Monday, January 6, 2014

Ellsworth Dobbs, Inc. v. Johnson case brief

Ellsworth Dobbs, Inc. v. Johnson case brief summary
236 A.2d 843 (1967)

Plaintiff real estate broker appealed from a decision of the Appellate Division (New Jersey), which reversed a lower court finding that defendant sellers were liable for breach of a contract to have paid commission to plaintiff for having brought about a contract of sale, and which reversed the jury verdict against defendant purchaser for breach of an implied contract to have paid commission to plaintiff.

Defendant purchaser entered a land purchase contract with defendant sellers but defendant purchaser failed to obtain financing and did not close.

Although the plaintiff real estate broker had a right to commission when he found willing and able purchaser who entered into a contract, the defendant sellers had reasonably expected an "able" purchaser would have consummated the deal and the risk of financial inability was on plaintiff.


  • The court reversed the lower court and held that defendant sellers were not liable for the commission because the deal failed due to defendant purchaser's financial inability, and contrary language in the brokerage agreement was unconscionable and unenforceable. 
  • Defendant sellers were not liable for having sued for specific performance and accepted releases because defendant sellers had a responsibility to sue, and the releases were not the substantial equivalent of performance. 
  • The defendant purchaser could have been liable for an implied promise to have paid plaintiff's commission, however the case was remanded on the issue of whether plaintiff knew that the closing and commission were contingent upon having obtained financing.
The court reversed the judgement and entered judgment in favor of defendant sellers because the risk of the deal having failed due to defendant purchaser's financial inability was on plaintiff real estate broker, and contrary contractual language was unenforceable. Judgment as to defendant purchaser was reversed and remanded as to whether plaintiff was aware that his commission was contingent on defendant purchaser having obtained financing.

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