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A Tennessee court has considered whether a buyer’s representative could collect a commission from buyers who bought a property shown to them by the brokerage.
Ronald and Lisa Huestis (“Buyers”) contacted Moody Realty Company, Inc. (“Brokerage”) about their interest in purchasing a dairy farm in the area. In July 2004, the Buyers visited a number of dairy farms with William Fuchs (“Fuchs”) and James Oliver (“Oliver”) of the Brokerage. One of the farms they visited was the Hazleton farm, which was not currently listed for sale but the Brokerage knew that the owners would entertain offers for the farm.
Prior to visiting the Hazelton farm, Fuchs and Oliver had presented a standard “Buyer’s Representation” agreement to the Buyers. The agreement identified “Ron Huestis and wife” as the clients, and the agreement was effective until “1-1-2006”. The Brokerage would receive a specified commission if the Buyer purchased a property which was not otherwise listed for sale by the sellers, and specifically identified the Hazelton dairy farm as being subject to the terms of the agreement. Only Mr. Huestis signed the buyer’s representation agreement (“Agreement”), and there was a dispute as to when the Brokerage representatives signed the agreement and when the Brokerage representatives delivered a copy of the agreement to the Buyers.
Following the visit to the dairy farms, the Buyers informed the Brokerage that they were not interested in any of the properties. Fuchs testified he called the Buyers three times over the following months to see if they had changed their minds, and each time they told him that they remained uninterested.
However, in late 2004 the Buyers entered into conversations with the Hazeltons about purchasing their farm. The Buyers did not inform the Brokerage of these discussions. The Buyers eventually purchased the farm for $400,000. When the Buyers refused to pay the Brokerage a commission from the transaction, the Brokerage filed a lawsuit. The trial court ruled that there was not a valid agreement between the Brokerage and the Buyers, but the Brokerage was entitled to recover $20,000 under a quantum meruit theory. The Buyers appealed this ruling.
The Court of Appeals of Tennessee partially reversed the trial court but also agreed that the Brokerage was entitled to recover a commission from this transaction. The trial court had ruled that there had not been a “meeting of the minds” between the Buyers and the Brokerage on the listing agreement terms and so there was no contract between them. The trial court had based this ruling on the following: the Brokerage’s representatives did not sign the Agreement in the presence of the Buyers; the Buyers were not aware of the termination date contained in the Agreement; and the Buyers did not receive a contract signed by both parties until a later date.
The court found that the Buyers had evidenced their assent to be bound by the terms of the Agreement and so there was a valid contract between the parties. The court found that the Buyers assented to the Agreement and its terms because first, one of the Buyers signed the agreement; second, they went to visit the Hazelton farm after agreeing to pay a specified commission rate to the Brokerage if they purchased the farm; and finally, the evidence showed that the Brokerage believed the contract to be valid, since they continued to call the Buyers about possible interest in the farm for months following the Buyers’ visit. Thus, the court found that the parties had assented to the terms of the Agreement and so the Agreement’s terms were enforceable and the Brokerage was entitled to the commission describe in the agreement.
The court rejected the other arguments raised by the Buyers. First, the court found that the provision requiring real estate licensees to deliver agency contracts at signing to clients is a provision for disciplining licensees, not voiding contracts (click here to read a similar argument rejected by a New Jersey court recently). Second, the fact that Mrs. Huestis did not sign the Agreement had no bearing on whether there was an agreement between her husband and the Brokerage. Since he signed the contract, he was bound by the terms. Finally, the court ruled that the Brokerage had fully performed its obligations under the Agreement and the services they didn’t provide, such as negotiations, were hindered by the Buyers’ claims that they weren’t interested in purchasing the farm. Therefore, the court sent the case back to the trial court for entry of judgment in favor of the Brokerage, based on the terms of the Agreement.
Moody Realty Co., Inc. v. Huestis, 237 S.W.3d 666, (Tenn.Ct.App. 2007).