Under the standard California Residential Purchase Agreement, all of the following are accurate statements about the arbitration clause EXCEPT:
Correct Answer
D) Arbitration is mandatory and both parties are automatically bound upon signing the RPA
In the California RPA, the arbitration clause is NOT automatically binding upon signing the purchase agreement. The parties must separately initial the arbitration provision to opt in. This is a critical distinction — unlike mediation, arbitration is optional and requires affirmative consent through separate initialing.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Liquidated damages are a predetermined amount of money specified in the contract that the non-breaching party is entitled to receive if the other party breaches. In real estate, the earnest money deposit typically serves as liquidated damages.
Novation is the substitution of a new contract for an existing one, or the replacement of one party with a new party, with the consent of all parties involved. The original party is completely released from all obligations.
Offer and acceptance is the process by which one party proposes specific terms for a contract and the other party agrees to those exact terms, creating mutual assent. This mutual agreement, also called a meeting of the minds, is an essential element of every valid contract.
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