Tristram's Landing, Inc. v. Wait
367 Mass. 622, 327 N.E.2d 727 (1975)
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Rule of Law:
A real estate broker is entitled to a commission only if the sale is actually consummated by the closing of title, unless the seller's wrongful act or interference prevents the closing. Merely producing a buyer who signs a purchase and sale agreement is insufficient if that buyer subsequently defaults.
Facts:
- The defendant, a property owner, agreed that the plaintiffs could act as non-exclusive real estate brokers to sell her property in Nantucket.
- The plaintiffs found a prospective buyer, Louise L. Cashman, who entered into negotiations with the defendant.
- Cashman and the defendant executed a written purchase and sale agreement for a price of $105,000.
- The agreement contained a clause stating, 'It is understood that a broker’s commission of five (5) per cent on the said sale is to be paid to . . . [the broker] by the said seller.'
- Cashman provided a $10,500 down payment, which the defendant received and retained.
- On the agreed-upon closing date, the defendant was present and prepared to convey the property, but Cashman did not appear and subsequently refused to complete the purchase.
- The defendant did not take legal action against Cashman to enforce the agreement.
Procedural Posture:
- The plaintiff brokers brought an action in contract against the defendant seller in a Massachusetts trial court.
- The case was heard by a judge sitting without a jury based on a stipulation of facts.
- The trial court judge found in favor of the plaintiffs and awarded them the full commission.
- The defendant (appellant) filed exceptions to the finding and appealed to the Supreme Judicial Court of Massachusetts.
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Issue:
Does a real estate broker earn a commission when they procure a buyer who signs a binding purchase and sale agreement, but that buyer later defaults and fails to consummate the transaction through no fault of the seller?
Opinions:
Majority - Tauro, C.J.
No. A broker is not entitled to a commission if the sale is not consummated due to the buyer's default. First, the court interpreted the contract language 'on the said sale' as a special agreement creating a condition precedent that the sale must actually be completed for the commission to be earned. More significantly, the court abandoned the prior Massachusetts rule and adopted the rule from Ellsworth Dobbs, Inc. v. Johnson. This new rule holds that a broker earns a commission only when three conditions are met: (a) the broker produces a purchaser who is ready, willing, and able; (b) the purchaser enters into a binding contract with the owner; and (c) the purchaser completes the transaction by closing title. The court reasoned that the seller's expectation is that the commission will be paid from the sale proceeds, and thus the risk of the buyer's default should be borne by the broker who produced them. An exception exists if the sale fails because of the seller's wrongful act or interference, in which case the commission must still be paid.
Analysis:
This decision represents a significant shift in the common law for real estate brokerage commissions in Massachusetts, moving from the traditional 'ready, willing, and able' standard to a 'consummated sale' standard. It provides greater protection for sellers, who are often less legally sophisticated than brokers, by aligning the broker's right to a commission with the seller's actual receipt of the purchase price. The ruling incentivizes brokers to more carefully vet the financial stability and commitment of potential buyers, as the risk of a buyer's default now falls on the broker. This case establishes a new, clear default rule that can only be altered by a specific, fairly-made agreement to the contrary.
