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Corbin on Contracts

Copyright 2007, Matthew Bender & Company, Inc., a member of the LexisNexis Group.

PART I FORMATION OF CONTRACTS

TOPIC A OFFER AND ACCEPTANCE

Supp. To CHAPTER 2 OFFERS: CREATION AND DURATION OF POWER OF ACCEPTANCE

1-2 Corbin on Contracts Supp. to § 2.30

Supp. to § 2.30 Real Estate Brokerage and Other Agency Cases

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(A) The following case is noteworthy:

(1) Podolsky & Assocs. L.P. v. Discipio, 297 Ill. App. 3d 1014, 697 N.E.2d 840 (1998) . Affirming trial court's granting judgment as a matter of law against plaintiff broker on breach of contract claims, but using the case to explain that Illinois's duty of good faith and fair dealing entitles brokers to a commission if the broker shows that its principal intentionally delayed forming a contract for sale to avoid paying a commission. The court also noted that a principal's failure to notify the broker of a possible buyer would, under the terms of the agreement in this case, be a failure to perform, i.e., a breach, not an anticipatory repudiation.

(B) The following case cites this section:

Mapes, d/b/a Reata Realty v. City Council of the City of Walsenburg, a Colorado municipal corporation, (2006) . Mapes, a real estate broker, entered into an open listing contract with the City for the sale of a ranch owned by the City. The contract provided for a listing price of $506,000, an earnest money deposit of $10,000 and a six percent sales commission. Shortly after entry of the agreement, Mapes found a buyer who made an offer of $510,000, with an earnest money deposit of $10,000 and no contingencies. Six weeks later, however, the City entered into a contract to sell the property to another party. Mapes filed suit to recover his sales commission. The district court granted the City's motion to dismiss and Mapes appealed. The appellate court noted that the document evidenced an ''open listing'' standardized form that had been approved by the Colorado Real Estate Commission. The court cited Corbin's analysis that an open listing is an offer for a unilateral contract creating in the broker the power of acceptance by procuring a purchaser ready, willing, and able to buy on the terms proposed by the owner. The broker earns a commission by finding a ready, willing, and able purchaser before other agents or the owner find such a purchaser, and before the owner revokes the offer. Paragraph 1 of the contract stated that a ''Broker Sale'' occurred when either (1) the property was sold by Mapes during the listing period, or (2) Mapes procured a buyer during the period who was ready, willing and able to 'complete the sale' as proposed by the City. The court concluded that the provision evidenced the general rule that a real estate broker was entitled to receive a commission when he had procured for his client a party able to enter into the contract on the terms stated. Mapes alleged facts in his complaint that if true would entitle him to a commission under the unambiguous terms of the contract. The case was remanded for further proceedings consistent with this opinion.

Supplement to Notes in Main Volume

34. Jameson Realty Group v. Kostner, 286 Ill. Dec. 431, 813 N.E.2d 1124 (App. Ct. 2004) . The defendant agreed to give the plaintiff an exclusive one-year agency to sell condominium units for a commission of five percent. A liquidated damages clause provided that the plaintiff would receive this commission if its authority was revoked or if the property was withdrawn from the market during the period of the agency. Five and one-half months later after four units had been sold and thirteen remained unsold, the defendant terminated the agreement. The circuit court found the clause to be enforceable. On appeal, the instant court recognized that, assuming the usual requirements as set forth in the Restatement (Second) of Contracts, § 356 are met, such clauses are generally enforced in contracts for the purchase and sale of real estate. It found no precedent in Illinois, however, for the enforcement of such clauses in real estate brokerage contracts. Following case law in other jurisdictions, the court concluded that, though real estate contracts involve the exchange of property, while real estate brokerage agreements are contracts for services, there was no reason to treat a liquidated damages clause in such a contract differently. The court found the instant clause to be clear and unambiguous. The defendant had argued that it failed to specify the dollar amount of damages, but the court pointed to a list of asking prices for each unit that was explicitly referenced in the agreement and concluded that the plaintiff was entitled to 5 percent of the asking prices. The defendant claimed that the damages set forth in the clause did not bear any relationship to the damages that might be sustained since it assumed that the plaintiff would have succeeded in selling all of the units during the contract period and would, therefore, receive a ''windfall'' if the clause were enforced. The instant court disagreed in holding that the clause simply provided the plaintiff with what it would have received had it been afforded an opportunity to sell all of the units. The defendant's ''windfall'' argument supported the validity of the clause in the court's view since it demonstrated the uncertainty in calculating damages at the time the contract was formed. The court upheld the circuit court's decision that the clause was enforceable.