Blondell v. Ahmed
786 S.E.2d 405 (2016)
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Rule of Law:
The implied covenant of good faith and fair dealing inherent in every contract extends through the negotiation of the contract's termination. A party may breach this duty by failing to disclose material information to the other party to induce them into terminating the agreement, thereby depriving them of the benefits of the original contract.
Facts:
- In March 2013, Shakil and Shabana Ahmed ('Sellers') entered into a one-year exclusive listing agreement with Keystone Properties, represented by agent Colleen Blondell ('Agent').
- On April 3, 2013, the Agent showed the home to Michael and Susan Fekete ('Buyers'), who subsequently submitted an offer that the Sellers rejected.
- On April 22, 2013, the Sellers informed the Agent they wished to terminate the listing agreement.
- The following day, the Sellers signed and returned a termination agreement which stipulated it would only become effective once signed by both parties; the Agent did not sign it at this time.
- Subsequently, the Sellers began negotiating directly with the Buyers without the Agent's knowledge, and on May 9, 2013, the Buyers presented a written purchase offer directly to the Sellers.
- With the Buyers' offer in hand, the Sellers contacted the Agent about the status of the termination agreement but did not disclose the pending offer.
- The Agent executed the termination agreement on behalf of her firm on May 10, 2013.
- On May 11, 2013, the Sellers executed the contract to sell their home to the Buyers.
Procedural Posture:
- Colleen Blondell ('Agent') filed a lawsuit against Shakil and Shabana Ahmed ('Sellers') in the trial court to recover a real estate commission.
- The Sellers filed a motion for summary judgment, arguing no commission was due because the listing agreement had been validly terminated.
- The trial court granted the Sellers' motion for summary judgment.
- The Agent, as appellant, appealed the trial court's order to the North Carolina Court of Appeals, with the Sellers as appellees.
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Issue:
Does a seller breach the implied covenant of good faith and fair dealing by requesting their real estate agent finalize a termination of their listing agreement without disclosing that they have already received a purchase offer from a buyer the agent had previously introduced?
Opinions:
Majority - Dillon, Judge
Yes, a seller may breach the implied covenant of good faith and fair dealing under these circumstances. The court reasoned that the listing agreement, and the duties thereunder, remained in effect until the termination agreement was fully executed by both parties on May 10. The Parol Evidence Rule bars consideration of the Agent's prior email because the termination agreement's text was unambiguous that it required both signatures to be effective. Because the duty of good faith was still active, a jury could find that the Sellers breached it by failing to disclose the material fact of the Buyers' pending offer while urging the Agent to finalize the termination, an act calculated to deprive the Agent of her earned commission.
Dissenting - Bryant, Judge
No, the Sellers did not breach their duty of good faith because there is no evidence of intent to deceive or conceal material facts. The dissent argues that the Agent failed to present evidence of fraudulent intent, offering only vague allegations. Furthermore, the Sellers did not initiate contact with the Buyers and only learned their identity when the Buyers wrote to them directly. The dissent contends that the Agent's own actions, such as emailing the Buyers that she no longer worked with the Sellers and waiting 17 days to sign the termination, undermine the claim that a valid agreement was still fully in effect in the parties' understanding.
Analysis:
This decision reinforces the strength of the implied covenant of good faith and fair dealing, clarifying that this duty persists throughout the life of a contract, including during negotiations for its termination. The ruling establishes that a party cannot use termination as a strategic tool to circumvent its contractual obligations, such as paying a real estate commission. For future cases, this precedent means that a party's non-disclosure of material facts during termination talks can be evidence of bad faith, potentially nullifying the termination's effect and reviving the original contract's obligations. It cautions principals in agency relationships that they cannot secretly negotiate with a third party introduced by their agent and then terminate the agency to avoid payment.
