Wednesday, February 6, 2013

Ellsworth Dobbs, Inc. v. Johnson case brief

Ellsworth Dobbs, Inc. v. Johnson
50 N.J. 528
PROCEDURAL HISTORY: 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.
-The lower court held that although plaintiff real estate broker had a right to commission when he found willing and able purchaser who entered into a contract, defendant sellers 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 court held that defendant purchaser could have been liable for an implied promise to have paid plaintiff's commission, but the case was remanded on the issue of whether plaintiff knew that the closing and commission were contingent upon having obtained financing.
-When a broker is engaged by an owner of property to find a purchaser for it, the broker earns his commission when
(a) he produces a purchaser ready, willing and able to buy on the terms fixed by the owner,
(b) the purchaser enters into a binding contract with the owner to do so, and
(c) the purchaser completes the transaction by closing the title in accordance with the provisions of the contract.
-If the contract is not consummated because of lack of financial ability of the buyer to perform or because of any other default of his, there is no right to commission against the seller.
-On the other hand, if the failure of completion of the contract results from the wrongful act or interference of the seller, the broker's claim is valid and must be paid.
-In the absence of default by the seller, the broker's right to commission against the seller comes into existence only when his buyer performs in accordance with the contract of sale.

-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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