In the case McAvoy v. Hilbert, the plaintiffs, Randall and Trudy McAvoy, listed their business and the buildings that contained it for sale with the defendant, Dail Hilbert, a real estate broker who screwed up the paperwork. As a result, the McAvoys got sued — not by the folks that bought it from them, but by the folks that bought it from the buyers. The McAvoys said they should be able to sue Hilbert for malpractice.

Hilbert said his listing agreement with the plaintiff included an arbitration clause and that the McAvoys can’t sue him; rather, the matter should be taken to an arbitrator.

Analysis: The business listing agreement signed by the plaintiffs and the defendant did contain an arbitration clause, but the clause was not formatted in accordance with Section 1298 of the California Code of Civil Procedure, which requires that to be enforceable, arbitration clauses in real estate transaction contracts between an agent and client must include a separate heading and be initialed by both parties and be set out in at least 10 point bold type or contrasting red print in at least an 8 point type.

In this case, the parties’ agreement had none of these formatting characteristics. The defendant claimed that because the agreement was in essence an agreement to list a business for sale, rather than an agreement to list real property for sale, that Section 1298 didn’t apply and the plaintiffs should be compelled to arbitrate, rather than litigate, the matter.

Ruling: For the plaintiff. The court found that the listing agreement was a business listing agreement, but because it was inclusive of an agreement regarding the brokerage of a real estate transaction, Section 1298 was applicable. The lower court’s decision that the plaintiffs could not be compelled to arbitrate the matter, given the nonconformity of the arbitration clause to the Section 1298 format requirements, was upheld.

Based on the California Court of Appeal decision in McAvoy, et al v. Hilbert, et al.

Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Ask her a real estate question online or visit her Web site,


What’s your opinion? Leave your comments below or send a letter to the editor. To contact the writer, click the byline at the top of the story.

Show Comments Hide Comments


Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
Thank you for subscribing to Morning Headlines.
Back to top
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription