Century 21 Chalet v. New American Co., LLC: No Commission Entitlement for Producing Offer

A Michigan appellate court has considered whether a listing broker could collect a commission from a failed transaction in which the seller allegedly made a counteroffer to a potential buyer but then withdrew it.

T.M. Bahhur (“Bahhur”) of New American Company, LLC (“Owner”) entered a listing agreement with Century 21 Chalet (“Brokerage”) for the sale of a car wash held by the Owner. The offering price for the Owner’s property was $3,650,000. The listing agreement provided that the Brokerage could collect a commission for, among other things, obtaining an offer from a ready, willing, and able buyer at the terms set forth in the listing agreement even if the Owner refused to sell the property or if the Owner was unable to complete an executed purchase agreement.

The Brokerage obtained an offer from “an officer of a [Michigan] corporation to be formed” for $2,250,000. Thereafter, someone with the initials “A.H.” and allegedly associated with the Owner made notes on the offer, including crossing off the purchase price and writing “$2.55 million”. “A.H.” did not sign the purchase agreement, and there were no further negotiations between the parties. The offer was withdrawn before the buyer had accepted.

Eventually, the Brokerage filed a lawsuit seeking payment of the commission. The Brokerage argued that it was owed a commission based on the amount of the Owner’s counteroffer of $2.55 million because it had produced a ready, willing, and able buyer at the terms of the Owner’s counteroffer but the Owner revoked the counteroffer before the buyer could accept the offer. The trial court ruled in favor of the Owner, determining that the alleged counteroffer was never accepted by the potential buyer and was also void because the original offer was executed by a nonexistent entity. The Brokerage appealed.

The Court of Appeals of Michigan affirmed the trial court. The issue before the court was whether the Brokerage had fulfilled its contractual obligations set forth in the listing agreement which entitled it to a commission. The Brokerage argued that the Owner had frustrated the sale by withdrawing its counteroffer before it could be accepted by the buyer.

The court rejected this argument. The court stated that the Brokerage was not entitled to a commission because the Owner had never accepted the offer it had received from the buyer. Further, the court found that the alleged “counteroffer” was illegible, nor signed or dated by the alleged representative of the Owner. Even if the counteroffer was presumed to be legally sufficient, Michigan contract law allowed the Owner to revoke the counteroffer prior to the buyer’s acceptance. Therefore, the counteroffer did not create an agreement between the Owner and the buyer, and so the Brokerage did not have a commission claim. The court found that if the court accepted the Brokerage’s argument, sellers would be required to accept any offers they received from ready, willing and able buyers, no matter what the offering price was. Finding that the Brokerage had not earned a commission pursuant to the terms of the listing agreement, the court affirmed the ruling of the trial court.

Century 21 Chalet v. New American Co., LLC, No. 248307, 2004 WL 2601745 (Mich. Ct. App. Nov. 16, 2004). [This is a citation to a Westlaw document. Westlaw is a subscription, online legal research service. If an official reporter citation should become available for this case, the citation will be updated to reflect this information].

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