. Zellerbach v. Allenberg, 99 Cal. 57 (1893).  This means that the directors of a corporation have exclusive authority to declare distributions. Gibbons v. Mahon, 136 U.S. 549, 558 (1890). Corporate directors have the ultimate say on when and how such distributions are made.

Potential Corporate Liability for Improper Distributions

Corporations, however, cannot simply make whatever distribution they see fit.  Instead, a corporation may not even be able to legally make a distribution unless their retained earnings or remaining assets meet certain standards.  Corp. Code § 500.  Additionally, if a corporation’s dividend would make it insolvent, the distribution cannot be legally made. Corp. Code § 501. Corporate directors that make such improper distributions can be held personally liable for their actions.

Pre-Declaration = No Vested Right!

If a corporation is financially sound enough to make a distribution, the directors still do not have to declare a dividend.  There may be other reasons to keep certain cash holdings within the corporation.  In fact, a shareholder has no vested right to a dividend until it is declared by the corporation’s board of directors.  Miller v. McColgan, 17 Cal.2d 432, 436 (1941).  In absence of a declaration of dividends by a corporation’s board of directors, shareholders have no direct proprietary interest in corporate earnings, there being no dividend in earnings until one is declared. Gibbons v. Mahon, 136 U.S. 549, 558, 568 (1890). Put simply, there are no requirements for when a corporation must issue a shareholder distribution.

After Dividend is Declared = Vested Right!

Once a corporation passes a resolution declaring a dividend, though, a corporate shareholder has a right to receive their proportionate share of the corporate distribution.  At this point, the right to receive a dividend has “vested” with the shareholder, and a failure to distribute the declared dividend can form the basis for a lawsuit.

Conclusion

Whether you are a shareholder of a closely-held corporation or own stock in a Fortune 500 company, it is important to know your basic rights to corporate dividends. Please keep these basic rules in mind if a dispute arises as to a party’s right to corporate dividends.

Orange County Business Litigation Lawyers Brown & Charbonneau, LLP

Irvine Business Lawyers Brown & Charbonneau, LLP

http://www.bc-llp.com/Civil-Trial-Specialists/

http://www.bc-llp.com/Attorneys/Gregory-G-Brown.shtml

http://www.bcllpblog.com/trial/

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Twitter: @OCTrialLaw

714.505.3000

By: Irvine Trial Attorney Gregory G. Brown

The average person enters into many different types of contracts in their lifetime. Whether its signing up for a credit card, buying a car, agreeing to an extended protection plan on a television, or signing an employment agreement, chances are you have no input in the language of the contract.

If, however, you have input in revising, re-wording, changing, or amending a term within the agreement, the contract may be deemed “mutually drafted” by a court in the event the contract is breached. This designation can be significant in a contract dispute.

Ambiguities Construed Against Drafter

The Latin term contra proferentem is a contract principle that provides that an ambiguous or uncertain term in a contract will be construed against the party that caused the uncertainty to exist. Civ. Code § 1654. Ambiguities are contract language that is difficult to comprehend or distinguish. Royal Neckwear Co. v. Century City, Inc., 205 Cal.App.3d 1146, 1153 (1988).

In a practical sense, the person that “caused the uncertainty to exist” is the person that drafted the agreement. Thus, the general rule is that ambiguities in the drafting of contracts are construed against the drafter. Sands v. E.I.C., Inc., 118 Cal.App.3d 231 (1981).

This rule will benefit the average consumer who is handed a “boilerplate” contract and asked to sign it, or they won’t get a credit card. If, however, some revisions are made by both parties, the question of who drafted the contract can become essential to the determination of a contract dispute.

Effect of Contract Deemed “Mutually Drafted”

Where there is a joint drafting of the agreement, or where the terms and conditions of an agreement have been negotiated by both parties, the contract will not be construed against either party. Mitchell v. Exhibition Foods, Inc., 184 Cal.App.3d 1033, 1042 (1986). Upon a determination by a court that the contract is jointly or mutually drafted, deficiencies in the contract cannot be held against either party. Even if a party negotiated a smaller percentage of the contract than the opposing side, a court may find that enough of the contract was revised that the contract will be mutually drafted. In other words, the negotiation need not be equally proportioned for a finding of joint drafting.

Conclusion

In a contract dispute, the party that drafted the agreement may have the language used against them. If there is a finding, however, that both parties had input, that presumption goes away. Thus, it is important to find an experienced contract litigation attorney in your area to guide you through any dispute you may have.

Orange County Business Litigation Lawyers Brown & Charbonneau, LLP

Irvine Business Lawyers Brown & Charbonneau, LLP

http://www.bc-llp.com/Civil-Trial-Specialists/

http://www.bc-llp.com/Attorneys/Gregory-G-Brown.shtml

http://www.bcllpblog.com/trial/

http://www.bc-llp.com

Twitter: @OCTrialLaw

714.505.3000

Irvine Trial Lawyer Gregory G. Brown

Orange County Trial Lawyers Brown & Charbonneau, LLP

Irvine Trial Lawyers Brown & Charbonneau, LLP

http://www.bc-llp.com/Civil-Trial-Specialists/

http://www.bc-llp.com/Attorneys/Gregory-G-Brown.shtml

http://www.bcllpblog.com/trial/

http://www.bc-llp.com

Twitter: @OCTrialLaw

714.505.3000

A partnership may be formed whether or not the parties intend to form one, and its existence does not depend on a formal written agreement. Once a partnership is formed, then, it is important for you to know what your rights are in relation to the partnership accounts, recordkeeping, and partnership profits and losses.

Capital Contribution

The traditional “first step” in starting a partnership business requires a capital (usually cash) contribution by each of the partners into the partnership account. This contribution need not be equal, and the contribution itself is not necessarily required, as some partners may contribute their labor and skill to the partnership, rather than cash as capital. Regardless of the extent of capital contribution by each partner, the law deems each partner to have a “partner account” that is subject to several rules/limitations.

Partnership Profits and Losses

The initial partnership account is credited with the amount equal to the money and value of property contributed by the partner. As the partnership business progresses, the partner’s share of the partnership profits is added to this account. The division of profits (and losses) is left to the agreement of the parties.

Partnership Reimbursements

Any partner that acts in the “ordinary course of the business of the partnership” by making payments or taking on liabilities is entitled to reimbursement by the partnership. A partner is also entitled to reimbursement for any advance to the partnership beyond the amount of capital the partner agreed to contribute.

Recordkeeping

No partnership agreement can unreasonably restrict a partner’s access to the books or records of the partnership. This right of access provides the partner, its agents, and attorneys an opportunity to inspect and copy these books and records.

Actions for Accounting

In order to enforce your rights under your partnership, a partner may maintain an action of “accounting” against the partnership or another partner. An action for an accounting forces the partners to account to the partnership for any benefit or profits derived from any transaction connected with the formation, conduct or termination of the partnership or from any use of partnership property.

Other than actions dealing with the end of a partnership or the withdrawal of a partnership, partners are given the right to a formal accounting when:

• The right exists under the partnership agreement;

• A partner is excluded from the business or possession of its property by copartners; and/or

• Any other circumstances that render it just and reasonable.

Conclusion

It is important to stay informed about your partnership’s profits, losses, and recordkeeping. Know your rights when a partnership dispute arises.

Irvine Trial Lawyer Gregory G. Brown
Orange County Trial Lawyers Brown & Charbonneau, LLP
Irvine Trial Lawyers Brown & Charbonneau, LLP
http://www.bc-llp.com/Civil-Trial-Specialists/
http://www.bc-llp.com/Attorneys/Gregory-G-Brown.shtml
http://www.bcllpblog.com/trial/
http://www.bc-llp.com
714.505.3000

The competition takes place on December 1st, 2011 at OCSC – Central Justice Center!

http://www.bc-llp.com/Civil-Trial-Specialists/

Written by: Gregory Garth Brown

Attorney licensed in California

What is Rescission?

When a contract dispute arises, parties often look for ways to rescind the contract.  A rescission is not merely a cancellation of a contract.  Rather, a rescission will put the parties back to the day the contract was signed and the contract itself will be treated as if it never existed.  This determination by a court requires the parties to the contract to return all consideration under the contract that had been received up to the point of the dispute.  There are several different grounds for rescission of a contract in California.

Grounds for Rescission

In California, Civil Code §1689 governs when a contract may be subject to rescission:

Consent

Parties to a contract can agree to rescind an original contract between them without intervention by the Court.  This can occur regardless of the express terms of the agreement.  However, parties must complete the rescission by returning all consideration already given under the original contract.

Mistake

A party may rescind the contract on the basis of a “unilateral mistake”.  This means that one party was mistaken about a material fact under the contract that the other party knew or suspected of and the party used that mistake to their advantage.  However, if the mistaken party did not do their reasonable diligence in the contract, a unilateral mistake is insufficient for rescission.

If both parties are mutually mistaken about a material fact, then a contract can also be rescinded by either party.

Fraud or undue influence

When a party is “induced” into a contract by a misrepresentation of the other party and relies on that misrepresentation, the defrauded party can rescind the contract.

Failure of consideration

A party to a contract may also rescind a contract based on a failure of the other party to provide “consideration” for their agreement. A refusal or failure of a party to perform his part of the contract, or a clear intention to violate it, gives the other party the right to rescind. For example, a car buyer that fails to deliver the purchase price of a car to a seller after driving off with the car has failed to provide the “consideration” for their agreement.  Thus, buyer may rescind the contract and take back the car.

Unlawful contract and public interest

Finally, a contract may be rescinded if it is against the law or if the public interest will be prejudiced by permitting the contract to stand.

Conclusion

Contract disputes can be complex, and each situation is different.  It is important for any consumer or small business owner to have a basic knowledge of their rights and remedies under contract law.  For more complex disputes, you should find an experienced contract litigator in your area.

Irvine Business Lawyer Gregory G. Brown

Orange County Business Litigation Lawyers Brown & Charbonneau, LLP

http://www.bc-llp.com/Civil-Trial-Specialists/

http://www.bc-llp.com/Attorneys/Gregory-G-Brown.shtml

http://www.bcllpblog.com/trial/

http://www.bc-llp.com

714.505.3000

Certified Trial Specialist  – - Brown & Charbonneau, LLP

for more on trial practice, visit http://www.bc-llp.com/Civil-Trial-Specialists/

In good times and in rough times, always remember “The Doer”

“It is not the critic who counts: not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again, because there is no effort without error or shortcoming, but who knows the great enthusiasms, the great devotions, who spends himself for a worthy cause; who, at the best, knows, in the end, the triumph of high achievement, and who, at the worst, if he fails, at least he fails while daring greatly, so that his place shall never be with those cold and timid souls who knew neither victory nor defeat.”

Theodore Roosevelt

Irvine Trial Lawyer Gregory G. Brown

Orange County Trial Lawyers Brown & Charbonneau, LLP

Irvine Trial Lawyers Brown & Charbonneau, LLP

http://www.bc-llp.com/Civil-Trial-Specialists/

http://www.bc-llp.com/Attorneys/Gregory-G-Brown.shtml

http://www.bcllpblog.com/trial/

http://www.bc-llp.com

714.505.3000