Do the job, deliver the goods, don't get paid....until now!!!!

Source: ACAIQ
July 2005 • A seller who refuses a promise to purchase that conforms to the requirements of the brokerage contract must pay his real estate broker’s compensation. This is the conclusion reached by the Court of Appeal of Québec in Royal LePage Des Moulins v. Baril.
Obligation to pay the broker
In this case, a couple signed a brokerage contract with a real estate broker for the sale of their home. They were presented with a first promise to purchase, conditional to mortgage approval and some minor repairs. For personal reasons, the woman no longer wanted to sell. Her spouse still wanted to sell and, following discussions with the buyers, the latter presented a new promise to purchase for the asking price, without conditions and in every way conforming to all the requirements of the brokerage contract. The seller accepted this promise to purchase, but his spouse refused it and the transaction aborted. The listing broker sued the sellers for payment of the compensation stipulated in the brokerage contract. The Court of Québec rejected the broker’s suit, arguing that since a seller is not obliged to accept a promise to purchase, even if conforming, he cannot be at fault and owe his broker compensation in case of refusal. But basing itself on clause 7.2 of the mandatory form Exclusive Brokerage Contract – Sale of a Chiefly Residential Immovable, which stipulates that the compensation must be paid to the broker where a sale does not take place because the “seller voluntarily blocks it or otherwise voluntarily prevents the free performance of the contract”, the Court of Appeal overturned the decision of the Court of Québec and agreed with the broker. According to the Court of Appeal, the broker perfectly fulfilled his obligations under the brokerage contract by giving the sellers a promise to purchase that perfectly matched their requirements, without any conditions. It is the woman’s refusal to accept the promise to purchase that deprived the broker of his compensation, and therefore the responsibility is hers (that of her spouse, who is not at fault in this affair, was not called into question).
Is the seller obliged to sell his property...?
The Court of Appeal used this opportunity to issue the opinion that when a promise to purchase is presented that perfectly matches the brokerage contract, the buyer and the seller are bound and the seller must sell. This opinion is a departure from what was generally accepted until now to the effect that a brokerage contract and the ensuing marketing of a property constitute a simple invitation to potential buyers to present promises to purchase, which the seller is free to accept or refuse. This new point of view raises several questions. Can a seller counter a conforming promise to purchase? This question is especially relevant in a context of multiple promises to purchase. Can the seller give preference to a promise to purchase at a price higher than the listing price if he receives at the same time a promise to purchase for the asking price that perfectly matches the requirements of the brokerage contract? For the time being, these questions remain unanswered. However, it is important to understand that this opinion is secondary to the matter that required a decision by the Court of Appeal. It was issued without any real analysis of the mechanisms and requirements related to the sale of an immovable through a real estate broker. Still, to discount it would be risky. Therefore it is recommended to advise any seller who wants to refuse a promise to purchase that includes no conditions and meets all the requirements of the brokerage contract, to first seek the advice of a lawyer or a notary. In an effort to maintain the seller’s prerogative to refuse any promise to purchase, subject to compensating the broker if a conforming promise to purchase is received, it is recommended to add the following sentence under clause 11.1 of the mandatory brokerage contract: “It is understood that this contract does not constitute a promise or offer to sell and is meant as a general invitation to the public to submit promises to purchase.” This clause will be supplemented with the following disclaimer on the detailed description sheet: “This is not an offer to sell, but an invitation to submit promises to purchase.” The questions raised here deal solely with the possibility for a seller to refuse a conforming promise to purchase. It in no way jeopardizes a broker’s right to compensation in such cases.