■ ■ THE LIBRARY OF THE UNIVERSITY OF CALIFORNIA LOS ANGELES SCHOOL OF LAW Ucflal anb PusJtnestf $ut)licattong of Cfjc IXonalb jpreste Company 229 Broadway, New York CORPORATE ORGANIZATION. By Thomas Conyngton, of the New York Bar. 402 pages. 6x9 in. 1908. Buckram binding. CORPORATE MANAGEMENT. By Thomas Conyngton, of the New York Bar. Third Edition 422 pages. 6x9 in. 1909. Buck- ram binding. CORPORATION LAWS OE ALL STATES. By M. U. Overland, of the New York Bar. Interleaved Edition. 500 pages. 6x9 in. 1909. Buckram binding. CORPORATE FINANCE AND ACCOUNTING. By H. C. Bentley, C. P. A. S2S pages. 6x9 in. 1908. Buckram binding. FINANCING AN ENTERPRISE. By Francis Cooper. Third Edition. 543 pages. 5% x &\& in. 1909. 2 vols. Buckram binding. CONDITIONAL SALES. By Fred Benson Haring, of the Buffalo Bar. Interleaved Edition. 370 pages. 6x9 in. 1910. Buckram binding. MAINE CORPORATIONS. By H. M. Heath, of the Maine Bar. 300 pages. 6x9in. 1907. Buckram binding. DICKSEE'S AUDITING. By R. H. Montgomery, C. P. A. Authorized American Edition, Revised and Enlarged. 586 pages. 6x9 in. 1909. Cloth binding. THE LAW OF REAL ESTATE BROKE? S. By Fred L. Gross, of the Brooklyn Bar. 490 pages. 6x9 in. 1910. Buckram binding. Complete Descriptive Catalogue and Price List on application. THE LAW OF REAL ESTATE BROKERS WITH FORMS A MANUAL FOR THE USE OF LAWYERS AND REAL ESTATE OPERATORS BY FRED L. GROSS Of the Brooklyn Bar NEW YORK THE RONALD PRESS 1910 Copyright 1010 BY The Ronald Press Company I9IO PREFACE. In the course of a real estate practice extending over a number of years, the author has felt the need of some reasonably complete and conveniently arranged work on the law governing the transactions and relations of real estate brokers. The obligation, as well as the desire, to keep accurately informed, resulted in his accumulating a large amount of material relating to the subject. He was led to believe that this might be of use to other lawyers, and of practical value to real estate brokers as well. The present publication is the result. In preparing this work the author has used the mate- rial collected for his own use, and has largely supple- mented it by research and study specially devoted to pro- ducing from his original collection of notes a book which should accurately exhibit the law as it is. In the selection of supporting authorities the author has endeavored to avoid the too common habit of dump- ing in authorities secured from anywhere and every- where, leaving the reader to ascertain whether they af- fect the statement for which they are cited or not. Whal Pascal said concerning his ''Provincial Letters" may be conscientiously claimed for these pages: "I did not make use of a single passage without having myself read it in the book from which it is cited, without having examined the subject of which it treats, and without hav- ing read what went before and followed, so that I might run no risk of quoting an objection as an answer which would have been blameworthy and unfair." Beyond this, by ample quotations, the author has sought, wher- in • G67750 IV PREFACE. ever possible, to state principles in the language of the courts, rather than substitute his own language, thus presenting what the courts have really said, instead of what the text writer says they have said. The author believes the book will be of direct and ma- terial value to the real estate broker. The maxim im- presses upon us the fact that ignorance of the law ex- cuses no one. In other words, everybody is supposed to know the law. The real estate broker may therefore find a service rendered him in these pages which place before him much legal knowledge directly affecting his vocation. It must be borne in mind, however, that the present volume is not intended to make the broker his own law- yer. It will inform him on many important details of his calling, a knowledge of which will tend to prevent mistakes and lawsuits. It should also enable him to so conduct his business transactions that when litigation cannot be avoided he may place in his lawyer's hands a just and intelligent cause. But it will not qualify the broker to perform the duties of an attorney, and when litigation threatens, the prompt employment of compe- tent legal advisers is the course of safety and of wisdom. Feed L. Gross, 189 Montague Street, Brooklyn, N. Y., November 1, 1910. TABLE OF CONTENTS. PART I.— POWERS, AUTHORITY AND RIGHTS OF BROKER. Chapter I. — Introductory. § 1. Definition of Real Estate Broker. 2. Application of Term. 3. Functions of a Broker. 4. Definition of Terms. Chapter II. — Who May Act as Broker. License Requirements. § 5. General Statement. 6. Married Women as Brokers. 7. " " " " State Laws. 8. Minors. 9. Partnerships. 10. Corporations. 11. License or Tax on Right to Act as Broker. Chapter III.— Written and Oral Authority of Broker. § 12. General Statement. 13. Form of Authorization. 14. New York; Authority to Negotiate Sale. 15. " " " " " Loan. 16. New Jersey; Authority to Sell or Exchange. 17. California; Authority to Purchase or Sell. 18. Missouri; Authority to Sell. 19. " " " Negotiate Loan. 20. Nebraska; Authority to Sell. 21. Washington; Authority to Sell or Purchase. 22. Montana; Authority to Purchase or Sell. 23. Authority to Collect Rents. 24. Statute of Frauds as Affecting Brokers. v VI TABLE OF CONTENTS. 25. Agreements Not to be Performed within a Year. 26. Classification of Agreements Not to be Performed within a Year. (a) Where No Time is Fixed. (b) Agreements for More than a Year. (c) Agreements for More than a Year, but Terminable upon Some Contingency. Chapter IV. — Broker's Power to Sign Contract. § 27. General Statement. 28. Broker's Authority to Sign Contract. 29. Powers Conferred by Instructions to Sell Property. 30. " " " Appointment as Agent. 31. Broker's Power to Contract as Affected by Statutory Require- ments. 32. New York Rule. 33. New Jersey Rule. 34. Massachusetts Rule. 35. California Rule. 36. Illinois Rule. 37. Rule in Other States. 38. When Broker has Authority to Sign Contract. 39. Mere Employment Does Not Give Power to Contract. 40. Extent of Authority Ordinarily Conferred by Employment. 41. Dissenting Opinions as to Incidental Power to Contract. 42. Ratification of Contract Signed by Agent. 43. Liability of Agent for Signing Unauthorized Contract. 44. Formalities Where Agent has Authority to Sign Contract. 45. Authority to Cancel or Surrender Contract. 46. Enforcing Contract Made by Agent. Chapter V. — Broker Acting for Both Parties. 47. General Statement. 48. Broker Not to Act for Both Sides. 49. Acting for Both Parties a Breach of Contract. 50. " " " " Constitutes a Fraud. 51. The Rule Applies to Exchange of Property. 52. Acting for Both Parties with Their Knowledge. 53. " " " " Not Unlawful in Itself. 54. Broker Vested with No Discretion May Act for Both Parties. 55. Compensation of Broker Without Discretion. 56. General Rule as to Discretion. 57. Reason for the Rule. 58. How Question of Double Employment is Raised. TABLE OF CONTENTS. Vll Chapter VI. — Broker's Right to Interest in Profits. § 59. General Statement. 60. Agent Must Act in Interest of Principal. 61. " " Not be Personally Interested. 62. " May Not Also Act as Principal. 63. " " " Make Secret Profits. 64. Broker's Employees Governed by Same Rules. 65. Rule Not Affected by Agent's Honesty of Purpose. 66. Act of Agent in His Own Interest Presumed Injurious. 67. " " " " " " " Voidable, but May be Rati- fied. 68. Agent May be Personally Interested with Consent of Principal. 69. Broker Without Discretion as Disclosed Principal or Subsequent Purchaser. 70. Broker May Not Lawfully Combine with Others to Secure Secret Profits. 71. Person Sharing Benefits Liable though Unaware of Fraud. Chapter VII. — General Authority of Broker. § 72. General Statement. 73. Agent's Authority to Receive Payment for Property Sold. 74. Broker's Power to Employ Other Brokers. 75. Renting Agents. 76. In General, Renting Agency Terminates on Death of Principal. 77. Agent's Right to Dispossess Tenants. New York Rule. 78. Insurance Brokers. Chapter VIII. — Revocation of Broker's Authority. 79. General Statement. 80. Termination of Agency by Mutual Consent. 81. by Performance of Object of Employment. 82. " of Agency at Pleasure of Principal. 83. by Principal after Lapse of Reasonable Time. 84. Limitations on Principal's Power to Terminate Agency at Pleasure. 85. Revocation of Agency by Principal Must be in Good Faith. 86. " Must be Timely. 87. Termination of Agency by Previous Sale. 88. Good Faith Necessary to Termination of Agency by Previous Sale. 89. Termination by Destruction of Subject Matter. 90. " by Bankruptcy. 91. " by Insanity. 92. " by Death. Vlll TABLE OF CONTENTS. 93. Fraud of Agent as Revocation. 94. Revocation as to Third Parties. PART II.— COMMISSIONS AND THEIR RECOVERY. Chapter IX. — General Rules as to Commissions. § 95. General Statement. 96. When Commissions are Earned. 97. Respective Rights of Brokers when Several are Employed. 98. Rule as to Commissions when Several Brokers are Employed. 99. Liability of Principal for Commissions to Exclusive Agent. 100. for Commissions when Principal Negotiates Sale. 101. Rule as to Commissions when Broker's Efforts Fail. 102. On What Recovery of Commissions Depends. Chapter X. — Broker Must Be Employed. § 103. General Statement. 104. Volunteers Not Entitled to Commission. 105. When Party Acting is a Volunteer. 106. Employment Necessary to Recovery of Commissions. 107. Manner of Employment. 108. Employment Must be by Owner or Authorized Agent. 109. Ratification Equivalent to Original Employment. 110. Intent to Ratify Must be Plain. 111. Ratification by Implication. 112. " Must be with Full Knowledge of Facts. Chapter XI. — Broker Must Be Procuring Cause of Sale. § 113. General Statement. 114. Methods of Earning Commission. 115. Obligations of the Broker. 116. Procuring Cause. 117. What is Required to Constitute a Broker a "Procuring Cause." 118. Procuring Cause as Affected by Special Contract. 119. General Rule as to "Procuring Cause." 120. " Procuring Cause " when Representing Purchaser. 121. Effect of Promises to Pay Commission. 122. Unsuccessful Efforts. 123. Failure Through Fault of Principal. 124. Purchaser Taking Title in Another's Name. 125. Effort Required of Broker. TABLE OF CONTENTS. IX 126. Presence of Broker. 127. Introductions. 128. Advertising. 129. Consummation of Sale by Another Broker. 130. " " " " Principal. Chapter XII. — Sale Must Be on Employer's Terms. 131. General Statement. 132. Purchaser Must Agree to Seller's Terms. 133. All of Seller's Terms Must be Met. 134. Acceptance by Owner of Different Terms. 135. Broker's Commission, if He is " Procuring Cause," Not Affected by Variation of Terms. 136. Requirements as to Price. 137. Increase of Price by Owner. 138. Time of Performance. 139. Liability of Broker for Failure to Sell. Chapter XIII.— Broker Must Act in Good Faith. 140. General Statement. 141. Good Faith. 142. Accepting Pay from or Acting for Other Party to the Transaction. 143. Broker as a Principal in the Transaction or Making a Profit Therefrom Other Than His Commissions. 144. Broker Must Accept Largest Offer. 145. When Refusal to Disclose Information is Not Bad Faith. Chapter XIV. — Availability of Purchaser. § 146. General Statement. 147. Ready and Willing to Purchase. 148. Purchaser Not Ready and Willing. 149. Procuring Person Who Takes Option. 150. Change of Mind by Vendor. 151. Disclosure of Purchaser. 152. Waiver of Right to Disclosure of Purchaser. 153. Financial Ability of Purchaser. 154. When Financial Ability of Purchaser Need Not be Shown. 155. Burden of Proof as to Financial Ability of Purchaser. X TABLE OF CONTENTS. Chapter XV. — Transaction Must Be Complete. § 156. General Statement. 157. What Constitutes a Completed Transaction. 158. General Rule as to Completeness of Transaction. 159. All Details of Sale Must be Agreed Upon. 160. Effect of Special Conditions on Completeness of Transaction. 161. " " Failure to Contract. 162. Modification of Terms. 163. Options and " Alternative " Contracts. 164. Abandonment by Broker. Chapter XVI.— Failure of Principal to Complete. § 165. General Statement. 166. The Broker's Obligation. 167. General Rule as to Failure of Principal to Complete. 168. Defective Title as Cause of Failure. 169. Special Agreements as to Title. 170. " Causes of Failure. Chapter XVII.— Failure of Customer to Complete. § 171. General Statement. 172. Rule as to Failure of Customer. 173. Abandonment of Broker by Customer. 174. Misrepresentations by Vendor. Chapter XVIII. — Commissions on Exchanges of Property. § 175. General Statement. 176. Conflicting Decisions as to When Commissions are Earned. 177. Commissions on Exchanges. 178. Employment. 179. Authority to Sell Does Not Give Authority to Exchange. 180. Commissions from Both Sides. 181. Rule when Contract has been Executed. 182. Reason for Rule. 183. Rule as Affected by Broker's Bad Faith. Chapter XIX. — Commissions on Loans. § 184. General Statement. 185. Commissions for Procuring Loan. TABLE OF CONTENTS. xi 186. New York Rule. 187. " " " as Affected by Failure of Principal. 188. The Rule in Some of the Other States. 189. General Statement of Rule. 190. Further Statement of Rule. 191. Failure to Complete on Account of Defects, etc. 192. Employment and Written Authority. 193. Terms of Principal. 194. Recovery on Breach by Principal. 195. Amount of Commissions on Loan. Chapter XX. — Commissions on Leases. § 196. General Statement. 197. When Broker's Obligations are Performed. 198. General Requirements for Recovery of Commissions. 199. Liability of Tenant for Commissions. 200. Amount of Commissions for Procuring Lease. 201. Effect of Failure of Lease. 202. Operation of Rule as to Failure of Lease. Chapter XXI. — Who is Liable for Commissions. § 203. General Statement. 204. The Employer is Usually Liable for Broker's Commissions. 205. Promises to Pay Commissions. 206. Liability of Persons Not Owning the Property. 207. Trustees, Executors and Guardians. 208. Commissions from Purchaser. 209. Purchaser's Promise to Pay Commission. 210. Broker Employed by Purchaser. Chapter XXII. — Amount of Compensation. 211. General Statement. 212. Commissions. How Fixed. 213. Agreed Compensation. 214. Measure of Compensation. 215. All in Excess of Fixed Price. 216. Agreements for All in Excess of Fixed Price. 217. Rule as to All in Excess of Fixed Price. 218. " " " " " " " " " when Vendor Intervenes. 219. Compensation in Absence of Agreement. Xll TABLE OF CONTENTS. § 282. Silence and "Concealment." 221. " and Usage Denned. 222. When Custom Hinds the Parties. 223. Ignorance of Custom. 224. Proof of Custom. 225. Rules of Real Estate Boards. 226. Compensation in the Absence of Agreement or Usage. Chapter XXIII. — When Commissions Are Due. 227. General Statement. 228. Rule as to When Commissions are Due. 229. Requirements of an Earned Commission. 230. Unsupported Agreements to Wait for Commission. 231. Valid Agreements Deferring Payment of Commissions. 232. Contingent Commission Agreements. 233. Construction of Agreements to Wait until Title is Closed. 234. Deferred Commissions and Vendor's Warranty as to Title. 235. Commissions on Instalment Sales. PART III.— PRINCIPAL AND AGENT. Chapter XXIV. — Principal's Relations to Agent. § 236. General Statement. 237. Principal May Employ Several Brokers. 238. Negotiations by Principal. 239. Exclusive Agency. 240. Intervention of Principal. 241. " " " after Broker's Failure or Termination of Authority. 242. Rule when Broker's Efforts Fail. Chapter XXV. — Agent's Relations to Principal. § 243. General Statement. 244. Agent's Responsibility to Principal. 245. Agent Must Act in Interest of Principal. _Mii. Agent's Duty of Faithful Service. 247. Agent Must Not Exceed Authority. 248. " " Disclose Information. 249. Agent's Power to Make and Endorse Negotiable Paper. 250. " Liability for Conversion of Money. TABLE OF CONTENTS. Xlll Chapter XXVI. — Liability of Broker and Principal. 251. General Statement. 252. Misrepresentations by Brokers and Agents. 253. When Vendor is Liable for Broker's Representations. 254. Vendor Liable if He Accepts Proceeds. 255. Principal Bound by Agent's Representations. 256. Acceptance of Proceeds Test of Liability. 257. Fraud of Agent. Pleading. Chapter XXVII.— Liability of Principal to Third Parties. 258. General Statement. 259. Scope of Chapter. 260. Liability of Principal for Agent's Wrongdoing. 261. " " " who Accepts Benefits of Agent's Acts. 262. " " " for Agent's Contracts. 263. " " Undisclosed Principal. 264. Notice to Agent as Notice to Principal. 265. When Notice to Agent is Not Notice to Principal. 266. Agent's Knowledge Obtained in Other Transactions. 267. Usury of Agent. Chapter XXVIII.— Liability of Broker to Third Parties. 268. General Statement. 269. Scope of Chapter. 270. Liability of Agent for Moneys Received. 271. " " " " Misfeasance and Nonfeasance. 272. Agent Liable for Improper Contract. 273. Liability of the Agent on Unauthorized Contract. 274. Ground of Agent's Liability for Unauthorized Acts. 275. Warranty of Authority to Make Contract. 276. Reason of Liability of Agent for Unauthorized Acts. 277. Liability of Agent Acting for Undisclosed Principal. 278. Unlawful Intrusion on Real Property. PART IV.— FRAUD. Chapter XXIX. — What Constitutes Fraud. Acts Not Usually Considered Fraudulent, § 279. General Statement. 280. What is Fraud? 281. Broker's Frauds. XIV TABLE OF CONTENTS. § 220. Custom as Part of the Agreement. 283. Requirements as to Disclosure. 284. Fraudulent Concealment by the Purchaser. 285. Promises, Hopes, etc. 286. " and False Representations. 287. Opinions; Expressions of Value. 288. Assertion of Value, Though False, Not Ordinarily Fraudulent. 289. Opinions Amounting to Affirmations of Fact. 290. Assertions and Opinions Fraudulent in Intent. 291. When Expression of Opinion is Fraudulent. Chapter XXX. — What Constitutes Fraud. Acts Usually Considered Fraudulent. 292. General Statement. 293. Representation that Certain Price Had Been Offered. 294. " as to Value and Price Paid for Property. 295. Representations as to Rentals. 296. " " " Improvements. 297. " " " Situation of Property. 298. " " " Mortgages on Property. 299. Representation that Others Want the Property. 300. Representations as to Title of Vendor. Chapter XXXI. — Negligence on Part of Vendee. 301. General Statement. 302. May Vendee Rely Upon Statements of Vendor? 303. Vendor Not Ordinarily Required to Volunteer Information. 304. Vendee Required to Exercise Caution. 305. Degree of Caution Required by Vendee. 306. Vendee Must Exercise Ordinary Caution. 307. Negligence No Bar to Relief in Cases of Wilful Fraud. Chapter XXXII. — Waiver. Rescission. Remedies. 308. General Statement. 309. Waiver of the Fraud. 310. What Constitutes Waiver of Fraud. 311. Full Knowledge of Fraud Not Necessary to Waiver. 312. Recitals in Contract Do Not Operate as Waiver of Fraud. 313. Remedies for Fraud. Measure of Damage. 314. " " " Action to Rescind. 315. Liability on Contract in Case of Fraud. TABLE OF CONTENTS. XV § 316. Rescission. 317. Offer to Restore. 318. Pleading Fraud. 319. " Committed by More than One. 320. Proof of Fraud at Law and in Equity. Chapter XXXIII.— Criminal Frauds. § 321. General Statement. 322. Obtaining Property by False Pretenses. 323. Compelling Execution of Instrument. 324. Definition and Punishment of Conspiracy. 325. Corrupt Influencing of Agents; Unlawful Agreements of Agent. PART V.— PROCEDURE. Chapter XXXIV.— Pleading. § 326. General Statement. 327. Scope of Chapter. 328. Complaint for Broker's Commissions. 329. Methods of Pleading. 330. Pleading Legal Effect. 331. the Facts Constituting the Cause of Action. 332. Action Based upon a Contract. 333. Facts to be Stated. 334. Full Performance and Excuse for Performance. 335. Pleading Special Agreements 336. Matters of Defense. 337. Pleading Acts Done by Agent. Chapter XXXV.— Interpleader. § 338. General Statement. 339. Double Claims for Commission. 340. Nature of Interpleader. 341. Interpleader Permissible in Broker's Commission Cases in Some States. 342. Interpleader Not a Universally Recognized Right. 343. Method of Procedure. 344. Interpleader When Action Brought in Court Having no Jurisdic- tion to Interplead. 345. Requisites of Interpleader. 346. Interpleader Makes Actions at Law Equity Suits. XVI TABLE OP CONTENTS. PART VI.— CONTRACTS FOR SALE OF REAL ESTATE. Chapter XXXVI. — Agreements Relating to the Sale of Real Estate. § 347. Method of Presentation. 348. Nature of a Sale. 349. Usual Methods of Concluding a Sale. 350. Oral Agreements and Informal Written Agreements. 351. Options on Real Estate. 352. Essential Features of a Contract for Sale of Real Property. 353. Parties to the Contract. 354. Execution of Contract of Sale. Chapter XXXVII.— Subject Matter of Contracts for Sale of Real Estate. § 355. Drafting Contract for Sale of Real Estate. 356 Description of Property in Contracts of Sale. 357. Statement as to Ownership in Adjacent Streets or Highways. 358. " of Gross or Acreage Price. 359. " " Easements, Negative Easements, Encroachments, etc. 3G0. Leases of Property Held under Contract of Sale. 361. Price and Manner of Payment. 362. Suburban Property. 363. New Buildings. 364. Time for Delivery of Deed. 365. Fixtures. 366. Approval Clause. 367. General Provisions. PART VII.— SCHEDULES AND FORMS. Chapter XXXVIIL— Brokers' Rules. Schedules of Fees, Charges and Commissions. Form. 1. Schedule of Charges and Commissions. New York City. 2. " " Salesroom Fees and Commissions at Auctions. New York City. 3. Schedule of Fees, Charges and Commissions. Brooklyn, N. Y. 4. " " Salesroom Fees and Commissions at Auctions. Brook- lyn, N. Y. 5. Rental and Management Charges. Chicago, 111. 6. Charges for Ground Leases. Chicago, 111. 7. Commissions on Sales. Chicago, 111. TABLE OF CONTENTS. XV11 Form. 8. Loan Charges and Valuation Fees. Chicago, 111. 9. Brokers' Rules, Fees, Charges and Commissions. Cook County, 111. 10. Schedule of Fees, Charges and Commissions. Philadelphia, Pa. 11. " " " " " " St. Louis, Mo. 12. Rules and Regulations of the St. Louis Real Estate Exchange. 13. Schedule of Fees, Charges and Commissions. Boston, Mass. 14. Commission Rate Schedule. Jersey City, N. J. 15. Schedule of Brokers' Commissions. Denver, Colo. 16. Schedule of Fees, Charges and Commissions. San Francisco, Cal. Chapter XXXIX.— Forms of Contracts for Sale of Real Estate. Form. New York City. Cook County, 111. Chicago, 111. 17. Contra ct of Sal 18. a ii a 19. <( (t St 20. n tl a 21. it it a 22. a it it Philadelphia, Pa. Boston, Mass. 23. Agreement for Sale of Property. Baltimore, Md. 24. Contract of Sale. New Jersey. (Short Form.) OP it it it it it 20. Agent's Sale Contract. Chicago, 111. 27. Contract for Sale of Restricted Lots on Installment Plan. 28. " " " " Lots on Installment Plan. 29. Assignment of Contract. Informal. 30. Contract for Exchange of Properties. 31. " " " " " Chicago, 111. 32. Deed and Money. 33. Assignment of Contract. 34. " " " Without Recourse. 35. Demand for Performance of Contract of Sale. Chapter XL. — Miscellaneous Forms. Form. 36. Authority to Broker to Sell. 37. Exclusive Agency Contract. Chicago, 111. 38. Authority to Broker to Exchange Property. 39. Salesman's Contract. 40. Application for Loan. New York City. 41. Chicago, 111. 42. St. Louis, Mo. 43. " " " Baltimore, Md. 44. Encroachment Agreement. 45. « K XV111 TABLE OF CONTENTS. Chapter XLI. — Forms for Pleading. Form. 46. Complaint for Recovery of Broker's Commissions. Short. (First Form.) 47. Complaint for Recovery of Broker's Commissions. Short. (Second Form.) 48. Complaint for Recovery of Broker's Compensation. (Two Counts.) 4f>. Motion for Interpleader in New York City Municipal Court. 50. " " Interpleader. Supporting Affidavit. 51. Order of Interpleader. 52. Complaint after Interpleader. THE LAW OF REAL ESTATE BROKERS. PART I.— POWERS, AUTHORITY AND RIGHTS OF BROKER. CHAPTER I. INTRODUCTORY. § 1. Definition of Real Estate Broker. " Real estate brokers are those who negotiate between the buyer and seller of real property, either finding a purchaser for one desirous to sell, or vice versa; they also manage estates, lease or let property, collect rents, and negotiate loans on bonds and mortgages." 1 § 2. Application of Term. While in one case 2 it was said that the class of per- sons who are employed by owners of lands to find a pur- chaser for them, or, by those desirous of purchasing, to procure a vendor for them, are not in any legal or proper sense brokers, it has been stated, more recently, that the term broker is properly applied to a middleman. 3 But whatever technical objection there may be to the use of 1 4 Am. 4 Eng. Kncy. of Law (2nd Eel.), 962. » Rowe v. Stevens, 35 N. Y. Super. Ct. (3 J. & S.) 189 (1873); aff'd, 63 N. Y. Oil (1873). 1 Southack v. Lane, 23 Misc. 515 (N. T. 1898). 19 20 POWERS, AUTHORITY AND RIGHTS OF BROKER. the word "broker" in such case, it remains the actual fact that the term "real estate broker" is now used by jurist, lawyer and layman alike, to denote the agent who acts either for the purchaser or seller, or both, in nego- tiating the sale of real estate, or in any of the capacities embraced within the above definition. § 3. Functions of a Broker. "A broker is an agent primarily to establish privity of contract between two parties." 4 "A broker is, in general, one who buys or sells property for another. Real estate brokers are agents for the sale and purchase of real property. " 5 As stated in one of the leading cases on the subject of brokers, quoting from Story: " ' The true definition of a broker seems to be that he is an agent employed to make bargains and contracts between other persons in matters of trade, commerce or navigation for a compensation commonly called brokerage.' Story Agency, § 28, p. 25. In Pott v. Turner, 6 Bing. 702, 706, a broker is more tersely and quite accurately described as ' one who makes a bargain for another and receives a commission for so doing. ' " 7 And so it is said that the ordinaryprinciples governing the relation of principal and agent apply to real estate brokers. 8 In one case 9 it was said, however, that " a broker is regarded as a middleman, and not as an agent in whom peculiar trust and confidence are placed." 10 * Clark on Contracts, 736. 6 Law of Contracts, Special Topics, West Pub. Co. (1896), Topic "Brokers," p. 2. • Sibbald v. Bethlehem Iron Co., 83 N. Y. 378 (1880). 7 See also Little Rock v. Barton, 33 Ark. 444-449 (1878); Kramer v. Blair, 88 Va. 463 (1891) ; McCullough v. Hitchcock, 71 Conn. 404 (1899). As to whether a person making an isolated sale is a broker, see O'Neil v. Sinclair, 153 111. 525 (1894). 8 Martin v. Bliss, 57 Hun 157 (N. Y. 1890) ; Low v. Woodbury, 107 App. Div. 298 (N. Y. 1905) ; Kingslev v. Wheeler, 95 Minn. 362 (1905). See also Wilkinson v. McCullough, 196 Pa. St. 208-209 (1900). » Vinton v. Baldwin. 88 Ind. 105 (1882). 10 Citing Alexander v. Northwestern Un., 57 Ind. 466; Rowe v. Stevens, 53 N. Y. 261 ; Rupp v. Sampson, 16 Gray 398 ; Redneld v. Tegg, 38 N. Y. 212 ; Barry v. Schmidt, 27 Alb. L. J. 297. INTRODUCTORY. 21 § 4. Definition of Terms. The " principal " is one for whom the agent acts, and the term " principal " is hereinafter used interchange- ably with " owner," ''seller," and "vendor." The word " vendor " signifies the seller, while " vendee " signifies the purchaser. CHAPTER II. WHO MAY ACT AS BROKER. LICENSE RE- QUIREMENTS. § 5. General Statement. Any person may act as a broker, including minors and married women. (§§ 6-8.) Partnerships and busi- ness corporations may likewise act as brokers. (§§ 9, 10.) In some localities a license is required for, or a tax is imposed on, the right to do business as a real estate broker. (§ 11.) § 6. Married Women as Brokers. In general, any person may act as a real estate broker. In New York, a married woman may act as such broker, for the law in New York State gives a married woman all the rights in respect to property, real or personal, and the acquisition, use, enjoyment and disposition thereof, and the same power to make contracts in respect thereto with any person, including her husband, and to carry on any business, trade or occupation, and to exercise all powers and enjoy all rights in respect thereto and in respect to her contracts, and be liable on such contracts, as if she were unmarried. 1 Nor does her contract bind her hus- band or his property. 2 The same is almost universally true throughout the United States. (See next section.) » N. Y. Cons. Laws, Ch. 14, § 51, formerly § 21 Dom. Rel. Law. » N. Y. Cons. Laws, Ch. 14, § 55, formerly § 25 Dom. Bel. Law. 22 WHO MAY ACT AS BROKER. 23 § 7. Married Women as Brokers. State Laws. In the following states and territories a married woman may contract on her own account, or carry on business on her own account: Alabama; Alaska; Arizona; California; Colorado; Connecticut; 3 Delaware (as to contracts " nec- essary to be made with respect to her own property ") ; 4 District of Columbia; 5 Florida (but only after application to the court) ; Georgia; Hawaii (except she cannot make contract for personal service without written consent of husband); 6 Idaho; Illinois (but she cannot carry on a partnership business without the consent of her husband, unless he has abandoned her or is insane or confined in the penitentiary); 7 Indiana; 8 Iowa; Kansas; 9 Kentucky; Maine; Maryland; Massachusetts (certificate should be filed); Michigan; Minnesota; 10 Mississippi; Missouri; Montana (on application to court); Nebraska; Nevada (after order by court); New Hampshire; New Jersey; 11 North Carolina (by certificate filed); 12 North Dakota; Ohio; 13 Oklahoma; Oregon; Pennsylvania (with excep- tions); Rhode Island; South Carolina; 14 South Dakota; Utah; Vermont; Virginia; Washington; 15 West Virginia (to some extent) ; Wisconsin (to a limited extent) ; 16 and Wyoming. But in some states the right of a married woman to contract on her own account or to carry on busi- ness on her own account is limited even more than herein- before stated, or is withheld altogether, as in Louisiana (not without authority of husband, except when she is a public merchant), Tennessee and Texas. •General Statutes (1902), § 593. * 14 Delaware Laws. Ch. 550. s Code of the District of Columbia. § 1155. « Revised Laws of Hawaii, § 2252. 7 Hurd'8 Revised Statutes. § 1242. 8 Act ..f 1881. • General Statutes (1905), par. 4214. "> Revised Laws (1905), §§ 3605-3608. " General statute*, p. 2014. '-• Revised Laws (1905), § 21 12. •a Revised statutes. J§ :;i 10-31 14. m Code of Laws < 1902), Vol. 1. § 2668. w 1 Ball. C. & S . §§ 44!i.'{, 4504. '" Sec Statutes, § 2344. 24 POWEKS, AUTHORITY AND RIGHTS OF BROKER. § 8. Minors. And so any person under legal age may act as a broker. At least, a minor acting as broker could recover any earned commission, for it is the minor only, or on bis death his representatives, who can take advantage of his infancy. 17 The person employing such minor broker may, however, have some difficulty where any obligations arise on the broker's part which are contract obligations, for such the minor could avoid. 18 But for any tortious acts, such as fraud, conversion, and the like, the minor would be liable the same as an adult. 19 § 9. Partnerships. A partnership may act as agent. An authority by a principal to two persons not partners to do an act is joint, and the act must be concurred in by both. When a firm is appointed to an agency, this rule would necessarily be modified to the extent that either member of the firm could do any act within the scope of the agency just as he could perform any other partnership act. By appoint- ing a partnership it would be implied that the authority was joint and several. But upon dissolution of the firm such an agency would cease. 20 § 10. Corporations. A business corporation may, in general, act as a real estate agent, if it is within the scope of its powers. § 11. License or Tax on Right to Act as Broker. In some localities a license is required for, or a tax is imposed on, the right to do business as a real estate 17 Clark on Contracts, 242. w 2 Abb. Cyc. Dig. (N. Y.), 839; 15 Id., 1557; 27 Am. Dig. (Cent. Ed.), p. 1138; 10 Am. & Eng. Ency. of Law (2nd Ed.), p. 285. i» 2 Abb. Cyc. Dig. (N. Y.), 840; 15 Id., 1558. See Stone v. Rabinowitz, 45 Misc. 405 (N. Y., 1904), as to conversion. 20 Martine v. Int. Life Ins., 53 N. Y. 339 (1873); McLaughlin v. Wheeler, 1 S. D. 514 (1891). WHO MAY ACT AS BROKER. 25 broker. 21 It would be impossible to give any authorita- tive discussion of this subject, since in some instances the license or tax is imposed by municipal ordinance and in some by general statutes. All of these are subject to such frequent change or other vicissitude, that a presentation of them would be of little value for permanent use and the labor of gathering even an incomplete list would be quite an impossible task. We therefore reluctantly con- tent ourselves with resorting to the well-worn suggestion that the local ordinances or statutes should in each case be consulted. 22 In Texas it is held that the failure to pay the occupation tax and to obtain a license does not preclude a recovery of commissions. 23 21 A real estate agent who does not engage in the " purchase or sale of securities " is not required by the United States Revenue Laws to pay a tax. Rounds v. Alee, 116 Iowa 348 (1902). 23 The following authorities which bear on the subject may be of some value: Commonwealth v. Black Co., 34 Pa. Super. Ct. 431 (1907) ; Wiltse v. State, 55 Tenn. 544 (1873); Prince v. Eighth St. Church. 20 Mo. App. 332 (1886); Braun v. City of Chicago, 110 111. 186 (1SS4); Little Rock v. Barton. 33 Ark. 436 (1S7S); Ober v. Stephens, 54 W. V. 354 (1903); O'Neil v. Sinclair. 153 111. 525 (1894); Marker v. Tough, 98 Pac. 792 (Kans. 1908); Denning v. Yount, 50 L. R. A. 103 (Kans. 1900). See also §§ 14-22 infra. - 3 Watkius Co. v. Thetford, 96 S. W. 72 (Tex. 1906). CHAPTER III. WRITTEN AND ORAL AUTHORITY OF BROKER. § 12. General Statement. Generally, the broker's authority to negotiate the sale or purchase of real estate, loans thereon, or the renting thereof, need not be in writing (§§ 13-26), except that, — (1) The statutes in some jurisdictions require written authority. (§§ 14-22.) (2) An authority to a broker which, by its terms, is not to be performed within a year, must be in writing. (§§ 24-26.) § 13. Form of Authorization. As a general rule, the broker's authority to negotiate a sale, a purchase or exchange of real estate, mortgage loan or lease, need not be in writing. 1 The requirement of the Statute of Frauds in some states that a contract for the sale of real estate must be in writing, subscribed by the vendor or his agent thereunto authorized in writ- ing, 2 must not be confused with the proposition as to whether the agent's authority to negotiate a sale should be in writing. As was said in one case, " a person may employ a broker or agent to negotiate a sale of real es- tate without giving him written authority so to do. As between the vendor and vendee, the authority of the » Fisher Co. v. Woods, 187 N. Y. 00 (1007): Waterman R. E. Exchange v. Ste- phens, 71 Mich. 104 (1888); Griffith v. Woolworth, 28 Neb. 717 (1890); (See also § 20 as to present Nebraska statute); Jackson v. HiKgins, 70 N. H. 637 (1000); Lamb v. Baxter, 130 N. C. 67 (1902); McLaughlin v. Wheeler, 1 S. D. 407 (1801). See also §§ 24-26 infra as to agreements not to be performed within a year. 2 See §§ 31-37 infra. 26 WRITTEN AND ORAL AUTHORITY OF BROKER. 27 agent of the vendor to sign the contract of sale must be in writing, 3 but the rule goes no further." 4 But in some jurisdictions the statutes require written authority in the broker, either to negotiate the sale or exchange of real property, or to procure a loan upon it. There may, of course, also be local regulations where there are no state statutes, but with the extent or validity of such local regulations this chapter cannot assume to deal. The following sections contain the statute of each of several representative states. § 14. New York; Authority to Negotiate Sale. Chapter 128 of the New York Laws of 1901, which went into effect September 1, 1901, and became § 640d of the then Penal Code, provided that, ' ' In cities of the first and second class, 5 any person who shall offer for sale any real property without the written authority of the owner of such property, or of his attorney in fact, appointed in writing, or of a person who has made a written contract for the purchase of such property with the owner thereof, shall be guilty of a misdemeanor." The lower and intermediate appellate courts of New York were divided as to the legality of this statute. Some held that the broker could not recover commis- sions unless his authority to sell was in writing, 6 while others held that the broker could recover notwithstand- ing his authority was not in writing. 7 Then, too, dis- tinctions were drawn, and it was held that the stat- ute did not apply where a broker was employed to sell the interest of an intending purchaser under a con- » This is a requirement of the Illinois statute (if frauds which provides tlint an agent's authority to Bign a contract musl lie in writing. See statute quoted In §30 infra. « Monroe v. Snow. 131 ill. 135 (isol t. t Tlic New York State Constitution defines Buch cities — Art. XII, § 2. •Whitele; v. Terry. 39 MISC. 93 (N. Y. 1902); 83 App. Div. 107 (N. Y. 1903); Cohen v. Boccuzzl, 42 Misc. 544 (N. Y. 1904). » Grossman v. Caminez, 79 App. Div. 15 (N. Y. 1903) ; Cody v. Dempsey, 80 App. Div. 335 (N. Y. 1903). 28 POWERS, AUTHORITY AND RIGHTS OF BROKER. tract for the sale of real estate. 8 Finally, however, the Court of Appeals of New York, which is the court of last resort in that State, declared the law unconstitutional, 9 the law itself was repealed by Chapter 516, Laws of 1906, May 21, 1906, and, apparently, that there might be no question about it, the law was again repealed by the new Penal Law of 1909. 10 Written authority to negotiate a sale is therefore no longer necessary in New York State. 15. New York; Authority to Negotiate Loan. 8 With respect to a broker's authority to negotiate a loan in New York, a statute similar to that mentioned in the preceding section was also found in Chapter 128 of the New York Laws of 1901, in effect September 1, 1901, and this statute became § 640e of the then Penal Code. It provided as follows : ' l In cities of the first and second class, 11 any person who shall make application to any other person, or to any corporation, for a loan upon any real property, without the written authority of the owner of such real property, or of his attorney in fact, ap- pointed in writing, or of a person who has made a written contract for the purchase of such property with the owner thereof, shall be guilty of a misdemeanor." While Chapter 516 of the Laws of 1906 assumed to repeal the whole of Chapter 128 of the Laws of 1901, it referred specifically only to § 640d of the Penal Code, but whatever there might be of doubt as to whether § 640e of the Penal Code was thereby repealed is set at rest by the new Penal Law, 1 - which repealed Chap- ter 128 of the Laws of 1901 in its entirety. Then, how- ever, by § 2039 of the Penal Law aforesaid, the provision was re-enacted in exactly the same words as former SLevF v. Timble, 47 Misc. 394 ( N T . Y. 1005). » Fisher Co. v. Woods. 187 N. Y. 90 (1907). i»N. Y. Laws of 1909, Ch. 88; Cons. Laws, Ch. 40. 11 The State Constitution defines such cities in Art. XII, § 2. « N. Y. Laws of 1009, Ch. SS ; Cons. Laws, Ch. 40. WRITTEN AND ORAL AUTHORITY OF BROKER. 29 § 640e of the Penal Code, above given. But does not this section of the Penal Law offend the Constitution as did § 640d of the former Penal Code? 13 § 16. New Jersey; Authority to Sell or Exchange. In New Jersey the statute provides, ' ' That no broker or real estate agent, selling or exchanging land for or on account of the owner, shall be entitled to any com- mission for the sale or exchange of any real estate, un- less the authority for selling or exchanging such land is in writing, and signed by the owner or his authorized agent, and the rate of commission on the dollar shall have been stated in such authority." 14 It applies to one who makes only an occasional sale as well as to brokers. 15 § 17. California; Authority to Purchase or Sell. In California the statute reads : ' ' The following con- tracts are invalid, unless the same or some note or memo- randum thereof be in writing and subscribed by the party to be charged, or by his agent: 6. An agreement authorizing or employing an agent or broker to purchase or sell real estate for compensation or a commission. ' ' 16 § 18. Missouri; Authority to Sell. In Missouri the statute provides : " In cities of 300,000 inhabitants or more, any person who shall offer for sale any real property without the written authority of the owner of such property, or of his attorney-in-fact, ap- pointed in writing, or of a person who has made a writ- » See Fisher Co. v. Woods, 187 N. Y. 00 (1007). "General Statutes, N. J. (Ed. 1709-1805), Title "Frauds & Perjuries," §10, p. 1C04. See Leimbach v. Reiner, 70 N. .1. L. 608 (1004). » Stout v. Hunphrey, 60 N. J. L. 430 (1903). »Cal. Civil Ode, §1024. See McOe.try v. Satchwell, 129 Cal. 389 (1900), where authorities are cited. 30 POWERS, AUTHORITY AND RIGHTS OF BROKER. ten contract for the purchase of such property, with the owner thereof, shall be deemed guilty of a misdemeanor and fined in a sum of not less than $10 nor more than $300." 17 § 19. Missouri; Authority to Negotiate Loan. With respect to negotiating a loan, the Missouri stat- ute provides : " In cities of 300,000 inhabitants or more, any person who shall make application to any other per- son, or to any corporation, for a loan upon any real prop- erty without the written authority of the owner of such real property, or of his attorney-in-fact, appointed in writing, or of any person who has made a written con- tract for the purchase of such property with the owner thereof, shall be deemed guilty of a misdemeanor and fined in a sum not less than $10 nor more than $300." 18 § 20. Nebraska; Authority to Sell. In Nebraska the statute reads: " Every contract for the sale of lands, between the owner thereof and any broker or agent employed to sell the same, shall be void, unless the contract is in writing and subscribed by the owner of the land and the broker or agent, and such con- tract shall describe the land to be sold, and set forth the compensation to be allowed by the owner in case of sale by the broker or agent." 19 In Covey v. Henry, 71 Neb. 118 (1904), at pages 123, 124, the court comments as fol- lows: " The section of the statute above set out is plain and unambiguous. The reasons which impelled the legis- lature to pass that act are well known to the courts and the profession generally. Innumerable suits were being "Mo. Laws of 1903 (H. B. 509). p. 101. §1. See Real Estate & Trust Co. v. Hartman. 128 Mo. App. 233 (1907). See the New York statute, similar to this (§ 14 8«praKwhieh was declared unconstitutional. is Mo. Laws of 1903 (H. B. 509), p. 101, § 2. See comments on a similar statute of New York, § 15 supra. 18 Compiled Statutes, Ch. 73, §74 (Annotated Statutes, 10258). WRITTEN AND ORAL AUTHORITY OF BROKER. 31 instituted, from time to time, by agents and brokers, after the owner of lands had sold the same, claiming a commission on the ground that they had been instru- mental in securing the purchaser; and, in many cases, owners of land were compelled to pay double commission on account of such claims. ' ' § 21. Washington; Authority to Sell or Purchase. In the State of Washington, the statutory provision is as follows: " An agreement authorizing or employing an agent or broker to sell or purchase real estate for compensation or a commission " is void unless the ' ' agreement, contract or promise, or some note or memo- randum thereof, be in writing, and signed by the party to be charged therewith, or by some person thereunto by him lawfully authorized. ' ' 20 § 22. Montana; Authority to Purchase or Sell. " An agreement authorizing or employing an agent or broker to purchase or sell real estate for compensa- tion, or a commission," is invalid, unless the same, or some note or memorandum thereof, be in writing and subscribed by the party to be charged, or his agent. 21 § 23. Authority to Collect Rents. A broker's authority to collect rents need not be in writing, unless the authority comes within the prohibi- tion of the statutes requiring agreements not to be per- formed within a year to be in writing. 22 § 24. Statute of Frauds as Affecting Brokers. Reference has already been made to the ' ' Statute of Frauds." To present the subject comprehensively and 20 Washington Laws of 1905, Ch. 58, p. 110. « Montana Civil Code, § 2185. 22 For a discussion of this class of agreements, see §§ 24-20 infra. 32 POWEES, AUTHORITY AND RIGHTS OF BROKER. yet briefly, we quote from Clark on Contracts, page 90, this extract: " The famous statute of frauds and per- juries, 29 Car. II, c. 3, was enacted in England in 1677, during the reign of Charles the Second, and, as stated in its recital, had for its object the ' prevention of many fraudulent practices, which are commonly endeavored to be upheld by perjury and subornation of perjury.' * The original statute, which is substantially followed by the statutes of most of our states, contains two sections— the fourth and the seventeenth — which affect the form of certain simple contracts. The fourth section provides: ' That no action shall be brought whereby to charge any executor or administrator upon any special promise, to answer damages out of his own estate; or whereby to charge the defendant upon any special promise to answer for the debt, default, or mis- carriage of another person ; or to charge any person upon any agreement made upon consideration of marriage; or upon any contract, or sale of lands, tenements, or here- ditaments, or any interest in or concerning them; or upon any agreement that is not to be performed within the space of one year from the making thereof; unless the agreement upon which such action shall be brought, or some memorandum or note thereof, shall be in writing, and signed by the party to be charged there- with, or some other person thereunto by him lawfully authorized.' " The seventeenth section of the English statute is not involved in the present discussion, which is confined to the requirement of the statute in its bearing upon bro- kers, that all agreements not to be performed within a year from the making thereof shall be in writing. As Mr. Clark says, the English statute has been sub- stantially followed in most of our states, although in some the statute is materially different. It would be quite beyond the scope of the present work to attempt WRITTEN AND ORAL AUTHORITY OF BROKER. 33 to present the language of the so-called Statute of Frauds of each state. We shall therefore merely use the New York statute as a basis for a brief discussion of the subject, adding such miscellaneous authorities as will at least indicate the general inclination of the courts with respect thereto. § 25. Agreements Not to be Performed within a Year. Three situations present themselves which may be discussed in view of the statute which requires all agree- ments not to be performed within a year to be in writ- ing. First, where a person places real property in the hands of a broker to collect the rents and manage the property and fixes no time as to the continuance of the authority. Second, where property is placed in the hands of a broker for such purposes and the authority is to continue for more than a year. Third, where prop- erty is placed in the hands of a broker for such purposes and the authority is to continue for more than a year, or until the person shall sell the property, or which may be terminated upon some other contingency. § 26. Classification of Agreements Not to be Performed Within a Year. (a) Where No Time is Fixed. Where no time is fixed, either party may terminate the relation at any time, and as the law is that " if the agreement may, consistently with its terms, be entirely performed within the year, although it may not be prob- able or expected that it will be performed within that time, it is not within the condemnation of the statute," there need therefore be no writing. 23 a F.veritt v. N. Y. Eng. Co., 14 Misr. 580 (N. Y. 1895) ; 20 Misc. 548 (N. Y. is:i7i: Jagau v. Goetz, 11 Misc. 380 (N. Y. 189.'.). See also Wnrren v. Holbrook, 118 N. Y. r >93 (1889). 34 POWERS, AUTHORITY AND RIGHTS OF BROKER. (b) Agreements for More than a Year. The statute provides that every agreement, promise or undertaking is void, unless in writing, if by its terms it is not to be performed within one year from the mak- ing thereof. 24 Under the New York statute, the agree- ment, or note or memorandum thereof, must be sub- scribed " by the party to be charged therewith, or by his lawful agent." 25 (c) Agreements for More than a Year, but Ter- minable upon Some Contingency. Where the agreement is to continue for more than a year from the time it is made, but it is also agreed that either party may terminate it within the year, or where the agreement is to continue for more than a year or until the happening of an event which may transpire be- fore the end of the year, it need not be in writing. 26 In Eiseman v. Schneider, 60 N. J. L. 292, 293 (1897), it was said : ' ' As early as the case of Peter v. Compton, Skin. 353, the great majority of the judges declared that ' where the agreement was to be performed upon a con- tingent, and it does not appear within the agreement that it is to be performed after the year, there a note in writing is not necessary, for the contingent might hap- pen within a year; but where it appears by the whole tenor of the agreement that it is to be performed after a year, there a note is necessary; otherwise, not.' "This has been the generally accepted rule since that case was decided. "Parol agreements to do something for an indefinite period which may be terminated within a year are valid. ' ' To be within the statute, it must be such an agree- ment as does not admit of performance, according to its "* N. Y. Cons. Laws, Ch. 41, § 31 (L. 1909, Cu. 45), formerly § 21 Personal Prop. Law. 20 N. Y. Cons. Laws, Ch. 41, § 31. "Blake v. Voigt, 134 N. Y. 69 (1892). WRITTEN AND ORAL AUTHORITY OF BROKER. 35 language and intention, within a year from the time it is made. " The following contracts by parol have been held to be enforceable and not within the statute of frauds: 1 ' To pay upon the death of a third person. " To pay upon the termination of a suit. " To pay on the day of the promisor's marriage, which was the case in Skinner. ' ' To marry upon restoration to health. " To pay out of one's estate after death. " To pay during life of promisee. To pay during coverture. ' ' 27 2? Citing King's Executors v. Hanna, 9 B. Mon. 369; Sword v. Keith, 31 Mich. 247; MeConahey v. Griffey, 82 Iowa 564 ; Hutchinson v. Hutchinson, 46 Me. 154 ; Blanch- ard v Weeks, 34 Vt. 589; Burney Adr. v. Ball, 24 Ga. 505; Houghton v. Houghton, 14 Ind 505; Blake v. Voigt, 134 N. Y. 69; Bull v. McCrea, 8 B. Mon. 422; Browne on Frauds (5th Ed.). §§272, 276, and cases cited; Peter v. Compton, 1 Smith Lead. Cas. 143; Howard's Adtr. v. Burgen, 4 Dana (Ky.) 137. CHAPTER IV. BROKER'S POWER TO SIGN CONTRACT. § 27. General Statement. The mere employment of a broker as such only au- thorizes him to act as an intermediary to bring the par- ties together, and gives him no authority to sign a con- tract. But authority to sign a contract may be given him. (§§ 28-41.) In some jurisdictions an agent's authority to execute a contract for the sale of lands may be oral; while in other jurisdictions the authority must be in writing. (§§31-41.) A subsequent ratification is equally effectual as an original authority. (§ 42.) Authority to make a contract does not include au- thority to cancel or surrender it. ( § 45. ) § 28. Broker's Authority to Sign Contract. In order to determine when a real estate agent has authority to sign a contract and when he has not such authority, we must necessarily look to the circumstances attending the placing of the property with him, unless the authority is alleged to have been given prior or sub- sequent to that time. Mere brokers or middlemen, act- ing for both parties, and whose duty is ordinarily limited to bringing together the parties upon an agreement, are without power to execute a contract of sale, but an agent authorized to sell real estate may enter into a contract within the terms of his authority, which will bind his 36 broker's power to sign contract. 37 principal, and this, it has been held, is of the very es- sence of the authority given, viz., an authority to sell. 1 One who deals with an agent, knowing him to be such, is bound to know the limitations placed upon his authority. 2 § 29. Powers Conferred by Instructions to Sell Property. Ordinarily when a person places property with a real estate agent he instructs him to " sell the property." He really means that the agent is to find a purchaser. 3 Yet no such fine distinction of words is ever indulged in at such times, and from our own experience, we are satisfied that any ordinary landowner may, without dif- ficulty, be made to say that he gave the broker authority " to sell " the property. We have found, however, that juries will usually give the same meaning to the words as the landowner did, and conclude that the broker was authorized merely to find a purchaser. 4 We could easily dismiss the subject by stating gen- erally that it must resolve itself into a question of in- tention, but a more definite and satisfactory answer may naturally be expected. The situation is sometimes a serious one for the landowner, since he may at any time find a jury or a court informing him against his own be- lief and intention that he gave an agent authority to sign a contract for him, and it may be equally embarrassing for the broker, since he may sign a contract for the owner in good faith and then be shocked into no pleasant mood by a verdict that he had no such authority. Such a situ- ation may subject a responsible broker to considerable loss, as we shall see later. 5 1 Haydocfe v. Stow, 40 N. Y. 308 (1809). See the more extended discussion and citation <>f authorities in sections following. 'Commonwealth Trust Oo. v. Young, 122 App. Div. 502 (N. Y. 1007); Dayton v. Buford. is Minn. 126, 132 (1*71); Kramer v. Blair, 88 Va. 402 (1891); Milne v. Kleb, It N. .1. Eq. 381 (1888). 3 Sim- Bacon v. Davis, lis p a c. Rep. 71 (Cai. 1908). On the words, "I will sell," see Bosseau v. O'Brien, 4 Biss. 395 (U. S. 1809). * Sim- §§ 39-41 infra. G §§ 38-41, 272-270 infra. oS POWERS, AUTHORITY AND RIGHTS OF BROKER. § 30. Powers Conferred by Appointment as Agent. It may be argued that the agent has power to sign a contract because " the appointment of an agent, in general, carries with it all powers necessary, proper and usual, to effectuate the purposes of the appointment." 6 But this must be taken in connection with the further statement that ' ' the agent may use the ordinary and ap- propriate means in execution of the power given to him; and they are deemed to be comprehended within the authority, although not expressed. ' ' 7 But, under the prevailing rule, a real estate broker fulfills his duty when he presents to the principal a purchaser ready, willing and able to purchase on the terms prescribed by the prin- cipal, 8 or, under the rule which prevails in some jurisdic- tions, when he procures an enforceable contract of sale; 9 but under neither rule does it follow impliedly from the broker's authority ''to sell" that he has power to sign a contract of sale for his principal without special au- thority to do so. § 31. Broker's Power to Contract as Affected by Statu- tory Requirements. The Statute of Frauds of each state is of importance in determining whether the broker has authority to sign the contract of sale. In those states in which the Statute of Frauds re- quires the contract of sale to be signed by the vendor or his duly authorized agent, thereunto authorized in writ- ing, or where similar words are used, it would, of course, require written authority for the broker to sign the con- tract, and from the viewpoint of evidence, the question could be determined by his ability or inability to produce written authorization. 6 Hall v. Lauderdale, 46 N. Y. 70 (1871) ' Id. 8 §§ 90, 115. 117119 infra. »§§ 115, 117-119 infra. broker's power to sign contract 39 In those states in which the Statute of Frauds re- quires the contract of sale to be signed by the vendor or his duly authorized agent, and the provision that the agent's authorization to sign must be in writing is omit- ted, questions difficult to determine frequently arise. It is beyond the scope of this work to present the stat- utes of each state. The statutes of several states are, however, presented in the following sections, while the decisions in some of the other states are also referred to, although the statutes are not given. The statutes requiring the agent's authority to ne- gotiate a sale to be in writing 10 must not be confused with the statutes requiring written authority in the agent to sign the contract. In the former case, although the agent has written authority to sell as required by statute, the question nevertheless arises whether this written authority to sell includes authority to sign the contract. § 32. New York Rule. In New York, while generally the contract of sale must be in writing, the authority of an agent to sign the con- tract for his principal need not be in writing. With re- spect to a contract, the statute 11 provides that it must be "subscribed by the grantor or by his lawfully au- thorized agent," while with respect to a deed it pro- vides 12 that it shall be subscribed by the grantor, " or by his lawful agent, thereunto authorized by writing. " In other words, while as to deeds the agent's authority to sign for the principal must be in writing—?', e., by power of attorney or otherwise— as to contracts for the sale of real property the agent may be orally authorized J0 §$ 13-22 supra. " N Y. Tons Laws. Ch. 50, § 2. r ,<». formerly 5 224 of the Real Prop. Law. 12 N. Y. Cons. Laws, Ch. 50, § 242, formerly § 207 of the Real Prop. Law. 40 POWERS, AUTHORITY AND RIGHTS OF BROKER. to sign for the principal. 13 In an early ease, 14 the court, after observing that the statute does not require a seal to a contract for the sale of real estate, says: " The au- thority of the agent (to sign the contract) may be con- ferred by parol; neither a written authority nor an au- thority under seal is required." 15 It has been observed that here exists a peculiar situa- tion with respect to a contract for the sale of real estate. The statute requires that when a person himself makes the contract for the sale of real estate it must be in writ- ing, signed by him. When he makes the contract through an agent, the agent may sign, but the agent's au- thority may be given orally. What, therefore, it is said, the person himself cannot do, except in writing, he may do orally through another. But it seems that the situa- tion is not very peculiar after all, for is not the agent acting for the principal? And when the agent signs the contract, is it not the act of the principal, performed through his agent? This being true, the peculiarity of the situation does not deserve as much attention as do the dangers, sometimes to the principal, sometimes to the agent, which attend the situation. § 33. New Jersey Rule. In New Jersey, the statute provides, " that no action shall be brought * * upon any contract or sale of lands, tenements or hereditaments, or any interest in or concerning them * * unless the agreement, upon which such action shall be brought, or some memo- randum or note thereof, shall be in writing, and signed by the party to be charged therewith, or some other per- son thereunto by him or her lawfully authorized." 16 WAppelbaum v. Galewski, 34 Misc. 281 (N. Y. 1901); Worrall v. Munn, 5 N. Y. 243 (1851). "Worrall v. Munn, 5 N. Y. 243 (1851). >= See also Newton v Bronson, 13 N. Y. 593 (185G). See also § 46 infra. 13 General Statutes of N. J. (1709-1895), Vol. 2, p. 1603, §5. broker's power to sign contract. 41 An agent may be orally authorized to enter into a written contract for the sale of land. 17 In New Jersey, therefore, the agent's authority to sign the contract need not be in writing. § 34. Massachusetts Rule. Nor does the Massachusetts statute require the agent's authority to sign the contract to be in writing. The stat- ute provides: " No action shall be brought * upon a contract for the sale of lands, tenements or here- ditaments or of any interest in or concerning them * * * unless the promise, contract or agreement upon which such action is brought, or some memorandum or note thereof, is in writing and signed by the party to be charged therewith or by some person thereunto by him lawfully authorized." 18 § 35. California Rule. In California the agent's authority to sign the con- tract must be in writing. " The following contracts are invalid, unless the same, or some note or memorandum thereof, be in writing and subscribed by the party to be charged, or by his agent: * * 5. An agreement for the leasing for a longer period than one year, or for the sale of real property, or for an interest therein, and such agreement, if made by an agent of the party sought to be charged, is invalid, unless the authority of the agent be in writing, subscribed by the party sought to be charged." 19 § 36. Illinois Rule. And in Illinois the agent's authority to sign a con- tract must be in writing. The statutory provision is: 17 Milne v. Kleb, 44 N. J. Kq. 378 (1888); Brown v. rionlss, 74 N. J. L. 505 (1900). is Revlsp.l Laws Of Mass. (1!t02), Ch. 74, §1. 18 Cul. Civil Code. § L624. 42 POWERS, AUTHORITY AND RIGHTS OF BROKER. " No action shall be brought to charge any person upon any contract for the sale of lands, tenements or heredita- ments, or any interest in or concerning them, for a longer term than one year, unless such contract or some memo- randum or note thereof shall be in writing, and signed by the party to be charged therewith, or some other per- son thereunto by him lawfully authorized in writing, signed by such party * * . " 20 § 37. Rule in Other States. Minnesota requires written authority of the agent to sign contract. 21 And so does North Dakota. 22 But, as has been said, the statute of each state cannot be repro- duced here. It is advisable, therefore, to consult the laws of the particular state as occasion arises. § 38. When Broker has Authority to Sign Contract. The ordinary authority of a real es.tate broker de- puted to sell real estate is simply to find a purchaser, and he has no power to bind his principal by a contract of sale, unless it was intended to confer such additional au- thority. 23 " Authority to make or sign a written con- tract is not conferred, where the thing to be sold is land, by giving an agent power, by parol, to sell." 24 § 39. Mere Employment Does Not Give Power to Contract. " The mere employment of an ordinary real estate 2° Starr & Curtis's Ann. 111. Stats., Vol. 2 (1896), p. 1997, Ch. 59, §2. See Hughes v. Came, 135 111. 519 (1891). a Revised Laws (1905). § 3488. 22 Revised Code, § 3960. M Bacon v. Davis, 98 Pac. Rep. 71 (Cal. 1908), (citing Brandrup v. Britten, 11 N. D. 376). To the same effect are Manker v. Tough. 98 Pac. Rep. 792 (Kans. 1908); Hardinger v. Columbia, 97 Pac. Rep. 445 (Wash. 1908) ; Dotson v. Milliken, 27 App. D. C. 514, 518 (1906); Furst v. Tweed, 93 Iowa 302 (1895); Ettinger v. Weather- head, 29 Ohio Cir. Ct. 137 (1906); Schmidt v. Zahrndt, 148 Ind. 447 (1897), (citing Grant v. Ede, 85 Cal. 418; Duffy v. Hohson. 40 Cal. 240; Armstrong v. Lowe, 76 Cal. 616; Condon v. Osgood. 65 N. W. 1003 (la.); Jenkins v. Locke, 3 App. D. C. 485; Ballou v. Bergvendsen, 9 N. D. 285 (1900) ; Foss Inv. Co. v. Ater, 95 Pac. 1019 (Wash. 1908). 2 « Milne v. Kleb, 44 N. J. Eq. 382 (1888). See also § 33 supra. beoker's power to sign contract. 43 broker to effect a sale of a parcel of land, even though the price and terms be prescribed, does not amount to giving present authority to such broker to conclude a binding contract for the same. Moreover, such authority is not usually to be inferred from the use by the principal and broker in that connection of the terms ' for sale ' or * to sell ' and the like. Those words, in that connection, usually mean no more than to negotiate a sale by finding a purchaser upon satisfactory terms. " 25 In Kramer v. Blair, 88 Va. 463, 464 (1891), the court refers to Grant v. Ede, 85 Cal. 418, to show that the words " we will sell " do not mean that the broker was authorized to sell, and quotes from the California case: " A general authority to sell real estate includes merely the power to find a purchaser therefor, and the agent cannot conclude a contract which will be binding upon his principal." (See §§ 28-30.) § 40. Extent of Authority Ordinarily Conferred by Employment. " Ordinarily, when property is placed in the hands of an agent to sell, the authority conferred is only held to be the authority to find a purchaser at a given price and submit the same to the owner, and not an authority to sell and bind the owner." 26 "A real estate broker or agent is one who negotiates the sale of real property. His business, generally speaking, is only to find a pur- chaser who is willing to buy the land upon the terms fixed by the owner. He has no authority to bind the principal by signing a contract of sale." 27 "The busi- ness of agents for the purchase or sale of real estate is simply to bring the parties together. What is done by » Keim v. Linrlley, 30 Atl. Rep. (N. J. Ch. 1895) 1003, at 1073. See ulso §§ 29. 30 xupra. 28 fJault Lumber Co. v. Pyles. 92 Pac. Rep. 175 (Okl. 1907). 27 McCullough v. Hitchcock, 71 Conn. 404 (1899). 44 POWERS, AUTHORITY AND RIGHTS OF BROKER. them beyond this must be specifically authorized or rati- fied by their principals to make them responsible. They have no implied authority from the nature of their busi- ness. They cannot bind their principals as to the terms of sale, or the damages which may arise from the breach of any contract for the purchase or sale of real estate. ' ' 28 " Undoubtedly a broker may be given authority to con- tract, but the mere employment of a broker as such only authorizes him to act as an intermediary to bring the parties together. ' ' 29 § 41. Dissenting Opinions as to Incidental Power to Contract. In the dissenting opinion in Beattie v. Burt, 122 App. Div. 473 (N. Y. 1907), it was said, though that was not the real point decided, that where a person has authority to sell land, as such he possesses authority to sign a com tract. It was also said by the New York Court of Ap- peals in Schultz v. Griffin, 121 N. Y. 294, 299 (1890), though not in a dissenting opinion: " There seems to be no well-founded distinction between real and personal property, requiring a different construction of an agency for sale in the two cases. The great preponderance of authority now is that a power without restriction to sell and convey real estate gives authority to the agent to deliver deeds with general warranty binding on the prin- cipal, where, under the circumstances, this is the com- mon and usual mode of assurance. ' ' 30 In this case the agent was authorized to sell, in writ- ing, but the writing does not appear to have contained any express authority to sign contract or deed. In the 28 Re Fairmount Cab Co.. 9 Pa. Co. Ct. 202 (1S901. 28 Rowland v. Hall, 121 App. Div. 461 (N. Y. 1907). 30 Citing Le Roy v. Beard, 8 How. (U. S. ) 451; Peters v. Farnsworth, 15 Vt. 155; Vanade v. Hopkins. 1 J. J. March, 293; Taggart v. Stanbery, 2 McLean 543; Rawle on Cov., § 20, note. broker's power to sign contract. 45 report of this case, the syllabus interprets the quotation given to mean that a power, without restriction, to sell and convey real estate " gives authority to the agent to contract to sell and convey by deed with general war- ranty where under the circumstances this is the common and usual mode of assurance." This was undoubtedly the intent of the quotation. In any event, as the case was decided on another point, the statement quoted may be regarded as merely a dictum. § 42. Ratification of Contract Signed by Agent. " It is well settled that parol authority to the agent is sufficient to satisfy the requirements of the statute of frauds, 31 and that such authority may be inferred and deduced from circumstances and a course of dealing; and that a contract made by an agent without authority may be ratified and adopted by subsequent conduct, and even by mere silence. Fry, Spec. Perf. (3rd Am. Ed.), § 509; Pom. Cont., §§ 77, 78; Wat. Spec. Perf., § 243; What. Ag., §§ 85-89. " 32 In Rowan v. Hyatt, 45 N. Y. 138 (1871), the agent was authorized to receive proposals for the sale of property, and contracted in the owner's name to sell the property, and wrote the owner so, but the latter never received the letter, and later the owner was told of the sale but not of the signing of the contract. The owner subsequently wrote indicating that he was satisfied with the price, but when he learned that the broker had assumed to sign a contract for him he at once repudiated the transaction. Held, no ratification of the contract. 81 In considering this quotation (from a New Jersey case) It should be borne in mind that in that state, as well as In some others, the Statute of Frauds does not require the authority of an agent to sign a contract to be in writing. See §§ 29-35 supra. 82 Kelm v. Llndley, 30 Atl. Rep. (N. J. Ch. 1895) 1063, 1004. See also Ettlnger v. Weatherhead, 29 Ohio Cir. Ct. 137 (1900); Newton v. Bronson, 13 N. Y. 594 (1856). 40 POWERS, AUTHORITY AND RIGHTS OF BROKER. § 43. Liability of Agent for Signing Unauthorized Contract. The liability of an agent for signing a contract which he had no authority to sign is considered in detail in a later chapter. 33 § 44. Formalities where Agent has Authority to Sign Contract. Where there is no question about the authority of a broker to enter into a formal contract for his principal, as where the broker has a power of attorney, and is there- fore the attorney in fact of the principal as well as the broker in the transaction, or where he has other written authority to sign the contract, or where his authority to sign a contract, though oral, is not disputed, certain for- malities should be observed. The contract should be made in the name of the principal, so that there can be no question that it is the principal who contracts, and not the agent. As to signature, "It is immaterial whether the agent signs his name to the instrument be- fore or after the name of the principal. It is sufficient if the agent executes the paper in the name of the prin- cipal and not in his own name. ' ' 34 The agent may there- fore sign "John Smith, as Agent for William Brown," or 1 ' William Brown, by John Smith, Agent, ' ' and the effect is the same in either case. § 45. Authority to Cancel or Surrender Contract. An authority to make a contract for another is not sufficient to authorize its cancellation or surrender. 35 § 46. Enforcing Contract Made by Agent. Where a contract is signed by agents only in their a* See §§ 272-276 infra. a* Worrall v. Munn, 5 N. Y. 244 (1851). ssstllwell v. Mutual Life Co.. 72 N. Y. 391, 392 (1878). BROKER'S POWER TO SIGN" CONTRACT. 47 own names and there is no seal, an action can be main- tained by and against the principals for whom these agents signed. 36 But if the contract is under seal, and the name of the principal is not disclosed, it can be en- forced only against the parties to the instrument. 37 As has been said before, a contract for the sale of real estate in some jurisdictions need not be under seal. 38 Where an agent is appointed orally and, without dis- closing his agency, makes a contract under seal in his own name for the purchase of real estate, the contract cannot be enforced against the principal afterward dis- covered. 39 On the other hand, the principal cannot sue on a sealed instrument made by an agent in his own name, even though the latter adds the word " agent " after his name, if he does not disclose for whom he is agent. 40 And the same rule applies where the contract was made by an officer of a corporation, as purchaser, and he designates himself as " president " and signs his name and adds thereto, ' ' President of Buffalo Catholic Institute. " 41 In this case it was held that such addi- tions are merely descriptio persona and do not make the contract the contract of the corporation. *» Pelletreau v. Brennan, 113 App. Div. 806 (N. Y. 1906). ST Van Allen v. Peabodv. 112 App. Div. 57 (N. Y. 1906). See also Henricus v. Englert, 137 N. Y. 488 (1893); Loeb v. Barris, 50 N. J. L. 384 (1888); Haley v. Boston Belting Co.. 140 Mass. 74 (1885). ^ See § 32 supra, also § 354 infra. s» Briggs v. Partridge, 64 N. Y. 357 (1876). *o Schaefer v. Henkel, 75 N. Y. 378 (1878). « Buffalo Catholic Institute v. Bitter, 87 N. Y. 250 (1882). CHAPTER V. BROKER ACTING FOR BOTH PARTIES. § 47. General Statement. A broker cannot, at the same time and in the same transaction, be acting for both parties (§§ 48-50), except: (1) Where both parties know that the broker is so acting. (§ 52.) Or (2) Where the broker is vested with no discre- tion. (§§ 53-57.) The rule applies to an exchange as well as to a sale of property. (§ 51.) Where the principal desires to avail himself of the fact that the broker accepted or agreed to accept com- missions from both sides, he should plead it as a defense. (§ 58.) § 48. Broker Not to Act for Both Sides. It is the broker's duty to act solely for and in the interest of his employer. This is implied in the contract. The employer is entitled to the disinterested efforts and judgment of the broker, and if the broker procures a pur- chaser for whom he is also acting as agent, without dis- closing the fact to his employer, he is precluded from re- covering any compensation. 1 The principal is entitled to the exercise in his behalf 1 Harten v. Loffler, 31 App. D. C. 368, 369 (1908), (citing Raisin v. Clark. 41 Mil. 158, 101; 20 Am. Rep. 60; Farnswortb v. Hemmer, 1 Allen 494, 495; 79 Am. Dec. 750; Rice v. Wood, 113 Mass. 133, 135; 18 Am. Rep. 459; Marsh v. Buchan, 40 N. J. Eq. 595, 597; 22 Atl. 128; Bell v. McConnell, 37 Ohio St. 390. 399; 41 Am. Rep. 528; Carpenter v. Hogan, 40 Ohio St. 203; Bollman v. Loomis, 41 Conn. 581 ; Murray v. Beard, 102 N. Y. 505. 508; 7 N. R. 55:!; Wilkinson v. McCullough. 196 I'a. 205, 208: 79 Am. St. Rep. 702; 46 Atl. 357; Warrick v. Smith, 137 111. 504; 27 N. E. 709; Hafner v. Herron, 165 111. 242, 247; 46 N. E. 211). 48 BROKER ACTING FOR BOTH PARTIES. 49 of all the skill, industry and ability and the intensest fidelity of his agent. The agent is under the implied ob- ligation of using the utmost good faith, candor and zeal in obtaining for his employer the best price for his prop- erty. 2 A unique opinion is the one of Powell, J. in Gann v. Zettler, 60 S. E. 283 (Ga. 1908), where he writes: " It is recorded of Him ' who spake as never man spoke ' that, ' seeing the multitudes, he went up into a moun- tain, and when he was set his disciples came unto him; and he opened his mouth and taught them, saying: * * * "No man can serve two masters; for either he will hate the one and love the other, or else he will hold to the one and despise the other." ' So, also, is our law. Civ. Code, 1895, §§ 3010, 3011, 3014, 3018. Whoso, hav- ing undertaken the service of his master, counsels with another and agrees also to serve him in those same things wherewith he has been trusted, cannot claim the reward promised by his master unless he makes it plain that he has not acted privily, but that his master was consenting thereto. ' ' § 49. Acting for Both Parties a Breach of Contract. "It is implied in every contract of agency that the agent shall use his best efforts to promote the interests of his principal, and it is ordinarily inconsistent with the proper discharge by a broker of his duty to one em- ployer that he shall at the same time and in the .same matter be acting for another. The interests of the seller and purchaser of property in the negotiation for its sale are adverse. It is the interest of the seller to get the highest price and of the purchaser to buy at the lowest. So when a broker to sell is at the same time the broker to buy, the fact of the double agency, if unknown to the 2 Roomc v. Robinson, 99 App. Div. 14.'! (N. Y. 1904). 50 POWERS, AUTHORITY AND RIGHTS OF BROKER. principals, is a breach of his implied contract with each, and operates, or is likely to operate, as a fraud upon both. 3 The law, therefore, to prevent fraud, and upon the most obvious reasons of justice and policy, will not in such a case enforce the contract for compensation, and this, irrespective of the consideration whether the sale made was or was not advantageous to the party from whom the compensation is claimed. ' ' 4 50. Acting for Both Parties Constitutes a Fraud. s Where a broker, ascertaining that a person desires to sell or exchange his property, calls upon him and is di- rected to see what he can do, and thereupon finds a pur- chaser or a party having property to exchange, and the fact is that he is also the agent of such other party, the broker can recover no commission from the owner, for if he acts under such employment it is his duty to act solely for and in the owner's interest. This, although not expressed, is implied in the agree- ment. The owner is entitled to the disinterested efforts and judgment of his broker in the matter of the agency, and if the broker has procured a purchaser for whom he is also acting as agent without disclosing the fact to the owner, it constitutes such fraud as would preclude him from recovering any compensation. 5 § 51. The Rule Applies to Exchange of Property. Even though the transaction is an exchange, the broker cannot recover commissions if he is intrusted s See Plotner v. Chillson. 95 Pae. 777 (Okl. 1908), referring to and quoting from Campbell v. Baxter, 41 Neb. 735; 60 N. W. 91, (citing Rice v. Wood. 113 Mass. 133; 18 Am. Rep. 459; Walker v. Osgood. 98 Mass. 348; 93 Am. Dec. 108; Bollman v. Loomis, 41 Conn. r>Sl ; Meyer v. Hanehett, 43 Wise. 240; Holeomb v. Weaver, 136 Mass. 205; Byrd v. Hughes. 84 111. 174; 25 Am. Rep. 442; Atlee v. Fink. 75 Mo. 100; 43 Am. Rep. 385; Scribner v. Collar. 40 Mich, 375; 29 Am. Rep. 541). * Duryee v. Lester, 73 N. Y. 442 (1878), (citing Everhart v. Searle, 71 Penn. St. 259; Farnsworth v. Hemmer, 1 Allen 494; 79 Am. Dee. 756). « Carman v. Beach, 63 N. Y. 97 (1875). BROKER ACTING FOR BOTH PARTIES. 51 with any discretion, and has an agreement to receive part of the commission from the other side, without the knowledge of both parties. 6 But the rule does not apply to an exchange of property where the broker has no dis- cretion but is simply to bring the parties together. In such case the broker is a mere middleman. 7 Where the broker is a middleman in the transaction, he is not bound to inform his principal of his employment by the other side. In fact, in one case 8 it was said : ' ' Indeed, it may be said that defendant might reasonably assume that, in an exchange of property, a broker receives commissions from both sides." 9 Where the contract provides that each of the parties is to pay the broker a commission, it would appear from the contract that they knew he was acting for both sides, and therefore, as stated in the fol- lowing section, they cannot refuse his compensation. 10 § 52. Acting for Both Parties with Their Knowledge. " When a broker is employed by both the vendor and the purchaser, neither can refuse compensation if he had knowledge that the broker held the same relation to the other party." ll The burden of proof is, however, on the broker to show that the employer knew of the double employment. 12 Where, after knowledge of the broker's receipt of pay from the other party, the principal still promises to pay the broker his commission, and especially where the prin- • Norman v. Reuther, 25 Misc. 161 (N. Y. 1808) j Hannan v. Prentis, 124 Mich. 417 (1900). t Clark v. Allen. 125 Cal. 278 (1899). s Marks v. O'Donnell, CO Misc. 147 (N. Y. 1910). » See also Alvord v. Cook. 174 Mass. 120 (1899). i°WilIner v. Seale, 127 App. Div. 180 (N. Y. 1908). "Jarvis v. Schaefer, 105 N. Y. 289 (1887); Tieck v. McKenna, 1 15 App D v. 701 (N. Y. 1900); I.amb v. Baxter. 130 N. C. 67 (1902); Dennlson v. Gault 132 Mo. App. 301 (1908); Evans v. Rockett. 32 Pa. Super. Ct. 365 (1907) ; Weta bouse V. Cronln. 68 Conn. 254 (1800); MT.ure v. Luke. 154 Fed • RfJ'. 650 ( 1907) . (citing Meyer v. Hanchett." 43 Wise. 246; Scribner v. Collar. 40 Mich. 375; Leathers T. Canflew. 45 L. R. A. 33; 117 Mich. 277: Hobart v. Sherburne, 66 Minn. 171, ^oung v. Trainor. 42 N. K. 139; 158 111. 428; Hannan v. Prentis, 124 Mich. 417, »J N. w. 102). i 2 nannan v. Prentis, 124 Mich. 417 (1900). 52 POWERS, AUTHORITY AND RIGHTS OF BROKER. cipal actually pays something on account, he ratines the broker's act. 13 Where the buyer, who promised to pay the broker a commission, was told by the broker that the owner had placed the property with him and then attempts to es- cape payment of the promised commission, the jury may find that knowledge of the double employment existed. 14 But in a Pennsylvania case it was held that an agree- ment to waive the rule of law that commissions cannot be recovered from both sides cannot be inferred from knowledge of the fact that such rule has been violated, or from silence, or failure to dissent at the time, or from all these combined. 15 § 53. Acting for Both Parties Not Unlawful in Itself. "It is not per se unlawful for one to act as the broker for the buyer and seller without disclosing the fact. The broker may be a mere middleman. It is only when his employment is that of an agent with discretionary authority from his principal in the matter of such em- ployment that he cannot accept payment from another whose interests conflict with those of the first princi- pal." 16 § 54. Broker Vested with No Discretion May Act for Both Parties. As stated, a broker employed to buy or sell, who is vested with any discretion, or upon whom his employer has a right to rely for the benefit of his skill or judg- ment, loses his right to compensation if he agrees to act is Bonwell v. Auld. 9 Misc. 65 (N. Y. 1S94). See §§67, 109-112 infra. 14 Geery v. Pollock, 16 App. Div. 321 (N. Y. 1897). See also §51 supra. "Evans v. Rockett, 32 Pa. Super. Ct. 365 (1907). i" Pollatschek v. Goodwin, 17 Misc. 591 (N. Y. 1896) ; M'Lure v. Luke. 154 Fed. Rep. 650 (19K7). (citing Farnswortb v. Ilemmer. 1 Allen (Mass.) 494; 79 Am. Dec. 756; Rupp v. Sampson, 16 Gray (Mass.) 401; Knauss v. Kruej;er Rrewe. Co.. 142 N. Y. 75; Empire St. Ins. Co. v. American Central Ins. Co., 138 N. Y. 449); Clark v. Allen, 125 Cal. 278 (1899), (citing Mamlers v. Craft, 3 Colo. App. 239). BROKER ACTING FOR BOTH PARTIES. 53 in a similar capacity for the other party, but this does not apply to one simply employed to bring the parties together. 17 " A broker who is employed to sell property, and whose duty it is not only to find a purchaser but to ne- gotiate the sale, cannot accept any compensation from any other person than his employer; and if he does make an agreement to be paid by the purchaser, or if he as- sume a position with reference to the transaction where his duty and interest might clash, he loses all right to his commissions from his employer. But that rule ap- plies only to a case where the duty of the broker to his employer calls for the exercise of his judgment or dis- cretion, when he must confine himself to acting for the person who employed him, and look solely to him for his reward. But when he is employed simply to find a pur- chaser upon terms fixed by his employer, his duty is per- formed by bringing to the seller one who is willing to purchase upon such terms. He has no discretion to ex- ercise, and there is no reason why he should not be per- mitted to take from the purchaser such compensation as he may see fit to give for the benefit he has received by being informed of the fact that he would be able to make such a purchase." 18 § 55. Compensation of Broker Without Discretion. Where one acts as a middleman, merely bringing ven- dor and vendee together to make their own contract without aid, advice or interference to or on behalf of either, he may obtain compensation from both, even without knowledge of one of such arrangement with the other. 19 The court in Harten v. Loftier, 31 App. D. ( '. « Knauss v. Krneger Riwing Co., H2 N. Y. 70 (1S94); Lamb v Baxter, 130 N. C. 07 (11102). u Oracle v. Stevens, 56 App. Dlv. 2o:t (N. Y. 1900). As to when broker's duty Is performed, see §§ 117-110 infra. w Harten v.'i/ifflor. SI App. D. C. .''.70 (1908), (citing Ranney v. Donovan, 78 Mid.. .US, 329; 44 N. W. 276; M'Lure v. Luke, 154 Fed. 047; Mnmlers v. Craft, 3 54 POWERS, AUTHORITY AND RIGHTS OF BROKER. 370 (1908) stated that whether this doctrine be sound to the full extent of want of knowledge by the respective parties it was unnecessary to inquire, as there was noth- ing in the facts of that case to which it could be applied. Where the broker represents the purchaser and is to be paid by him, and he asks no commission from the vendor until after the vendor has accepted the offer 'submitted by the vendee, but the vendor then promises to pay a commission, the interests of the vendee are not affected by the commission from the vendor, and the broker may recover accordingly. 20 In Davis v. Weber, 46 Misc. 590 (N.Y.1905), the owner paid the broker a commission for obtaining her tenant, and then, giving the tenant an option to purchase the property at a fixed price within a certain time, it was agreed that if the tenant exercised the option and bought, the owner was to pay the broker a commission on the sale. The tenant was later offered a price in excess of his op- tion, and through the efforts of the broker obtained a purchaser at still higher figures and paid the broker a commission therefor. The tenant having exercised his option, it was held that the broker was entitled to re- cover his commission from the owner, although he also received a commission from the tenant, since the owner, by the execution of the lease and option, had debarred herself from selling to any one but the tenant, and thereby terminated any fiduciary relations between her- self and the broker. § 56. General Rule as to Discretion. "It is undeniable that where the broker or agent is invested with the least discretion, or where the party has the right to rely on the broker for the benefit of his skill Colo. App. 236, 238; 32 Pac. 83G ; Orton v. Scofield, 61 Wise. 382, 384; 21 N. W. 262 ; Rupp v. Sampson, 16 Gray 398, 401 ; 77 Am. Dec. 416 ; Knauss v. Gottfried Krueger Brewg. Co., 142 N. Y. 70, 75; 36 N. E. 867). 20 Jones v. Henry, 15 Misc. 153 (N. Y. 1895). And see § 121 infra. BROKER ACTING FOR BOTH PARTIES. 55 or judgment, in any such case an employment of the broker by the other side in a similar capacity, or in one where by possibility his duty and his interest might clash, would avoid all his right to compensation. The whole matter depends upon the character of his employ- ment. If A is employed by B to find him a purchaser for his house upon terms and conditions to be determined by B when he meets the purchaser, I can see nothing improper or inconsistent with any duty he owes B for A to accept an employment from C to find one who will sell his house to C upon terms which they may agree upon when they meet. And there is no violation of duty in such case in agreeing for commissions from each party upon a bargain being struck, or in failing to notify each party of his employment by the other. ' ' 21 § 57. Reason for the Rule. In Empire State Ins. Co. v. American Central Ins. Co., 138 N. Y. 446, 449, 450 (1893), the court said: " It is not doubted that the same person may sometimes act as agent for the two parties in the same transaction. But he can do so only in case he has no discretion to exercise for either party. An agent to sell for one party may also act as agent for the buyer, but only in case the price and terms of sale have been fixed by each party, so that nothing is left to his discretion. But an agent to sell, intrusted with a discretion, and thus bound to obtain the best price he can, cannot buy for himself or as agent for another. In such a case he would occupy antagonistic positions and there would be a conflict of interests. He could not faithfully serve the one party without betraying the interests of the other. He would at least be under great temptation to betray the interest of one of the parties. So a person may sometimes act 21 Knauss v. Krueger Brewg. Co., 142 N. Y. 75 (1894). 56 POWERS, AUTHORITY AND RIGHTS OF BROKER. as agent of both parties in the making of any contract. But he cannot do so when he is invested with a discretion by each party, and when each is entitled to the benefit of his skill and judgment. The rules of law upon this sub- ject have been laid down and illustrated in many cases, of which it is sufficient for the present purpose to cite the following: Utica Ins. Co. v. Toledo Ins. Co., 17 Barb. 132; Rett v. Washington Marine and Fire Ins. Co., 41 Barb. 353; N. Y. Central Ins. Co. v. National Fire Ins. Co., 14 N. Y. 85; Claflin v. Farmers' & Citizens' Bank, 25 N. Y. 293; Murray v. Beard, 102 N. Y. 505, 509; Porter v. Woodruff, 36 N. J. Eq. 174; Michoud v. Girod, 4 How. (U. S.) 503. " Contracts thus negotiated are void at the option of any non-assenting party thereto. The policy of the law condemns them. It matters not that the agent has acted fairly and honestly, and even that neither party to the contract has suffered injury. It is enough to condemn the contract that the common agent in fact had any, even the least, discretion to exercise for the parties. As said by the Chancellor in Porter v. Woodruff, ' So jealous is the law upon this point that it will not even allow the agent or trustee to put himself in a position in which to be honest must be a strain upon him.' " 22 § 58. How Question of Double Employment Is Raised. Where the principal desires to avail himself of the fact that the broker accepted or agreed to accept commis- sions from both sides, he must plead it as a defense. 23 In Norman v. Reuther, 25 Misc. 161 (N. Y. 1898), (citing Chatfield v. Simonson, 92 N. Y. 209), it was said that while the owner did not plead affirmatively that the broker was acting for both sides, without the knowledge 22 This case cited in Hartford Fire Ins. Co. v. McKenzie, 70 111. App. 624. 23 Bonwell v. Auld, Misc. 05 (N. Y. 1894). BROKEK ACTING FOR BOTH IARTIES. 57 of both, proof of it may be made where the answer denies the performance of the services. 24 But in Duryee v. Lester, 75 N. Y. 442 (1878), the Court of Appeals re- marked that if one of the parties to a deal desires to avoid liability on the ground that the agent has agreed for commissions from both sides, it seems the better practice is to plead it and not to rely on a mere general denial. 25 2* S*e also Brierly v. Connelly, 31 Misc. (N. Y.) 268, to same effect, and Wolff v. Denbosky, 36 Misc. (N. Y.) 643, where a general denial was held sufficient to raise the question. 25 See 1 Chitty on PL, 501. CHAPTER VI. BROKER'S RIGHT TO INTEREST IN PROFITS. § 59. General Statement. Neither an agent, nor those in his employ, may be interested in the profit of a sale to or purchase from his principal without the clear assent of the principal. (§§ 60-64.) That the intention was honest, or that the principal suffered no loss by the transaction, makes no difference. (§§ 65, 66.) Such a transaction is not, however, void, but is voida- ble at the option of the defrauded party, and may be ratified by him. (§ 67.) And where the principal knows that the agent is acting in his own behalf, the transac- tion is valid. (§§68, 69.) Where others combine with the broker to carry through a transaction in the profits of which the broker is secretly interested, they may all be liable for fraud or deceit. Such a combination is usually sought to be held liable on the theory of a conspiracy. (§ 70.) Sharing in the benefits of such a transaction makes one liable, even though unaware of the wrong committed. (§ 71.) In New York, a conspiracy to defraud another out of property by criminal means is a misdemeanor. And so is corrupt influencing of an agent. And under the New York statute, an agent may also commit a misdemeanor by accepting a gratuity or a promise under an under- standing that he shall act in a particular manner in his principal's business. (§ 70.) 58 broker's right to interest in profits. 59 § 60. Agent Must Act in Interest of Principal. A person may agree with the owner of property to buy it at a certain price, and then turn around and agree to sell it to somebody else at an advanced price, and may, as a matter of right, make all he can so long as the purchaser gets all he bought, and pays no more than he agreed to pay, and is not, in fact, damaged. But this rule does not apply where the person who makes the profit is the agent of either party and makes the profit out of the party whom he represents. 1 '* It is the unquestionable duty of an agent to act in matters touching the agency with a sole regard to the interests of his principal. The agent in accepting the employ- ment undertakes to manage the interests confided to him and discharge the trust reposed in him to the best of his ability for the benefit of his principal." 2 Some cases go to the length of holding that the broker may not accept part of the commission of the broker acting for the other party. 3 On the other hand, in Alvord v. Cook, 174 Mass. 120 (1899), the plaintiffs, while acting as the defendants' brokers, made an agreement with a person acting as broker for the other party to an exchange that the bro- kers for the contracting parties should share equally the commissions obtained on both sides. It was claimed that this arrangement was not known to the defendants, and was a fraud upon them. The arrangement was not such as to make the respective brokers partners, and it did not appear whether the commissions of the respective brokers were to be lump sums or percentages, or whether they were to be equal in amount. The court said: " It is easy to conceive of an arrange- i Helberg v. Nichol, 149 111. 240 (1894). 2 I*rlo«' v. Keyes, 82 N. V. ::*2 ii*7."i: Klngsley v. Wheeler, 95 Minn. 362 (1905); Leathers v. Canfleld, 15 L. B. A. 33 (Mich. 1898). •See Plotner v. Chillson, 95 Pac. 777 (1908), (citing McKiuley v. Williams, 74 Fed. 95; 20 C. C. A. 313). GO POWERS, AUTHORITY AND RIGHTS OF BROKER. inent between brokers for sharing the commissions which would put one of them under a temptation to act ad- versely to the interest of his client, and perhaps it is easier to conceive of such an arrangement than of one not having such an effect, but we are not prepared to say that necessarily, as matter of law, every arrangement between brokers to share commissions changes the rela- tion they hold to their principals, either by putting them under an additional or different temptation than that arising out of the nature of the employment or otherwise, and is therefore invalid. ' ' In this case there was an exchange of property, and it is fair to assume that the property upon each side was substantially of the same value; and it does not appear that the commissions were unequal. " The defendants fail to show that, upon the facts of this case, either broker was placed by this arrangement in any better or worse condition than without it, or that in any way he was subjected to any other or different temptation to act adversely to the interests of the prin- cipal than that naturally and ordinarily arising out of the nature of his employment." If the person who makes the profit is not the agent of either party, it seems no inference may be drawn from the fact that he ascertained first whether the purchaser would give a certain amount before the party who makes the profit agrees to buy the property at a less amount. 4 § 61. Agent Must Not Be Personally Interested. "It is established by the authority of elementary writers and by a long course of decisions that a person employed as an agent in any respect cannot be held to act for his own benefit, and must account to his principal for any profit he may have made in the transaction. * Healev v. Martin. 33 Misc. 236 (N. Y. 1900). B Carruthers v. Dieft-mlorf, OG App. Div. 33 (N. Y. 1901). >» 5 broker's right to interest in profits. 61 In Fellows v. Northup, 39 N. Y. 122 (1868), the court said: " The rule is well settled also that an agent can have no personal interest in the subject-matter of the agency, and cannot act when he is so concerned. The law of agency proceeds upon the idea that the agent is devoted to the interests of his principal, and that his judgment, his feelings and his interests all concur in the discharge of his duty. An agent employed to sell cannot buy. An agent employed to buy cannot himself be the seller, nor can a trustee be interested in the sub- ject of the trust." 6 § 62. Agent May Not Also Act as Principal. In Clark v. Bird, 66 App. Div. 284 (N. Y. 1901), the court quotes from Story on Agency to the effect that ' ' an agent employed to sell, cannot himself become the purchaser; and an agent employed to buy, cannot him- self be the seller. So an agent, employed to purchase, cannot purchase for himself. ' ' 7 In Wheeler v. Bell, 88 Hun 100 (N. Y. 1895), the then General Term of the Supreme Court in New York re- fused to interfere with a verdict against real estate bro- kers who secured an option for a certain price and then turned the property over to their principal at an in- creased price. An agent to sell cannot himself become the purchaser, and one who undertakes to act for another in any matter cannot in the same matter act for himself. 8 " Where one undertakes to act as agent for another in the sale of property the rule is inflexible that he vio- lates his trust by becoming the purchaser from his prin- cipal, unless the assent of the latter is established by most 8 Gardner v. Ogden, 22 N. Y. 327 (1800), reviews many of the authorities. See also Vol. 2, Abb. N. Y. Cv. Dig.. 632. •'Citing Dutton v. Willner. 52 N. Y. 312; Conkey v. Bond, 36 N. Y. 427; Ten Eyck v. Craig, 02 N. Y. 400, 41!). See also Finch v. Conrarie, 154 Pa. St. 326 (1893); Cornwell v. Foord, 96 111. App. 300 (1001); Albertaon V. Fellows. 46 N. .7. Eq. 810; Amlck v. Butler, 111 Inil. 518. 8 Bain v. Brown, 5G A. Y. 285 (1874). 62 POWERS, AUTHORITY AND RIGHTS OF BROKER. convincing proof. This principle is based upon good morals and good sense. As was said by Judge Story in his work on Agency (§ 210) : ' It may be correctly said, with reference to Christian morals, that no man can faith- fully serve two masters whose interests are in conflict. If, then, the seller were permitted, as the agent of an- other, to become the purchaser, his duty to his principal and his own interest would stand in direct opposition to each other ; and thus a temptation, perhaps in many cases too strong for resistance by men of flexible morals or hackneyed in the common devices of worldly business, would be held out which would betray them into gross misconduct, and even into crime. It is to interpose a preventive check against such temptations and seduc- tions that a positive prohibition has been found to be the soundest policy, encouraged by the purest precepts of Christianity.' " 9 § 63. Agent May Not Make Secret Profits. A real estate broker who receives a price in excess of that reported and accounted for to his principal is liable to the principal for the difference. 10 And so a real estate agent who induces the owner to fix a net price upon cer- tain property upon the supposition that a sale is to be made to a third party cannot himself purchase the prop- erty and by such transaction realize a greater profit than a reasonable commission. 11 This doctrine was enforced in the New York courts in Bain v. Brown, 56 N. Y. 285 (1874), in which, an agent authorized to sell real estate of his principal contracted to sell the same for $17,000 and advised his principal of the sale. The next day, other parties applying to pur- chase the property, he opened negotiations for a sale to •Clark v. Bird, 66 App. Div. 284 (N. T. 1901). w Babeock v. De Mott, 160 Fed. 882 (1908). ii Merriam v. Johnson, 86 Minn. 61; 90 N. W. 116 (1902). broker's right to interest in profits. 63 theni which resulted in his giving his own name as ven- dor and selling the property for $26,000. He then took an assignment of the first contract, and procured his principal to deed direct to the parties with whom he had contracted, on the representation that the purchaser un- der the first contract had assigned to them. The price to be paid under the second contract he did not communi- cate to his principal. He received the $26,000, account- ing to his principal only for the $17,000. In an action to recover the balance the Court of Appeals held that, assuming the first sale to have been in good faith, the agent could not rightfully appropriate to himself the advance upon the second sale, but that the principal was entitled to the benefit thereof. The officers of a corpora- tion are its agents, and the rule applies to them. 12 Where the broker is to receive for his compensation all in excess of a fixed net price, it has been said that he need not disclose to the vendor the terms of the sale. 13 § 64. Broker's Employees Governed by Same Rules. The same principles apply to a clerk of the broker. Whatever duty the broker owes to the seller, the clerk equally owes the same. The disability extends to all persons who being employed or concerned in the affairs of another acquire a knowledge of his property. " The honesty and fairness of transactions between principals and their agents demand a firm adherence to these rules, and to bring within their operation, not only the agent himself but those in his immediate employ, and who are engaged in the transaction of his business, which is, nec- essarily, the business of the agent's principal." 14 "McCloskev v. Goldman, C2 Misc. 404 (N. Y. 1909). And see Fry v. Piatt, 32 Kans. 02 (1884), where the agent sold to his own partner. Cf. Boqua v. Marshall, 114 S. W. 714 (Ark. 1908). "Fulton v. Walters, 210 Pa. St. 56 (1900). "Gardner v. Ogden, 22 N. Y. 349, 3. r ,o (1800); Powers v. Black, l. r .9 la. St. 153 (189.!). 64 POWERS, AUTHORITY AND RIGHTS OF BROKER. § 65. Rule Not Affected by Agent's Honesty of Pur- pose. It is no answer to a complaint that brokers have acted for themselves in a transaction involving their principal, that their intention was honest and that the brokers did better for their principal by selling him their own prop- erty than they could have done by going into the open market. The rule is inflexible, and although its viola- tion in the particular case cause no damage to the prin- cipal, he cannot be compelled to adopt the purchase. 15 The fact that the agent volunteered his agency does not absolve him from the duty of fidelity. Neither is it ma- terial to inquire whether the agent had any actual fraud- ulent purpose. The making of a purchase from himself without authority from his principal is a constructive fraud in view of the fiduciary relation. 16 § 66. Act of Agent in His Own Interest Presumed In- jurious. "It is a well-settled principle of morals as well as of law that the agent must faithfully serve his principal. However unquestioned may be the honesty of the agent, or his impartiality between his own interests and those of his principal, he is bound to the exercise of all his skill, ability and industry in favor of his principal. As an agent to sell, it is his duty to get the highest fair price; and this duty is wholly incompatible with his wish to buy. In every trust this principle prevails. No agent or trustee can deal with the subject-matter of his trust, except for the benefit of his principal * * *. And the rule in equity is, that any act by an agent in respect "Taussig v. Hart, 5cS N. Y. 425 (1874); Hare v. De Young, 39 Misc. 368 (N. Y. 1902); Mullen v. Bower, 22 Ind. App. 302, 303 (1898). (citing Clendenon v. Pan- coast, 75 Pa. St. 213 ; Soule v. Deering. S7 Me. 365 ; 32 Atl. 998 ; Hammond v. Book- waiter. 12 Ind. App. 177: Everhart v. Searle, 71 Pa. St. 256; Pratt v. Patterson's Ex., 112 Pa. St. 475; :'. Atl. 858; Wadsworth v. Adams, 138 U. S. 380). i*Conkey v. Bond, 36 N. Y. 427 (1867). See also Porter v. Woodruff, 36 N. J. Eq. 174. broker's right to interest in profits. 65 to the subject-matter of the agency, injurious to the prin- cipal, may be avoided by the principal, and where an agent to sell becomes the purchaser, the court will pre- sume that the transaction was injurious, and will not permit the agent to contradict the presumption. 17 The policy of this rule is obvious. The confidence reposed in the agent must not be abused. His position of trust must not be employed to his own advantage, or to the injury of his principal. In short, while in the employ- ment of his principal, his principal 's interest must be his interest, and he may have no interest which, conflicting with those of his principal, can work injury to the latter." 18 § 67. Act of Agent in His Own Interest Voidable, but May Be Ratified. Such a transaction is voidable at the election of the defrauded party, and if, with full knowledge of all the facts, he deliberately and freely ratifies the act of the agent, he thereby waives his right to repudiate it. Rati- fication between the original parties, however, implies a conscious and intended approval of the act done. It rests in the intention. That intention is generally one of fact to be deduced from all the circumstances. 19 § 68. Agent May Be Personally Interested with Con- sent of Principal. While the general rule that an agent cannot himself be interested in a deal holds, yet the agent may be per- sonally interested therein if tbe principal knows of the facts. 20 But the mere fact that the property was to be sold at a fixed price does not make the rule inapplica- w Citing roles v. Thecothlck, Ves. 234, 247. IB McDonald v. Lord, 20 How. IT. 107 ( N. Y. 1SG4). »Clart v. Bird, 60 App. Dlv. 284 (N. Y. 1901). See §§ 08, 09 infra. 20 Kingsley v. Wheeler, 1)5 Minn. 303 (1005). GO POWERS, AUTHORITY AND RIGHTS OP BROKER. ble. 21 " It is not always the case that a broker may not purchase for himself. If it is apparent that in making the purchase his object is to acquire title for himself, and the seller contracts with him with a knowledge of this fact, or the facts connected with his purchase are of such a character that notice could be implied that he was dealing with the broker as purchaser, and not as his broker, we see no reason, in such a case, for the applica- tion of the rule that an agent will not be permitted, to his own advantage, to deal with the property of his prin- cipal." 22 • § 69. Broker Without Discretion as Disclosed Principal or Subsequent Purchaser. In Pomeroy v. Wimer, 167 Ind. 440 (1906), the court, at pages 450-452, first discusses the rule that an agent with discretionary power to sell or exchange must exer- cise that discretion for the sole benefit of his principal, but where he acts as a mere middleman he may act for both parties. 23 The court then said: " If an agent, under the limitations and terms above stated, may act for both parties, and recover compensation from both, there can be no sound reason why one who engages, under similar restrictions, to find a purchaser or trader for another may not himself become the purchaser or trader, as well as a stranger, provided that in doing so he violates no obligation, and fully discloses to his employer his per- sonal relations to the subject-matter. The fact that he has undertaken to find a purchaser for the property does not impress upon the agent any particular incapacity to buy or trade for the property himself, nor make a trade with him less profitable to his employer. And if the principal, with full knowledge of all the material facts 21 Ruckman v. Bergholz, 37 N. J. L. 441 (1874). 22 Texas Brokerage Co. v. Barkley, 109 S. W. 1002 (Tex. 1908). 23 See §§ 48-57 supra. broker's right to interest in profits. 67 concerning the transaction, enters into negotiations with him and consummates a trade, the transaction is valid and the agent entitled to his compensation. 24 In the case of Stewart v. Mather, 32 Wis. 344 (1873), it is said: ' Where the broker merely engages to find a purchaser at such price as may be agreed upon, if he presents him- self as such purchaser and the seller, with full knowledge of that fact, so receives and enters into negotiations with him and a sale is consummated, the broker may recover his commissions.' " In another case, 25 it was held that when the agent has fully discharged his trust and sold property to a third person in good faith, having no interest in the same at the time, he may afterwards acquire the title from the purchaser, and such fact, or the fact that his wife ac- quired the title, will not afford ground for avoiding the sale. § 70. Broker May Not Lawfully Combine with Others to Secure Secret Profits. Sometimes others combine with the broker in putting through a deal in which the broker is secretly to share in the profit of a sale to or purchase from his principal. 26 Again, at other times, a broker may use a ' ' dummy ' ' to represent either a supposed buyer or seller, as the case may be, in endeavoring to or in actually putting through such a deal. The principles which govern an action for fraud and deceit are the same, whether the fraud is alleged to have originated in a conspiracy or to have been solely com- mitted by a defendant without aid or co-operation. 24 Citing Rochester v. Levering. 104 Intl. 502 (1886); Stewart v. Mather, ::•-> Wis. 344 (1873) ; 1 White & Tuilor's Learlg. Cases in Equity, Part 1. p. 219; Burke v. Bours, 98 Cnl. 171 (1893); 32 Pac. 980; 1 Clark & Skyles on Agency, § 413; 1 Am. & Kng. Ency. Law (2nil Ed.), 1081. 2 . G18 (1908). GENERAL AUTHORITY OF BROKER. 75 § 75. Renting Agents. The ordinary agency to collect rents usually includes authority to rent, to receive rent money and receipt there- for in the name of the landlord; also to allow deductions from the rent for cost of minor repairs, janitor service, etc., but does not include authority to execute a lease unless such authority is expressly conferred. The extent of the agent 's power is usually agreed upon, or otherwise is established by the acts of the agent ratified by the principal. A renting agent is not liable for failure to rent property in the absence of proof that he could with reasonable diligence have rented it to any person who could, or would, have paid any rent therefor. 14 Where the meaning of the agreement is uncertain, proof of custom is admissible to show that a renting agent is responsible for the care of the property while vacant, under an agreement to take " care " of the property for a commission on collections. 15 An agent to rent premises and collect rent, where the lease is for a term of more than one year and under seal, has no implied power to consent to the substitution of a new tenant. 16 And an agent in regard to the collection of rent and the ordinary repairs that a real estate agent makes in behalf of the owner has no power to agree to pay for, or even to authorize, extensive improve- ments, such, for instance, as the removal of partitions for the purpose of changing a number of small rooms into larger rooms and painting and plastering these rooms. 17 "An agent authorized to receive payment can receive it in money only. Ordinarily he can receive it when it becomes due and not before. He cannot commute the debt for another thing. He cannot com- pound the debt, or release it on composition, or sub- '< Riin*> v. Van Eman, 11 Minn. 327 (1866). » Cameron v. Seal KM. Co.. 70 Mo. App. 366 (1898). i» Wallace v. Dinninv. 11 Misc. ."{17 (N. Y. 1895). " Garber v. Spivak, 05 Misc. 37 (N. Y. 1909). 76 POWERS, AUTHORITY AND RIGHTS OF BROKER. mit it to arbitration." 18 An agent authorized to col- lect rents is not to be presumed to have authority to receive rents before they are due, and such prepayment does not discharge the tenant unless the landlord ratifies the payment or receives the money paid. 19 76. In General, Renting- Agency Terminates on Death s of Principal. The power of an agent to collect and receive payment of rents, when such power is not coupled with an interest, terminates and ceases upon the death of the principal. Payment made to the agent after the principal's death does not bind the estate of the principal though the pay- ment be made in ignorance of the principal's death, un- less perhaps where the agent has accounted for same to the estate. " The rule seems to have originated in the presump- tion that those who deal with an agent knowingly assume the risk that his authority may be terminated by death without notice to them. The case of an agency coupled with an interest is made an exception to the rule." It is possible, however, to so word a lease that the personal representatives or the estate of the principal may be es- topped from recovering money paid to his agent in good faith after his death. 20 § 77. Agent's Right to Dispossess Tenants. New York Rule. Section 2235 of the New York Code of Civil Procedure expressly authorizes the agent of the landlord to make application for the removal of the tenant, and in Case v. Porterfield, 54 App. Div. 109 (N. Y. 1900), it was held 18 Fellows v. Northup, 39 N. Y. 121, 122 (1868). 19 Realty Transfer Co. v. Kimball, fi« Misc. 185 (N. Y. 1910). 20 Farmers' L. & T. Co. v. Wilson, 139 N. Y. 284 (1893); but see Kelly v. Bower- man, 113 Mien. 446. GENERAL AUTHORITY OF BROKER. 77 that this authority included the right to entitle the pro- ceedings and to issue the precept in the agent's name. 21 The proceedings may be entitled and the precept issued in the name of the agent where he is stated in the petition to be the agent of the owners in fee of the premises. 22 § 78. Insurance Brokers. Many brokers designate themselves " real estate and insurance brokers." As such, they usually solicit and receive applications for insurance. These applications they transmit to some insurance company selected by themselves or by the applicant for insurance. Such bro- kers are in law regarded as the agents for the applicants and not as agents of the company. 23 There are, of course, brokers who write insurance policies,— that is, are authorized by the company to ac- cept risks and write and issue the policies. They are usually regarded as the company's agents, but sometimes even they may be regarded as partly the company's agents and partly the agents of the insured. Some poli- cies contain special provisions as to who are to be re- garded as the company's agents and by whose acts and representations the company is to be bound. A broker who effects insurance under no employment by the insurance company, but for a commission paid by the company upon the premiums received for such risks as he procures and the company chooses to accept, is not an agent of the company. And notice to such an agent is not notice to the company. 24 And so an insurance broker soliciting business, whose sole office is to deliver the policy and collect the premium, is not an agent of the company and has no authority to bind the company. If 2i Powers v. He O., 04 App. Div. 373 (N. Y. 1fi;» (N. v. inno). *» Hartford Ins. Co. v. Reynolds, 36 Mich. 502 (1877). M Devens v. Mechanics & f. Ins. Co., 83 N. Y. Hi8 (1880). 78 POWERS, AUTHORITY AND RIGHTS OF BROKER. he is merely a conduit between the company and the in- sured for the delivery of the policy and its renewals and the collection of the premiums, to that extent, it may be said, he is the agent of the company, but no other powers can be predicated upon those acts. 25 In some states licenses are required to carry on the business of insurance broker. 25 Allen v. German Am. Ins. Co., 123 N. Y. 6 (1890). CHAPTER VIII. REVOCATION OF BROKER'S AUTHORITY. § 79. General Statement. The relation of principal and agent, so far as real es- tate brokers are concerned, may be terminated in any of the following ways: (1) By mutual consent; (2) by per- formance of the object of the employment; (3) by the pleasure of either party in good faith; (4) by lapse of time; (5) by a sale of the property through means other than the broker's efforts; (6) by the destruction of the subject-matter; (7) by bankruptcy; (8) by the insanity of either party; (9) by the death of either party. (§§ 80-92.) The fraud of the agent also affects his agency. (§ 93.) The agency continues as to third persons until notice of the revocation. ( § 94. ) But death revokes the agency as to third persons, without notice. (§ 92.) § 80. Termination of Agency by Mutual Consent. It needs no citation of authority to demonstrate that the principal and the broker may put an end to their relation by mutual consent. For whatever the parties may do by agreement, they may usually undo by agree- ment. It is true that there may be occasions in which a dispute may arise as to whether the agency has been ter- minated by mutual consent. But these occasions are de- pendent rather on questions of fact than on law. § 81. Termination by Performance of Object of Em- ployment. Again, no elaboration is required to show that the agency is terminated by performance of the object of em- 79 80 POWERS, AUTHORITY AND RIGHTS OP BROKER. ployment. For, if the agent is employed to find a pur- chaser and finds one, or if he is engaged to purchase property and he purchases, the contract of employment is performed. " The agency of a real estate agent and his duty to his principal cease upon the delivery of the title papers and payment for the property. ' ' l But does not the broker's duty as such cease when he has obtained a purchaser, ready, willing and able to buy on the vendor's terms, or has brought about a contract of sale? 2 § 82. Termination of Agency at Pleasure of Principal. As a general rule, a mere naked authority is, while executory, revocable at any time at the pleasure of the principal. 3 A mere naked authority is one in the execu- tion of which the agent has no other interest than that which springs from his employment as agent and his right to earn his compensation. 4 Where no time is fixed, either the broker or the prin- cipal is at liberty to terminate the relation at will, acting in good faith. 5 In Raleigh K. E. & Trust Co. v. Adams, 145 N. C. 164 (1907), the court said: " The defendants, having specified no definite time for the duration of the plaintiff's employment as their broker when they ap- pointed and authorized it to sell the lots, had the right to terminate it at will, before any contract was effected with a purchaser, subject, however, only to the ordinary requirement of good faith." c " Where the owner of property employs a broker to bring him an offer for the purchase of it, without naming ' Board of Trustees v. Blair. 45 W. Va. S20 (1809). 2 See Dickinson v. Updike, 49 Atl. 713 (N. J. 1901). And see §§ 117-119 infra. s Terwilliger v. Ontario Co., 149 N. Y. 92 (1896); and see Miller v. Wehrman, 115 N. W. 1078 (Nebr. 1908) ; Glover v. Henderson, 120 Mo. .'570 (1893). 4 Terwilliger v. Ontario Co., supra; Glover v. Henderson, supra. * Geery v. Pollock, 10 App. Div. 321 (N. Y. 1897). •Citing Abbott v. Hunt, 129 N. C. 403; Sibbald v. Iron Co., 83 N. Y. 378: Coffin v. Landis, 46 Pa. St. 426; Young v. Trainor. 158 111. 428; Bailey v. Smith, 103 Ala. 641; Hartley's Appeal, 53 Pa. St. 212; Hunt v. Rousmanier. 8 Wheat. 174; Ins. Co. v. Williams, 91 N. C. 69; Brookshire v. Voncanuan, 28 N. C 186; Wilcox v. Ewing, 141 U. S. 627. REVOCATION OF BROKER'S AUTHORITY. 81 a price at which he is willing to sell, — that is to say, where the owner of property employs a broker to bring him an offer which he is to pass upon after it is brought to him,— there can be no implied agreement or under- standing that the broker is to be entitled to a reasonable time in which to procure such an offer; in such a case the owner has a right to reject every offer brought to him, as was held in Walker v. Tirrell, 101 Mass. 257; and it is plain that under those circumstances he could decide not to accept any offer and to dismiss the broker alto- gether. ' ' 7 § 83. Termination by Principal after Lapse of Reason- able Time. Where no time is fixed within which the broker must procure a purchaser, the principal may, after the lapse of a reasonable time, 8 terminate the broker's authority and relieve himself from liability, unless such action is taken in bad faith for the purpose of depriving the broker of the fruits of his labor at the time such labor was about to prove effectual. 9 But if the broker fails after a reasonable time to procure a purchaser and the agency is terminated in good faith, it matters not that what the broker has done proves of use and benefit to the principal. 10 And where the property remains in the broker's hands for a long time unsold, the owner has a right to terminate the broker's employment. 11 In Milne v. Kleb, 44 N. J.Eq. 384 (1888), the court sug- gested that one year might be a fair limit to the agency where no time is fixed. We do not say it was so decided, 7 Cadi!fan v. Crabtree, 170 Mass. 480 (1001); s. c. on further appeal, 186 Mass. 7 (1904). ""Where no time is expressed, (lie law will affix the limit of n reasonable time; bill it will n.it extend mi express limit." Emery v. Atlanta Exch., 88 Ga. 826 (1891). » Donovan v. Weed, 182 N. Y. 43 (1905); Turner v. Snyder, 132 Mo. App. 322 (1908); Moore v. Boehm, 45 Misc. C,22 IN. Y. 1004); Kand v. Cronkrite, 04 111. App. 224 (1896). 111 Donovan v. Weed, supra. See also § 101. 11 Van Siclen v. Herbst, 30 App. Div. 205 (N. Y. 1898). 82 POWERS, AUTHORITY AND RIGHTS OF BROKER. but the court endeavors to compare the situation with what is required by the statute of frauds, 12 and uses these words, which are suggestive if nothing- more: " More- over, where power to sell land is given by parol it is usually given to serve a temporary purpose with an ex- pectation on the part of the donor that it will be speedily exercised, and it would, therefore, seem entirely reason- able that the rule prescribed by the statute of frauds con- cerning parol contracts not to be performed within a year from the time they are made, should, by analogy, be adopted as the rule limiting the duration of such powers. Especially should this be so where it appears that neither party to the power had, for more than a year after it was granted, done anything which would indicate to the other that he regarded it as still subsisting. ' ' The most that this case can be authority for is that the reasonable time implied by law should not be longer than a year. No definite time, however, can be laid down as constituting a reasonable time for all cases. If that were so, there would be no need to call it a " reasonable time," as it could then be called a " definite time." What would be a reasonable time in one case would not be in another. In the matter of the sale of the ordinary dwelling-house for which there is more or less call, a few months might be said to be a reasonable time within which the broker should procure a customer. On the other hand, a reasonable time in which to sell a large office building, for which there would be but few pur- chasers, should certainly be longer than the time allowed for a sale of an ordinary dwelling. The subject could be further discussed, but we should in the end have to re- turn to the statement that what is a reasonable time depends altogether on the particular situation at hand. Enough has been said to illustrate the idea. " See §§ 24-26 supra. REVOCATION" OF BROKER'S AUTHORITY. 83 § 84. Limitations on Principal's Power to Terminate Agency at Pleasure. Some of the authorities cited in the preceding sec- tions hold that the broker's authority may be revoked at any time by the principal, acting in good faith, while others hold that the principal may do so after the lapse of a reasonable time. It may be conceded that some con- fusion exists. The cases may be summarized, however, and the following may be said to be a fair general deduc- tion: Where no time is fixed, and the broker has done nothing, his authority may be terminated at any time. Where the broker has actually instituted some negotia- tion, the principal may only terminate the authority in good faith— that is, for some sufficient reason, or after the broker has had a reasonable time in which to make his efforts produce results. Where no time is fixed, and the property remains in the broker's hands for a long time and he then enters upon negotiations, the principal may assert that as the broker has done nothing during a reasonable time, his authority has expired " by lapse of time." It is, however, generally conceded that in the ordinary case until the broker has actually some deal under way, the principal may withdraw the property from him and thus terminate the agency. 13 In such case the broker could have no other cause for complaint than that he was thus prevented from possibly making a sale, which is altogether too speculative. It may be that where the broker has incurred expense, 14 such as advertising the property, he is entitled to a fair and reasonable oppor- tunity to perform his obligation, subject to the owner's "See Warren v. Holbrook, 118 N. Y. r,02 (1SS0K where it was Bald that at any time before there was a reasonable assurance that the contract would he obtained (in that case a contract to do roofing), the principal might have terminated the agency. usee Vincent v. Woodland Oil Co., 165 Pa. St. 402 (1894), Where it did not ap- pear that services were to be on a contingency. See also actio,, tor expenses, etc. .where agent's authority was revoked pending bis efforts — Jaekel v. Caldwell, loG i a. Bt. ~1>U (1893). See also McDonald v. Ortman, 98 Mich. 40 (1893). 84 POWERS, AUTHORITY AND RIGHTS OF BROKER. right to sell independently. 15 But it may be doubted if any recovery could be had therefor, since it is now cus- tomary for brokers to advertise property at their own risk,— unless, perhaps, the broker could show that his advertisement brought a prospective purchaser, in which case he would no doubt have to bring himself under the general rule and show that the owner terminated the agency in bad faith. If the agency is for a definite time it cannot be ter- minated without liability to the agent, unless for the agent's default or by virtue of some agreement to that effect. 16 Where the broker was to have a definite time to sell the property and expended money in an effort to do so and the agency is revoked before the expiration of the time limit, the broker is entitled to compensation. 17 If a time is fixed giving exclusive right to sell and the broker in good faith undertakes performance on his part, the principal cannot revoke the authority without com- pensating the broker. 18 And it has been said that the principal could not himself sell during the time. 19 But see the subject of exclusive agency on this point. 20 § 85. Revocation of Agency by Principal Must Be in Good Faith. A leading case 21 speaks generally of the right to ter- minate the contract of agency, in these words: " Where no time for the continuance of the contract is fixed by its terms, either party is at liberty to terminate it at will, subject only to the ordinary requirements of good faith. Usually the broker is entitled to a fair and reasonable opportunity to perform his obligation, subject, of course, 16 See Glover v. Henderson, 120 Mo. 367 (1S93). 18 Rand v. Cronkrite, 64 111. App. 224 (1896). "Glover v. Henderson, 120 Mo. 377, 380 (1893). 18 Attix v. Pelan, 5 Iowa 343 (1857). is Id. 2" §§ 238, 239 infra. " Slbliald v. Bethlehem Iron Co., 83 N. Y. 384 (1880). REVOCATION OF BROKER 's AUTHORITY. 85 to the right of the seller to sell independently. But that having been granted him, the right of the principal to terminate his authority is absolute and unrestricted, ex- cept only that he may not do it in bad faith, and as a mere device to escape the payment of the broker's com- missions. Thus, if in the midst of negotiations insti- tuted by the broker, and which were plainly and evi- dently approaching success, the seller should revoke the authority of the broker with the view of concluding the bargain without his aid and avoiding the payment of commissions about to be earned, it might well be said that the due performance of his obligation by the broker was purposely prevented by the principal. But if the latter acts in good faith, not seeking to escape the pay- ment of commissions, but moved fairly by a view of his own interest, he has the absolute right before a bargain is made, while negotiations remain unsuccessful, before commissions are earned, to revoke the broker's authority, and the latter cannot thereafter claim compensation for a sale made by the principal, even though it be to a cus- tomer with whom the broker unsuccessfully negotiated, and even though, to some extent, the seller might justly be said to have availed himself of the fruits of the bro- ker's labor." 22 Again, in the same case, 23 the court says: " If after the broker has been allowed a reasonable time within which to produce a buyer and effect a sale he has failed to do so, and the seller in good faith and fairly has ter- minated the agency and sought other assistance by the aid of which a sale is consummated, it does not give the original broker a right to commissions because the pur- chaser is one whom he introduced and the final sale is in some degree aided or helped forward by his previous unsuccessful efforts." *»See also Cadlgan v. Crabtree, 18G Mass. 13 (1004); Newton v. Conness, 106 S. \V. N04 (TVx. liios i. -•■> Sibl.ald v. Bethlehem Iron Co., 83 N. Y. 390, 391 (1880). S6 POWERS, AUTHORITY AND RIG1ITS OF BROKER. § 86. Revocation Must Be Timely. The termination of the agency must be timely. Where the broker has in fact procured a purchaser on his prin- cipal's terms, it is too late to revoke the broker's au- thority. 24 Likewise, where a written authorization pro- vided that it should remain in force until nullified by the principal in writing, a nullification after the broker has performed his obligation is too late. 25 An express termination of the employment of the broker is matter of defense. 26 In other words, the broker need not show as part of his affirmative case that the agency was still in force, but the principal must show the contrary, if he relies upon a revocation of the agency. § 87. Termination of Agency by Previous Sale. A previous sale revokes the agent's authority, 27 and no notice to the broker of the sale is necessary. 28 A broker must produce his customer while the premises are in the market; the owner does not contract to hold them for the customer to be produced by the broker, but, act- ing in good faith, he may sell the premises at any time and to any customer who is willing to buy upon his terms, and commissions cannot be collected for customers pro- duced after the premises have been sold. 29 And a real estate broker is not entitled to commissions if his principal has already in good faith sold the prop- erty to the same customer through another broker. 30 But the giving of an option to another person is not a previous sale? 1 24 Peach R. Co. v. Montgomery, 115 S. W. K7 (Tex. 1908). 26 Finck v. Schmitt. 4S Misc. 50:', (N. Y. 1905). See also preceding sections. 29 Moore v. Boehm. 45 Misc. G22 (N. Y. 1904). 27 Gertling v. Ilaskin, 141 N. Y. 52<> ( 1S94 I ; Weisels v. Wainwright, 127 Mo. App 514 (1907); Wallace v. Figone, 107 Mo. App. 366, 367 (1904). (citing Ahern v. Baker, 34 Minn. 98; Walker v. Oenison. SO 111. 142; Bissell v. Terry, 69 111. 184; Dolan v. Scanlon. 57 Cal. 201; Tiffany on Agency. pp. 134, 135; Mecuem on Agency, ■: 969; Parsons on Contracts, 71; Reinhanl on Agency, § 100). 28 Wallace v. Figone, supra. -'•' Rttinghoff v. Horowitz. 115 App. Div. 571 (N. Y. 1906). ■■■" Hodge v. Appelles, 122 App. Div. 437 (N. Y. 1907). 81 Wallace v. Figone, supra. REVOCATION OF BROKER 's AUTHORITY. 87 § 88. Good Faith Necessary to Termination of Agency by Previous Sale. On an issue as to the good faith of the owner in ter- minating the plaintiff's employment and selling the property through other brokers to the same person, the owner may show that he paid a commission to the broker through whom the sale was finally effected, and this is relevant, as it tends to show that the owner did not ter- minate plaintiff's agency for the purpose of avoiding payment of commissions. 32 Where the broker produces a customer ready, willing and able to buy and apparently acceptable to the vendor, he has, under the general rule, 33 earned his commission, although after a delay was had for proper reasons the vendor informs the broker that the property is sold. 34 § 89. Termination by Destruction of Subject-Matter. " If the subject-matter of the agency is extinguished or ceases to exist, this will revoke the agency. It has been held, for instance, that where two persons jointly appoint an agent to take charge of some matter in which they are jointly interested, as to sell real estate owned by them jointly, a severance of the joint interest revokes the agency. ' ' 35 § 90. Termination by Bankruptcy. Bankruptcy, either of principal or broker, operates as a revocation of the agent's authority. 36 As a prac- tical proposition it may be suggested that if the broker went into bankruptcy before bringing about a sale nothing would be due him and no question would arise. If he went into bankruptcy after effecting a sale and be- Mgewell v. Collison, 123 App. Div. 586 (N. Y. 1008). M s«h- 5S 1 17-1 lit Infra. MParvlS v. Abels-Gold Realty Co.. 12C App. Div. 329 (N. Y. 1»08). 35 r:i..,rk on Contracts, 750, (citing Bowe v. Band, ill Ind. 206; 12 N. B. Rep. an). a« Davis v. Lane, io N. II. 158. See also Clark on Contracts, uO. 88 POWERS, AUTHORITY AND RIGHTS OF BROKER. fore collecting his commissions, the trustee in bank- ruptcy would succeed to the money. If the principal goes into bankruptcy before the broker completes a sale, the agency is no doubt terminated, for bankruptcy in effect brings about the destruction of the subject-matter, the bankrupt's title passing to the trustee in bankruptcy. If the principal becomes a bankrupt after the consumma- tion of the sale and before payment of commissions, the broker stands as does any other creditor. 37 § 91. Termination by Insanity. "We are not now dealing with the legal status of a contract made by a person of unsound mind. We are assuming that two competent persons have entered into an agency and that thereafter one becomes mentally in- competent. " It is said by Chancellor Kent that the authority of an agent may be revoked by the lunacy of a principal, but the better opinion would seem to be that the fact of the existence of the lunacy must have been previously established by inquisition before it could con- trol the operation of the power. ' ' 38 In the case from which the foregoing is taken, 39 the court discusses the subject further, stating that the ques- tion was presented to the highest court of New Hamp- shire in the case of Davis v. Lane, 10 N. H. 156, and quot- ing from that case as follows : " We are of opinion, however, that the authority of the agent, where the agency is revocable, must cease or be suspended by an act of Providence depriving the con- stituent of all mind and ability to act for himself, and that this doctrine can be sustained by very satisfactory principles. An authority to do an act for and in the name of another presupposed a power in the individual 87 See Collier on Bankruptcy (7th Ed.), 740. 38 Merritt v. Merritt, 27 App. Div. 208 (N. Y. 1898). 38 Merritt v. Merritt, 27 App. Div. 208 (N. Y. 1898). REVOCATION OF BROKER'S AUTHORITY. 89 to do the act for himself, if present. The act to be done is not the act of the agent, but the act of the principal; and the agent can do no act in the name of the principal which the principal might not himself do if he were per- sonally present. The principal is present by his repre- sentative, and the making or execution of the contract or acknowledgment of a deed is his act or acknowledg- ment. But it would be preposterous, where the power is in its nature revocable, to hold that the principal was, in contemplation of law, present, making a contract or acknowledging a deed, when he was in fact lying insensi- ble upon his death-bed, and this fact well known to those who undertook to act with and for him. The act done by the agent, under a revocable power, implies the exist- ence of volition on the part of the principal. He makes the contract, He does the act. It is done through the more active instrumentality of another, but the latter rep- resents his person and uses his name. Further: Upon the constitution of an agent or attorney to act for an- other, where the authority is not coupled with an inter- est, and not irrevocable, there exists at all times a right of supervision in the principal, and power to terminate the authority of the agent at the pleasure of the prin- cipal. The law secures to the principal the right of judg- ing how long he will be rej^resented by the agent and suffer him to act in his name. So long as, having the power, he does not exercise the will to revoke, the au- thority continues. When, then, an act of Providence de- prives the principal of the power to exercise any judg- ment or will on the subject, the authority of the agent to act should thereby be suspended for the time being; otherwise, the right of the agent would be continued be- yond the period when all evidence that the principal chose to continue the authority had ceased, for, after the principal was deprived of the power to exercise any will upon the subject, there could be no assent or acquies- 90 POWERS, AUTHORITY AND RIGHTS OF BROKER. cence, or evidence of any kind to show that he consented that the agency should continue to exist. And, more- over, a confirmed insanity would render wholly irrevo- cable an authority which, by the original nature of its constitution, it was to be in the power of the principal at any time to revoke. It is for these reasons that we are of opinion that the insanity of the principal, or his in- capacity to exercise any volition upon the subject by reason of an entire loss of mental power, operates as a revocation, or suspension for the time being, of the authority of an agent acting under a revocable power." The rule thus laid down is adopted by Judge Story. 40 § 92. Termination by Death. Agency is terminated by the death of the principal. 41 And the death of the agent, of course, terminates his agency. No notice of the death of the principal is neces- sary to relieve his estate of responsibility. 42 ' ' The question is not new, and it has been uniformly answered by our decisions to the effect that the death of the principal puts an end to the agency, and, there- fore, is an instantaneous and unqualified revocation of the authority of the agent. 2 Kent's Com. 646; Hunt v. Rousmanier, 8 Wheat. 174. There can be no agent where there is no principal. There are, no doubt, exceptions to the rule, as where the agency is coupled with an interest (Knapp v. Alvord, 10 Paige, 205; 40 Am. Dec. 241; Hunt v. Rousmanier, supra; Hess v. Rau, 95 N. Y. 359), or where the principal was a firm and only one of its members died. Bank v. Vanderhorst, 32 N. Y. 553. But both cases recognize the general rule to be as above stated. In Davis v. Windsor Savings Bank, 46 Vt. 728, *° Story on Agency, § 4S1. See also Matthiesen & W. Refining Co. v. MacMahon, 38 N. J. Law 536. (The Merritt ease is again reported on a subsequent trial, in 32 Misc. (N. Y.) 21; aff'd, without opinion. 02 App. IMv. (N. Y.) 617.) "Farmers' L. & T. Co. v. Wilson, 139 N. Y. 284 (1893). 42 George on Partnership, 258, and cases there cited; Weber v. Bridgman, 113 N. Y. 600 (1889). REVOCATION OF BROKER 's AUTHORITY. 91 the rule was applied. The defendant paid money to the agent after the death of his principal, but in ignorance of it, and the administrator of the deceased recovered. " It is quite unnecessary to go through the cases on this subject, The rule at common law which determines the authority of an agent by the death of his principal is well settled, and no notice is necessary to relieve the estate of the principal of responsibility, even on con- tracts into which the agent had entered with third per- sons who were ignorant of his death. Those who deal with an agent are held to assume the risk that his au- thority may be terminated by death without notice to them. This rule was established in England (Leake Cont. 487), although now modified by statute, and is gen- erally applied in this country. 43 In some States altera- tions have been made by statute; and, following the civil law, it was held in Pennsylvania, 44 that the acts of an agent or attorney, done after the death of his principal, of which he was ignorant, are binding upon the parties. This was, however, in opposition to the current of au- thority. 1 Bars. Cont., 71; 2 Kent's Com. 646." 45 § 93. Fraud of Agent as Revocation. As will be seen, 46 one of the requisites entitling a broker to commission is "good faith." Where the broker commits a fraud on his principal he has, of course, failed to observe good faith and cannot claim his commis- sion. " When an agent abandons the object of his agency and acts for himself by committing a fraud for his own exclusive benefit, he ceases to act within the scope of his employment and to that extent ceases to act as agent." 47 "Citing Story on Agencv. § 4**; Pars. Cont., Vol. 1. p. 71; 2 Kent's Com. (12th Ed.). (145. 646. " Cassiilay v. McKenzie, 4 Walts & Serg, 2S2; 39 Am. Dec. 7C. 45 Welier v. Bridgman, 113 N. Y. 6 ivso). 48 § GO supra ct 8eq. and Cli. XIII infra. "Henry v. Allen, 151 N. Y. 1 (1800) ; 30 L. R. A. 058, (citing Shipman v. Bank \Y2 POWEES, AUTHORITY AND RIGHTS OF BROKER. § 94. Revocation as to Third Parties. When one has constituted or accredited another his agent, the authority of the agent continues, even after an actual revocation, until notice of the revocation has been given. 48 Notice of revocation of the agency is gov- erned by the same rules as notice of the dissolution of a partnership. 49 of New York, 120 N. T. 318 : 12 L. R. A. 791 ; Welsh v. G. A. Bank. 73 N. Y. 424, 29 Am. Rep. 175; Allen v. So. Boston R. Co., 150 Mass. 200; 5 L. R. A. 716). See also Benedict v. Arnoux, 154 N. Y. 715 (1897) ; Bienenstock v. Ammidown, 155 N. Y. 47 (1898). See also §§ 59-71 supra. «* Claflln v. Lenhe'im, 66 N. Y. 305 (1876); Bielenberg v. Montana U. R. Co., 2 L. R. A. 813 (1888). 18 Claflin v. Lenheini, supra. But see § 92 supra. PART II.— COMMISSIONS AND THEIR RECOVERY. CHAPTER IX. GENERAL RULES AS TO COMMISSIONS. § 95. General Statement. A broker's commissions are earned when, having been employed, he has been the procuring cause of the sale. (§ 96.) When several brokers are employed on the same prop- erty, the broker who in good faith and without collusion consummates the sale is entitled to the commission. (§§97,98.) An exclusive agent is entitled to his commission when he produces a party ready to purchase at a satisfactory price. (§99.) The owner may always, in good faith, sell independent of the broker unless he has agreed not to do so. (§ 100.) If a broker abandons his negotiations, the employer may subsequently sell to the same person without liabil- ity to the broker for commissions. (§ 101.) Under the rule which prevails in most jurisdictions, to recover commissions, the duly employed broker must show that he either procured a contract of sale, or that he produced an available purchaser who was ready, will- ing and able to purchase on his employer's terms. (§102.) 93 94 COMMISSIONS AND THEIR RECOVERY. § 96. When Commissions are Earned. As stated more fully hereafter, 1 the rule which pre- vails in most jurisdictions is that a duly employed broker is the "procuring cause" and entitled to commissions either when he secures a contract of sale or produces a purchaser ready, willing and able to purchase on his prin- cipal's terms. A typical case is that of Kiernan v. Bloom, 91 App. Div. 429 (N. Y. 1904). 2 Here it was agreed that the broker should advertise the owner's place in the broker's name; that the inquiries should be attended to by the broker and that the owner would pay a commission if a sale resulted. A purchaser had his attention drawn to the advertisement and wrote the broker asking for de- tails. The broker arranged a meeting between his rep- resentative and the purchaser, and within a day or two after this interview, in which the broker's representative described the property and advised the purchaser to buy, the purchaser opened negotiations personally with the owner, which resulted in his purchasing the property. The matter of the purchase and the sale had not been discussed before between the owner and the purchaser and no other agency at any time intervened to induce the purchaser to open negotiations. The purchaser did not disclose to the broker or his representative that he had previously seen the property nor did he mention the broker or his representative to the owner. The broker did not introduce the purchaser to the owner, and he was not present when the sale was consummated. In passing upon this case the court said: " The sale was effected through the plaintiff's (broker's) agency as the procuring cause; his communications with the pur- chaser were the cause and means of bringing him and the defendant (owner) together, and a sale resulted in con- 1 See § 117 infra. 4 See also Branch v. Moore, 105 S. W. 1178 (Ark. 1907). GENERAL RULES AS TO COMMISSIONS. 95 sequence of his efforts. He is, therefore, entitled to his commissions. It is of no consequence that the plaintiff did not negotiate the sale in person, and was not present at the sale; nor that the purchaser was not made known to the defendant as the plaintiff's customer, for he was so in fact. The plaintiff's right to commissions is in no way affected by proof that the defendant himself nego- tiated the sale, nor by the fact that the purchaser was not introduced to the owner by the plaintiff. In full com- pliance with his agreement he procured a purchaser, who took the property on the owner's terms. His commis- sions were, therefore, earned." It is not essential, to entitle a broker to commissions, that he should have procured a purchaser upon the pre- cise terms first named by the principal at the time of employment; for if, through the instrumentality of the broker, the buyer and seller meet, and negotiations are thus opened up between them, which, continuing with- out withdrawal of either party therefrom, culminate in a sale, though for a less sum than originally named, the broker is entitled to his commissions. 3 And in Southwick v. Swavienski, 114 App. Div. 681 (N. Y. 1906), it was held that where a broker duly em- ployed, is the cause of bringing the purchaser and owner together, he is entitled to his commissions although the sale is consummated subsequently by the owner himself on different terms. 4 § 97. Respective Rights of Brokers when Several are Employed. The owner may employ as many brokers as he pleases, 5 and he is liable for commissions only to the one who effects the sale. » Hobbs v. Edgar, 23 Misc. 618 (N. Y. 1898). « *<■>■ also Iiranch v. Moore, 105 S. W. 1178 (Ark. 1907). » Bee § 237 infra. 96 COMMISSIONS AND THEIR RECOVERY. Where there are two brokers, the one who first calls the customer's attention to the property is not neces- sarily entitled to the commissions. If the other broker, in good faith and without collusion consummates the sale, he is entitled to the commission. 6 " Unless he specially agrees not to do so, an owner may employ two or more brokers. In such case it is the broker who is the effi- cient cause of the sale who is entitled to commissions, and this right is not affected by the fact that such broker sells to one whose attention to the property had before been called by another broker. It is not the broker who first speaks of the property, but he who is the procuring cause of the sale, be he the first or second to engage the attention of the purchaser. 7 The party selling, where several brokers have been employed, may in the absence of all collusion on his part, pay to the agent through whose instrumentality the sale was brought about, with- out inquiry as to whether some other broker may not have had something to do with effecting the sale. ' ' 8 ' ' Whatever may be the rights of a real estate broker who takes a customer away from another broker and closes a sale between such customer and the owner, if done without the aid or connivance of the owner, yet if the owner, with knowledge of the facts, deals with the customer of the first broker, even through another agent, he will be liable to the first broker." 9 Where two brokers are apparently working on the same purchaser, the one who first brings the purchaser up to the terms of the employer is entitled to the commissions. 10 In Jennings v. Trummer, 96 Pac. 874, (Ore. 1908), the court quotes from Tinsley v. Scott, 69 111. App. 352, • Martin v. Killings, 2 N. Y. City Ct. Rep. 8G (1884); McCloskey v. Thompson, 26 Misc. 735 (N. Y. 1899). 7 Citing Mechem on Agency, § 9G9 ; Vreeland v. Vetterlein, 33 N. J. L. 247 ; Sib- bald v. The Bethlehem Iron Co., 83 N. Y. 378. s Patten v. Willis, 134 111. App. 651, G52 (1907), quoting from McGuire v. Carl- son, 61 111. App. 295. See §§ 338-346 infra. * Jennings v. Trummer, 96 Pac. 874 (Ore. 1908). 10 preedman v. Havenmeyer, 37 App. Div. 518 (N. Y. 1899) ; Hennings v. Par- sons, 108 Va. 3 (1908). GENERAL RULES AS TO COMMISSIONS. 97 355: " Of several independent brokers under such em- ployment at the same time, the one who first so sells is entitled to the commission. No express contract to that effect is required to give him that right. But, to be a producer, the party presented must be a client or a cus- tomer of his own, and not one then sustaining that rela- tion to another broker under like employment. If he was first in negotiation with such other, he continues to sustain that relation to him until it is expressly broken off, or the matter of the purchase has ceased to be held by him under consideration. The employer, with notice of the pendency of such negotiation, cannot escape lia- bility to the broker for his commission by selling to his customer through another, even though he first dis- charges the former if he does so without giving him a reasonable time to effect the sale." 11 " Where two brokers are employed, the one effects the sale who brings the minds of the parties to meet." 12 § 98. Rule as to Commissions when Several Brokers are Employed. The fact that a person is the first broker who calls the attention of the purchaser to the property, in itself, gives no claim to commissions. The_ right to commis- sions depends upon the performance of the broker's obli- gation to bring the buyer and seller to an agreement. 13 'Where the owner does not know that the purchaser produced by the second broker is the same purchaser which the first broker is working with, the owner* is not liable to the first broker in the absence of bad faith, or of such facts as should have prompted inquiry. 14 Al- though the parties are originally brought together by the broker, but no terms are agreed upon, and some >i Also citlnc Dnv v. Porter, 00 111. App. 380, 389. '- Ilobbs v. Edgar, 2.T Misc. 618 (N. Y. 1898). 13 Tlalnes v. Hiirn<>v. X'i Misr. 748 (N. Y. 1900). " Qulst v. Goodfcllow, 99 Minn. 511 (1900). 98 COMMISSIONS AND THEIR RECOVERY. weeks later the matter is taken up by another broker who finally consummates the sale by bringing the parties to terms, the first broker is not entitled to commissions. To earn his commission the broker must do something more than get authority from the owner to negotiate the sale. He must be the effectual cause of the sale. He must find the purchaser, or at the very least induce a purchaser to buy the property at a price acceptable to the owner. 15 " The fact that a sale or exchange of the property is finally brought about by the efforts of the principal or another broker with a person with whom the first broker had previously negotiated without suc- cess, will not furnish a legal basis for a claim for com- missions by the first broker, especially when it appears that the first broker has for a long time ceased negotia- tions with the purchaser and abandoned all efforts to induce him to take the property on the proposed terms." 16 While the statement of the law is plain, it is a matter not always free from difficulty to determine which broker's efforts were the inducing cause of the sale. 17 In Edwards v. Pike, 107 S. W. 586 (Tex. 1908), it was said: " The general rule is that a real estate agent hav- ing a contract authorizing him to effect a sale is entitled to the commissions agreed upon where he procures a buyer who consummates the purchase of the property on terms satisfactory to the owner. Ordinarily the appli- cation of this rule to the facts of a given case is not diffi- cult; for, when it is shown that the agent was instrumen- tal in bringing the buyer and seller together, the fact that the agent was the procuring cause of the sale afterwards consummated is sufficiently established. But when each of two or more brokers within the knowledge of the other is De Zavala v. Rogaliner. 45 Misc. 430 (N. Y. 1904). 19 Davis v. Gassette, 30 111. App. 45 (1888). (citing Lipe v. Ludewick, 14 111. App. 372; Sibbald v. Bethlehem Iron Works, 83 N. Y. 378). w See also § 173 infra. GENERAL RULES AS TO COMMISSIONS. 99 has a contract authorizing him to effect a sale of the same property, the fact that one was instrumental in bringing the parties together fairly cannot be made the test of the liability of the owner of the property for commissions claimed. The owner has a right to authorize more than one broker, each independently of the other, to effect a sale of his property; and, so long as he remains neutral, he ought to be permitted without incurring liability for commissions to more than one of them to consummate the sale of the property through the one who first pro- duces a person ready to buy it, whether the agent pro- ducing the purchaser is the one who first brought him and the buyer together or not. The practical test which ought to control in fixing the liability of the property owner on the facts of a case like this is: Within the knowledge of the owner at the time, was the sale con- summated on terms agreed upon between the buyer and the broker who brought the parties together; or was it consummated on other terms as the result of negotiations between another broker and the buyer, and after the lat- ter had abandoned the contract made by him with the other broker! In the absence of special circumstances which would make it proper to so charge him, the owner ought not to be held liable for commissions to more than one broker, and, after actually selling his property to a purchaser produced by one broker on terms negotiated by such broker and not by another, he ought not before paying him the commissions be required * * at his peril to determine whether some other broker was not, in fact, the procuring cause of the sale. 18 In such a case, the risk of finally effecting by his agency, on terms agreed upon between him and the buyer, a sale of the property, ought to be borne by the broker. His services towards effecting one are performed with a knowledge on his part that another broker has authority similar to i* See Ch. XXXV, " Interpleader," § 339, as to conflicting claims for commission. 100 COMMISSIONS AND THEIR RECOVERY. that conferred upon him; and, if before a sale is com- pleted the buyer quits him and on other terms consum- mates it through another agent, it is a contingency he should be held to have contemplated at the time he un- dertook the service, and about the happening of which he has no right to complain. 19 The broker who under- takes a sale of property with full knowledge that another broker has also undertaken to sell it ought not to expect more of the owner than that he will not interfere in favor of the one or the other. It is then an even contest between them, where the chances of success in contemplation of the competition to be expected should be presumed to have been duly weighed by each; and, if as a result of such competition, without interference or fault on the part of the owner, the sale is actually consummated by his com- petitor the broker who brought the prospective purchaser and the owner together, but failed to consummate a sale upon the terms agreed upon between him and the buyer, ought not to be permitted to charge against the owner the loss sustained by him, not by the owner's fault but as a result of acts of his competitor and conduct of the purchaser which he reasonably should have contemplated might ensue when he undertook and performed the serv- ice. Such a case is not at all like the one where the broker, having the exclusive right to sell, or ignorant of the fact that another broker has a right equal to his own, brings the purchaser and the owner together, when the sale is consummated by the owner himself or by the direct agency of another broker. There the broker bringing the parties together should be held to be en- titled to his commissions if the sale is consummated by the owner himself, because he is entitled to same by the terms of his contract ; and if the sale is consummated bv another broker, because his services were performed on 19 Citing Vreeland v. Vetterlein, 33 N. J. L. 247 ; Scott v. Lloyd, 19 Colo. 401 ; 35 Pac. 733 ; Farrar v. Brodt, 35 111. App. G17 ; McGuire v. Carlson, Gl 111. App. 295. GENEKAL RULES AS TO COMMISSIONS. 101 the faith of his contract and without reference to risks of failure which a knowledge that he had a competitor would have caused him to weigh and perhaps provide against." § 99. Liability of Principal for Commissions to Exclu- sive Agent. A broker, employed to make a sale under an agree- ment for the exclusion of all other agencies, is entitled to his commissions when he produces a party ready to purchase at a satisfactory price, 20 and the principal can- not avoid liability for such commissions by negotiating a sale through another broker. 21 And where a broker is given the exclusive agency to sell property, as for in- stance a large plot of lots, the owner is liable in damages if he breaks the agreement. 22 l O J § 100. Liability for Commissions when Principal Ne- gotiates Sale. " A party having employed a broker to sell real es- tate, may, notwithstanding, negotiate a sale himself; and if he does so without any agency of the broker, is not liable to him for commissions. To earn his commis- sions the broker must be an efficient agent in, or the pro- curing cause of the contract. 23 His commission is earned by finding a sufficient purchaser, ready and willing to enter into a valid contract for the purchase upon the terms fixed by the owner, and having introduced such a one to the owner as a purchaser, is not deprived of his 20 See §§ 117-11!) infra as to conflicting views concerning when broker Is the pro- curing cause (if a sale. As to exclusive agency, see § 239 infra. -' (loses v. Blerllng, 31 N. Y. 462 (1805). -- Barthrick v. Coffin, 13 App. Dlv. 101 (N. Y. 1897) ; Attlx v. Pelan, 5 Iowa 344 (1857). - :l The owner may always in good faith sell independent of the broker unless he has agreed not to do 80", Hiircli v. Hester, 10!) S. W. 399 (Tex. 1908) ; Cook v. Forst, 110 Ala. 390 (1890) ; Humphries v. Smith, 5 Ga. App. 343 (1908). See also § 238 infra. 102 COMMISSIONS AND THEIR RECOVERY. right to commission by the owner negotiating the con- tract himself ." 24 A contract employing a broker to sell lands and giv- ing him commissions " in case of the sale or conveyance of said property at any time within one year from this date," should not be construed to mean that the broker was entitled to commissions if the property were sold by the owner without the aid of the broker, but, on the con- trary, only entitles the broker to commissions if he was instrumental in bringing the owner and purchaser to- gether. 25 § 101. Rule as to Commissions when Broker's Efforts Fail. " In Wylie v. Bank, 61 N. Y. 416, it is held that, to entitle a broker to recover, he must be the efficient agent or the procuring cause of the sale. The means employed by him, and his efforts, must result in the sale. He must find the purchaser, and the sale must proceed from his efforts, acting as broker; and where a broker opens ne- gotiations, but, failing to bring the customer to the speci- fied terms, abandons them, and the employer subse- quently sells to the same person at the price fixed, he is not liable to the broker for commissions. 26 Although in Hay v. Piatt, 66 Hun 488, 21 N. Y. Suppl. 362, the principal had subsequently dealt directly with the party brought to his notice by the broker, and sold at the same price he had been willing to sell for originally, the broker was not allowed to recover. This upon the ground that where the broker fails to produce a customer ready and willing to enter into a contract upon the terms of his 24McClave v. Paine, 49 N. Y. 561 (1S72), (citing Lyon v. Mitchell, 36 NY. ••:;.-• Barnard v. Monnot, 3 Keyes (N. Y.) 203; Moses v. Bierling, 31 N. Y. 462; Red- lid. 1 v. Tegg. 38 N. Y. 212). 25 Parkhurst v. Tryon, 134 App. Div. 843 (N. Y. 1900), 2 « See §§ 241, 242 infra. GENERAL RULES AS TO COMMISSIONS. 103 principal and abandons further efforts the principal violates no right of the broker in negotiating with the proposed purchaser directly and independently. In Douglass v. Halstead, 81 Hun 65, 30 N. Y. Suppl. 592, a broker had been negotiating a sale and was compelled to stop before reaching a consummation by the circum- stance that the purchaser at the time wanted another piece of property in addition to the defendant's. An- other broker conceived the idea of a partition suit to bring about a sale of the other piece required, and com- mission was finally paid him on the sale. The court (at page 69, 81 Hun, and page 594, 30 N. Y. Suppl.) said: 1 While it is unfortunate for the plaintiff that he should have been " so near and yet so far " from the accom- plishment of his purpose, the fact remains that the evi- dence justified the determination of the referee that the plaintiff did not at any time find a purchaser, and pro- duce him to his principal, ready and willing to purchase the real estate upon its terms * * and this much was necessarv for him to do in order to recover. ' " 27 But " if the efforts of the broker are rendered a fail- ure by the fault of the employer; if capriciously he changes his mind after the purchaser, ready and willing, and consenting to the prescribed terms, is produced; or if the latter declines to complete the contract because of some defect of title in the ownership of the seller, some unremoved incumbrance, some defect which is the fault of the latter, then the broker does not lose his commis- sions." 28 § 102. On What Recovery of Commissions Depends. In order to recover commissions, the broker must: (1) Show that he was employed; (2) be the procuring WMarkna v. Kenneally, 19 Misc. r.17; 43 N. Y. Suppl. 1057, 1058 (1897). WSlbbaW v. Bctblehem Irou Co., 83 N. Y. 383, 384 (1880). 104 COMMISSIONS AND THEIR RECOVERY. cause of the sale; (3) bring about the deal on the terras of his employer; (4) act in good faith; (5) produce an available purchaser, which under the general rule is one ready and willing to purchase and also legally able to do so; (6) bring about a completed transaction. CHAPTER X. BROKER MUST BE EMPLOYED. § 103. General Statement. A mere volunteer who brings a customer is not en- titled to commissions. (§§ 104, 105.) To justify a re- covery of commissions, there must be an employment of the broker, either express or to be implied from the cir- cumstances. (§§ 106, 107.) Where the broker claims he was employed by the owner's agent, he must show the agent's authority to employ him. (§ 108.) Where original employment is wanting, a ratification of the broker's acts may, under some circumstances, be equiva- lent to an original retainer. (§§ 109-112.) § 104. Volunteers Not Entitled to Commission. In order to recover commissions, a broker must prove an employment by the defendant and the rendition of services at the defendant's request. 1 It occurs frequently that the broker is not retained by the owner of property to endeavor to sell it but hears through other sources that the owner desires to sell. The broker then interests himself in the matter and endeavors to find a purchaser, not having, however, been authorized or requested by the owner to do so. In such case, the broker is said to be a " volunteer." The owner may, in such case, recognize the efforts of the broker and obligate himself to pay commissions, or he may refuse to recognize the broker's efforts altogether. 2 i Roome v. Robinson, 99 App. Dlv. 143 (N. T. 1904). 2 See §§ 109-112 infra. 105 106 COMMISSIONS AND THEIR RECOVERY. " If the broker renders services as a mere volunteer, without authority, express or implied, the owner of the property is not bound to pay him anything for such serv- ices." 3 "If a broker, without a previous request, brings a customer to a vendor, and the latter, without further acceptance of the broker's services, takes the customer, the broker is not entitled to compensation. An owner is not obliged to refuse a possible customer because services which he has not requested have been obtruded upon him, nor can he be enticed into a liability for commissions without his knowledge. In order to en- title the broker to commissions, there must be an actual employment or ratification and acceptance of the broker's acts; but in such case the intention to ratify must be plain, and no ratification could be inferred where no claim was made by the broker, and the fact that he was acting as broker was not drawn to the attention of the seller at the time. ' ' 4 § 105. When Party Acting Is a Volunteer. Even though a person is a real estate broker, he may assume such relations to the parties as would entitle the latter to the benefit of any services rendered. For ex- ample, a broker may agree that the amount of his com- mission may be deducted from the purchase price and al- lowed to the purchaser, in whom he is interested. 5 Or, again, a person is not entitled to a commission from the owner for informing a broker that certain property is 8 Fordtran v. Stowers, 113 S. W. 631 (Tex. 1908), (citing Pipkin v. Home, 68 S. W. (Tex. Civ. App.) 1000; Ehrenworth v. Putnam, 55 S. W. (Tex. Civ. App.) 190; Dunn v. Price, 87 Tex. 319 ; 28 S. W. 681 ; Cook v. Welch, 91 Mass. 350 ; Hinds v. Henry, 36 N. J. L. 328 ; McVickar v. Roche, 74 App. Div. 397 ; 77 N. Y. Suppl. 501 ; Viley v. Pettit, 96 Kv. 576 ; 29 S. W. 438 ; Walton v. Clark, 54 Minn. 341 ; 56 N. W. 40; Barton v. Powers, 182 Mass. 467; 65 N. E. 826). * Fowler v. Hoschke, 53 App. Div. 327 (N. Y. 1900) ; McVickar v. Roche, 74 App. Div. 397 (N. Y. 1902) ; Hinds v. Henry, 36 N. J. L. 330 (1873) ; Ballentine v. Mercer. 130 Mo. App. 614 (1908), (citing Butts v. Ruhey. 85 Mo. App. 405; Brady v. Machine Co., 83 N. Y. Suppl. 663; Havnes v. Fraser. 78 N. Y. Suppl. 794; Downing v. Buck, 98 N. W. 388; Barton v. Powers, 65 N. E. 826; Viley v. Pettit, 29 S. W. 438). ; and Bailey v. Chapman, 41 Mo. 537). But see Wilson v. Mason, 158 ill. :;i(> (1895), a fairly full quotation from which is given in this section, in another Illinois case decided before Wilson v. Mason, it was said: "In order to be entitled to commissions it is Indispensable thai the broker should show thai he has produced a purchaser ready and willing to take the property on the terms specified, or thai his efforts were the procuring cause of the sale which the principal has made to the purchaser with whom he has been brought Into communication." Davis v. Cassette, 30 III. App. 47 (1888). "Parker v. Walker, 86 Tenn. 509 (1888). See also Emery v. Atlanta Exchange, 88 Gu. 326 (1891). See also § 118. 120 COMMISSIONS AND THEIR RECOVERY. seem to hold that the broker is entitled to his commis- sions when the minds of the vendor and purchaser meet in a verbal agreement for the sale by the one and the purchase by the other of the land. We are not inclined to follow either of these classes of cases, regarding them as extreme and exceptional. The true rule is, that the broker is entitled to his commissions, if the purchaser presented by him and the vendor, his employer, enter into a valid, binding and enforceable contract. If, after the making of such a contract, even though executory in form, the purchaser declines to complete the sale and the seller refuses to compel performance, the broker ought not to be deprived of his commissions. He has done all that he can do when he produces a party who is able, and, in binding form, offers to purchase upon the proposed terms. An agreement by a real estate broker to procure a purchaser not only implies that the purchaser shall be one able to comply, but that the seller and the purchaser must be bound to each other in a valid contract. So, where the agreement of the real estate broker is to make a sale, his commission is earned when a contract is entered into which is mutually obligatory upon the vendor and vendee, even though the vendee afterwards refuses to execute his part of the contract of sale or pur- chase. 18 " An oral agreement upon the part of the purchaser of land would not be a valid agreement; and if he re- fused to complete the sale of the land after such oral agreement, without fault upon the part of the seller, the obligation of the broker would not be fulfilled, and he could not recover his commissions. 10 Nor would a writ- 18 Citing Parker v. Walker, 80 Tenn. 500; Coleman's Exrs. v. Mead, 13 Bush. 358; Francis v. Baker, 45 Minn. 83: Love v. Miller, 53 Ind. 294; Veazie v. Parker, 72 Me. 443 ; Willes v. Smith. 77 Wis. 81 ; Rice v. Mayo, 107 Mass. 550 ; Christensen v. Wooley, 41 Mo. App. 53 ; Love v. Owens, 31 Mo. App. 501 ; Greene v. Hollingshead, 40 111. App. 195; Short v. Millard, OS 111. 292; Kerfoot v. Steele, 113 111. 610; Ward v. Cobb, 148 Mass. 51 S. 19 Citing Parker v. Walker, supra; Middleton v. Findla, 25 Cal. 76; Whitney v. Cochran, 1 Scam. 209 ; Christensen v. Wooley, supra. BROKER MUST BE PROCURING CAUSE OF SALE. 121 ten agreement be binding upon the purchaser of land, under the Statute of Frauds, if such agreement were signed for him by some other person not lawfully au- thorized in writing to do so. ' ' 20 And at page 314 the court says : ' ' If the contract is of such a character, that the vendee can successfully plead the Statute of Frauds against its performance in a suit therefor by the vendor, then it is not a valid contract entitling the broker to his commissions within the rule already laid down." 21 In other cases there are expressions which lend color to this view. Thus in Flynn v. Jordal, 124 Iowa 458 (1904), it was said that where no sale was actually con- summated the broker to be entitled to commissions must either have procured a valid obligation to buy, or have brought the proposed purchaser and the vendor together so that a contract of sale might have been entered into if the vendor had so elected. And in Kifer v. Yoder, 198 Pa. St. 308 (1901), it was said: "It is always incumbent upon a broker seeking to recover a commission, to prove either that a sale was made to the party whom he procured as a purchaser, or that the purchaser was able and willing to buy and the failure to make an actual sale was through no fault of the broker or his customer." 22 § 118. Procuring Cause as Affected by Special Contract. A special contract supersedes the general rule as to commissions, and when such a contract exists the broker must, of course, comply with its terms before he is en- titled to commissions. " Upon the general question concerning the services to be performed by a land broker or agent to entitle him to recover upon a contract for commissions, there is much 20 Citing 111. Rev. Stat., Ch. 59. § 2; Cloud v. Greasley, 125 111. 313; McGlnnls v. Fernandas, 120 111. 228. 21 Cf. Monroe v. Snow, 131 111. 13C (1801). Sec also § 118. 22 See also Fraser v. Wyckoff, 03 N. Y. 445 (1875). 122 COMMISSIONS AND THEIR RECOVERY. confusion in the cases. It is apparently held by some Courts that the production of a purchaser who is ready and willing to buy upon the authorized terms, is all that is required to entitle the agent to the agreed compensa- tion. 23 Other cases hold to the rule that, under a con- tract giving the agent authority to sell, and providing a commission for such service, the mere production of a purchaser who is willing to buy upon the stated terms is not sufficient, but an actual sale or binding contract of sale must be shown before a recovery can be had upon the agreement. 24 Many of the decisions involving agent's and broker's commissions turn, more or less, upon the effect of the custom obtaining in such business, and upon implied obligations growing out of the peculiar circum- stances in the case decided. But where, as in this case, there is a special contract expressly stating the terms and conditions of the obligation entered into, there is no room for implication, nor can its terms be controlled by reference to custom. Consigney's contract empowered him to make a sale, to collect the cash payments, and to retain therefrom his commissions. By his petition he alleges that he did, in fact, make a sale, which appellants wrongfully refused to carry out by making the proper conveyance. Upon such a claim, based upon such an agencv we have heretofore held that the recovery of com- missions depends upon a 'consummated sale' — not nec- essarily a sale consummated by the delivery of deeds of convevance, but such a contract as will be enforced by the Courts if enforcement be demanded. Felts v. Butcher, 93 Iowa 414. The doctrine of this decision is well 23 Citing Knapp v. Wallace, 41 N. Y. 479 ; Davis v. Lawrence. 52 Kans. 383 ; 34 Pac. Rep. 1051 ; Parker v. Walker, 80 Tenn. 566 ; 8 S. W. Rep. 391 ; Potvin v. Curran, 13 Neb. 302; 14 N. W. Rep. 400. 24 Citing Hammond v. Crawford. 06 Fed. Rep. 425 ; 14 C C A. 109 ; 35 U. S. App. 1; Norman v. Reuther, 25 Misc. Rep. 101 : 54 N. Y. Supp. 152; Keys v. John- son, 68 Pa. 42; Haydock v. Stow, 40 N. Y. 363; Wilson v. Mason. 158 111. 304: 42 N T . E. Rep. 134; 49 Am. St. Rep. 162; Olson v. Jodon, 38 Minn. 468; 38 \. W. Rep. 185; Richards v. Jackson, 31 Md. 250; 1 Am. Rep. 49; De Santos v. Taney, 13 La. Ann. 152; Dorrington v. Powell, 52 Neb. 440; 72 N. W. Rep. 5S7 ; Drurv v. New- man, 99 Mass. 250; Bradford v. Menard, 35 Minn. 197; 2S N. W. Rep. 248. BROKER MUST BE PROCURING CAUSE OF SALE. 123 supported by the authorities. In Wilson v. Mason (158 111. 304; 42 N. E. Eep. 134; 49 Am. St. Rep. 162) the Illinois Court reviews the leading precedents and holds the true rule to be that the commission of an agent who undertakes to sell (as distinguished from a mere agree- ment to find a purchaser) ' is earned when a contract is entered into which is mutually obligatory upon the ven- dor and the vendee.' This holding is fully sustained by the other cases in the list last above cited (see footnote 24) as well as many more to which no special reference is here made. The rule of the Felts case is controlling in the present controversy. The cross-petitioner's ac- tion is based upon a special contract of agency to sell, and he can recover only by proof of a sale in fact ; that is, a sale so far consummated as to be valid, binding and mu- tually obligatory upon the parties — vendor and vendee. That a completed sale as a basis for the recovery of com- missions was contemplated by the parties, is shown in the stipulation, which authorized the agent to retain his compensation from the first cash installment of the price for which the property might be sold. In a case very similar to the one at bar, where the agent's commission was to be the excess obtained over a fixed net price, the Supreme Court of Minnesota has said that a provision of this kind ' involves the proposition that a sale shall be consummated' before an action by the agent on the con- tract will be sustained. 25 " In the preceding division of this opinion, we have held that no contract was effected between Ormsby and Consigney which equity will enforce against appellants. This alone has been held sufficient to defeat a claim for agent's commissions for negotiating an alleged sale. 20 And such seems to be the logical import of the opinions of this Court in Felts v. Butcher, 93 Iowa 414, and Bums 26 Citing Cremor v. Miller, 56 Minn. 52; 57 N. W. Rep. 318. » Citing Simonson v. Kissick, 4 Daly 143; Crombie v. Waldo (Super. Ct. N. X.J, 17 N. Y. Snpp. 373. 124 COMMISSIONS AND THEIR RECOVERY. v. Oliphant, 78 Iowa 456. See also Wilson v. Mason, 158 111. 304; 42 N. E. Eep. 134; 49 Am. St. Rep. 162, and Ward v. Cobb, 148 Mass. 518; 20 N. E. Rep. 174; 12 Am. St. Rep. 587, which, while not parallel cases, have a bearing upon the principle under discussion. ' ' 27 § 119. General Rule as to "Procuring Cause." As will be noted, there is some conflict of opinion as to when the agent's commission is earned; in other words, as to when he is the "procuring cause," some of the au- thorities holding that the procuring of an enforceable contract of sale is requisite to recovery. In some in- stances the authorities cited for the latter proposition do not sustain it, but are based on the particular nature of the employment, or relate to an exchange of property, or the procuring of a lease and not to a sale. A suggestion will, in connection with what has been already said, assist in giving the proper emphasis to the point really decided in these cases. Some of them sus- tain the proposition that the broker is not the procuring cause unless he secures an executed contract of sale. But it is not true that the authorities cited for the proposition all sustain it. On the contrary, it will be found that some do not and that the text writers and even the judges who do, stumble to their conclusions. The cases do say with one accord that the broker is entitled to commissions when he procures a contract of sale, but they do not mean that the broker must procure a contract of sale before he is entitled to commissions. The emphasis should be on this, that if he does procure such a contract his commissions are earned. But by weight of authority they would have been earned also had he not procured the contract, but instead produced a purchaser ready, willing and able to purchase. =t Ormsby v. Graham, 123 Iowa 213, 216 (1904). BROKER MUST BE PROCURING CAUSE OF SALE. 125 One illustration will suffice to show how easily errors are made in this matter. In a comparatively recent case, already cited, but which we refrain from now singling out, the court said that some cases hold that the broker must procure the contract to earn his commission, and cited authority for the statement. Yet the very first sup- porting citation does not really sustain the proposition. In this cited case the fact was that the broker had pro- cured a contract of sale and the court very rightly said that this entitled him to his commission, but nowhere in the entire opinion was it said that the procuring of the contract was essential. There are not a few cases cited in support of the statement that an executed contract of sale is required for recovery of commissions, which are as inadequate.- The statements of the present chapter have been pur- posely confined to the discussion of a sale or exchange. Some authorities hold that the case of a broker negotiat- ing a loan or a lease is the same as that of a broker nego- tiating a sale, while others apply a somewhat different rule to a loan or lease. There are states— Illinois, for example— where, as has already been indicated, even the decisions of the same court conflict on the question as to when the broker is the procuring cause of a sale. So there are instances— New York, for example— where the rule applied to loans is somewhat different from that ap- plied to sales. The subject of commissions on exchanges, on loans and on leases is discussed in Chapters XVIII- XX of the present volume. § 120. ' ' Procuring Cause ' ' when Representing Pur- chaser. A broker engaged by a prospective purchaser to pur- chase property must, in order to entitle himself to a com- mission from the prospective purchaser, either procure 126 COMMISSIONS AND THEIR RECOVERY. from the owner and deliver to the purchaser a valid con- tract for sale which could be enforced by the purchaser, or obtain from the owner a verbal agreement to make the sale, and bring the owner and prospective purchaser to- gether so that the latter may have an opportunity to pro- cure such a contract. 28 Where the broker represents the purchaser and has authority to buy at a fixed price, the broker earns his commission when he produces a vendor and his principal makes a valid, binding agreement with this vendor, and the broker's right to his commission is not affected by the inability or refusal of the vendor to deliver the property. In such a case, the broker has not produced a vendor able to deliver the property, and would not have earned his commission had it not been that his principal, by con- tracting with the vendor, had accepted him. 29 § 121. Effect of Promises to Pay Commission. Acknowledging in the contract an indebtedness to the broker to the amount of his customary commission, may be taken as an admission that the sale was effected through the agency of the broker. 30 But even where the owner actually promises to pay the broker commissions, under the belief that the broker was the procuring cause of the sale, he may nevertheless resist payment, and successfully too, if in fact the broker was not the procuring cause. 31 Without an employment, or the performance by the broker of some service at the request, express or implied, of the principal, a promise by the latter to pay commis- sions has no consideration for its support and no liability to pay is created by it. 32 And so it was said that in the 28 Logan v. McMnllen. 87 Pae. 285 (Cal. 19061. See also § 117 supra. 2» Roche v. Smith. 170 Mass. 595, at 597. 598; 51 L. R. A. 510 (1900). so Rerl field v. Teas. 38 N. Y. 214 (isr.s, si Rellesheim v. Palm. 54 App. Div. 77 (N. Y. 1900). »2 Myers v. Dean, 132 N. Y. 71, 72 (1892). BROKER MUST BE PROCURING CAUSE OF SALE. 127 absence of a written contract of employment, as required by the New Jersey statute, 33 a subsequent promise to pay commission is without consideration. 34 And where the promise to pay commission is made after the sale is al- ready consummated, there is said to be no consideration for the promise. 35 § 122. Unsuccessful Efforts. In one of the leading cases, 36 the New York Court of Appeals says: " A broker is never entitled to commis- sions for unsuccessful efforts. 37 The risk of failure is wholly his. The reward comes only with his success. That is the plain contract and contemplation of the par- ties. The broker may devote his time and labor, and ex- pend his money with ever so much of devotion to the interests of his employer, and yet if he fails; if without effecting an agreement or accomplishing a bargain, he abandons the effort, or his authority is fairly and in good faith terminated, he gains no right to commissions. He loses the labor and effort which was staked upon suc- cess. And in such event it matters not that after his failure, and the termination of his agency, what he has done proves of use and benefit to the principal. In a multitude of cases that must necessarily result. He may have introduced to each other parties who otherwise would have never met; he may have created impressions which, under later and more favorable circumstances, naturally lead to and materially assist in the consumma- tion of a sale; he may have planted the very seeds from which others reap the harvest; but all that gives him no M See § 16 supra. ** Leimbaeh v. Regner, 70 N. J. L. 609, 610 (1904). See also §§ 330, 333. « Wolvertcn v. Tuttle, 94 Pac. 963 (Ore. 1908). *• Slbbald v. Bethlehem Iron Co., 83 N. Y. 383 (1880). "See Patten v. Willis. 134 111. App. 649 (1907); Newton v. Conness, 106 S. W. (Tex. 1908); Raleigh K. E. & T. Co. v. Adams, 14.", N. C. 166 (1907); Smith v. Kimball. 193 Mass. r,.sr, (1907). As to consideration for promise t" pay commission though the broker is unsuccessful, see Kimmel v. Skelly, 130 Cal. 553 (1900). Sec also 0-84. 128 COMMISSIONS AND THEIR RECOVERY. claim. It was part of his risk that failing himself, not successful in fulfilling his obligation, others might be left to some extent to avail themselves of the fruit of his labors. As was said in Wylie v. Marine National Bank, 61 N. Y. 416, in such a case, the principal violates no right of the broker by selling to the first party who offers the price asked, and it matters not the sale is to the very party with whom the broker had been negotiating. He failed to find or produce a purchaser upon the terms pre- scribed in his employment, and the principal was under no obligation to wait longer that he might make further efforts. The failure, therefore, and its consequences, were the risk of the broker only." 38 In Garcelon v. Tibbets, 84 Me. 148 (1891), the court said: "It is now the well-settled doctrine, that in the absence of any usage, or contract, express or implied, or conduct of the seller preventing a completion of the bar- gain by the broker, an action by the broker for his com- missions will not lie until it is shown that he has effected or procured a sale of the property. It is not enough that the broker has devoted his time, labor or money to the in- terests of his employer. Unsuccessful efforts, however meritorious, afford no ground of action. Where his acts effect no agreement or contract between his employer and the purchaser, the loss must be his own. He loses his labor and effort which he staked upon success. If no contract, then no reward. His commissions are based upon the contract of sale. 39 Of course, there may be con- tracts between the broker and his employer, by the terms of which the broker may become entitled to his commis- sions, even though a bargain or sale may not be effected. In such cases the terms of the contract must govern, as 3« See § 158 infra; also § 242 infra. 39 Citing Viaux v. Old South Society, 133 Mass. 1, 10; Loud v. Hall, 106 Mass. 404, .407; Tombs v. Alexander, 101 Mass. 255; Koch v. Kmmerling, 22 How. (U. S.) 69; Glentworth v. Luther, 21 Barb. (N. Y.) 147; Drury v. Newman, 99 Mass. 256; Stbbald v. The Bethlehem Iron Co., 83 N. Y. 383; Cook v. \Veleh, 9 Allen (Mass.) 350; Veazie v. Parker, 72 Me. 443 ; Rockwell v. Newton, 44 Conn. 337. BROKER MUST BE PROCURING CAUSE OF SALE. 129 in Chapin v. Bridges, 116 Mass. 105, and Rice v. Mayo, 107 Mass. 550." § 123. Failure Through Fault of Principal. The broad statement that the broker when unsuccess- ful gains nothing from his labor and effort, " must be taken with one important and necessary limitation. If the efforts of the broker are rendered a failure by the fault of the employer; if capriciously he changes his mind, after the purchaser, ready and willing, and con- senting to the prescribed terms, is produced; or if the latter declines to complete the contract because of some defect of title in the ownership of the seller, some unre- moved encumbrance, some defect which is the fault of the latter, then the broker does not lose his commissions. And that upon the familiar principle that no one can avail himself of the non-performance of a condition prec- edent, who has himself occasioned its non-performance. But this limitation is not even an exception to the gen- eral rule affecting the broker's right, for it goes on the ground that the broker has done his duty, that he has brought buyer and seller to an agreement, but that the contract is not consummated and fails through the after- fault of the seller. The cases are uniform in this re- spect." 40 § 124. Purchaser Taking Title in Another's Name. " An agent cannot be deprived of his commission merely because the actual purchaser takes title in an- other's name." 41 And a broker does not lose his com- mission simply because the purchaser he produced did not buy in person but through an agent, provided the agency is known to the owner of the property. 42 ugibbald v. Bethlehem Iron Co.. 83 N. Y. 383 (1880). 11 Konner v. Anderson, .''.2 Misc. 511 (N. Y. 1900), (citing Randrup v. Schr ler, 22 Mi.-,-. 367). , . '-'Minster v. Benoliel, 32 Misc. 630 (N. Y. 1900). As lo the mutter of knowledge on the vendor's pari that the purchaser is the broker's customer, see § 130 infra. 130 COMMISSIONS AND THEIR EECOVEEY. 125. Effort Required of Broker. ' ' The broker must be the efficient agent or procuring cause of the sale." 43 It is not indispensable that the pur- chaser should be introduced to the owner by the broker, nor that the broker should be personally acquainted with the purchaser; but in such cases it must affirmatively appear that the purchaser was induced to apply to the owner through the means employed by the broker. 44 But " to earn a commission for effecting the sale of real es- tate, a broker must do something more than get author- ity from the owner to negotiate the sale. He must be the effectual cause of the sale. He must find the pur- chaser, or at the very least induce a purchaser to buy the property at a price acceptable to the owner, and the sale must proceed from his efforts. ' ' 45 Where, for instance, a person ascertained that A desired to sell or exchange, and presented A's card to B which resulted in an ex- exchange, held, the broker was not entitled to commis- sion. 46 " All the cases agree that the disclosure of the pur- chaser's name and the putting of him in communication with the defendant by the plaintiff must be not only the foundation upon which the negotiation was begun, but upon which it was conducted and the sale ultimately made. 47 The broker must be shown to be the procuring cause of the sale. The intervention of the plaintiff in beginning the negotiations, and their subsequent culmi- nation in a sale, will not suffice unless those negotiations were the ultimate cause of the sale." 48 " To entitle a broker to commissions, he must have 43 King Powder Co. v. Dillon, 90 Pae. 441 (Colo. 1908) ; Piatt v. Johr, 9 Ind. App. 01 (1893). ** Sussdorff v. Schmidt, 55 N. Y. ."522 (1873). And see § 90 supra. *~* Scherer v. Colwell, 43 Misc. 391 (N. Y. 1904); Ayres v. Thomas, 110 Cal. 144 (1897); Burch v. Hester. 109 S. W. 399 (Tex. 190S). M See Walton v. M'MoriOW, 03 App. Div. 147 (N. Y. 1901); aff'd, 175 N. Y. 493 (1903), no opinion. 47 Citing Keener v. Harrod, 2 Mrt. 71 ; Tlollydav v. Southern Agency, 100 Md. 290. *» Walker v. Baldwin, 100 Md. 019 (1907). See §§ 97, 98 supra, 237 infra for subject of "Employment of Several Brokers." BROKER MUST BE PROCURING CAUSE OF SALE. 131 produced a purchaser who was ready, willing and able to purchase the property upon the terms and at a price des- ignated by the principal. Second: The broker must be the efficient agent or procuring cause of the sale. The means employed by him and his efforts must result in the sale. He must find the purchaser and the sale must pro- ceed from his efforts, acting as broker. ' ' 49 " It may be doubtful whether merely advising the consummation of a bargain, of which the efforts of a rival (broker) are the procuring cause, would entitle a broker to commissions. It ought certainly to be shown that the advice given contributed so materially to the result as to be fairly entitled to be regarded as the pro- curing cause of the transaction. ' ' 50 If a proposed purchaser promises to pay the commis- sion in case he purchases because the vendor would pay no commission, and the property is subsequently sold to a third party, who in turn sells to the proposed pur- chaser, the question whether the commission was earned should be submitted to the jury. 51 And the broker must procure a purchaser during the term of his employment. (See § 138 and also Ch. X.) § 126. Presence of Broker. The broker need not of necessity be present and an active participator in the agreement of buyer and seller when that agreement is actually concluded. 52 Brokers are to bring buyer and seller together; they need have nothing to do with the negotiation of the bargain. 53 The " sale " which brokers are to make under the ordinary 49 Cole v. Thornburg, 4 Colo. App. 07 (1893), (citing Babcock v. Merritt, 1 Colo. App. 84. and cases cited; Anderson v. Sniythe, 1 Colo. App. 253). 60 Davis v. Cassette, 30 111. App. 40 (1888). C1 Mntchnick v. Friedman, 135 App. Div. 350 (N. Y. 1009). B2 Colonial Tr. Co. v. Pacific, l.'.s Fed. 280 (1907), (citing Sibbald v. Bethlehem Iron Co.. .s:; N. Y. 378; Hoadley v. Savings Bank. 71 Conn. 509; 42 Atl. 007; 44 I.. R. A. 321; Vreelaud v. Vetterlein, 33 N. .(. I.. 247: Keys v. Johnson, 68 Pa, 42; McMillan v. Beves, 77 C. C. A. 444; 147 Fed. 218; French v. McKay, 181 Mass. 485; C3 N. E. 10C8). "Crevellug v. Wood, 05 I'a. St. 157 (1880). 132 COMMISSIONS AND THEIR RECOVERY. employment is usually considered as effected when the minds of the buyer and seller are brought to meet. 54 " He may just as effectually produce and create the agreement, though absent when it is completed and taking no part in the arrangement of its final details. ' ' 55 He must, however, bring the minds of the buyer and sel- ler to an agreement for a sale, and the price and terms on which it is to be made. 50 Where the broker produced to the owner a pro- posed purchaser, and a memorandum of the purchase and sale was written out and signed bv the seller in duplicate and the proposed purchaser took them and did not sign them in the form they then were, but made some material erasures and interlineations and then signed them, and the seller refused to re-sign them in their altered shape, it cannot be said that there was a meeting of the minds of the parties. 57 The fact that the broker is not present at the sale is of no consequence, for, to entitle him to compensation, it is sufficient that a sale is effected through his agency, as its procuring cause; and if his communications with the purchaser are the means of bringing him and the owner together, and the sale results in consequence, the compensation is earned, although the broker does not ne- gotiate and is not present at the sale. 58 And neither need the broker transact the business in person. After he has produced the buyer, the owner may conclude the trans- action, and the broker will not lose his commission. 59 And where the owner concludes the sale at a less sum than that fixed, the broker is entitled at least to a ratable proportion of the agreed commission. 60 " See § 158, 159 infra. BBSlbbald v. Bethlehem Iron Co., 83 N. Y. 382 (1880). 5,1 Id. And see § 96 supra. w Bruce v. Hurlbut, 47 App. Div. 103 (N. Y. 1900). See also §§ 132-138 infra as to terms of sale. «* Hobbs v. Edgar, 23 Misc. 61S (N. Y. 1898); Boqua v. Marshall, 114 S. W. 714 (Ark. 1908). «> Baker v. Thomas. 11 Misc. 112 (N. Y. 1895). eo Martin v. Sillinian, 53 N. Y. 015 (1S73). BROKER MUST BE PROCURING CAUSE OF SALE. 133 § 127. Introductions. If, as a proximate result of the introduction of the purchaser to the owner by the agent, the owner makes the sale himself, either personally or by another agent, it will not exonerate the owner from the payment of commission to the agent who has initiated the negotia- tions. 61 " But if the casual connection between the in- troducing agent and the procurement of the sale be broken, the first agent is not entitled to any commis- sion." 62 An introduction is not necessary if the broker is ac- tually the procuring cause of the sale. 63 All that is ne- cessary is for the owner before making the sale himself to acquire the knowledge— it matters not in what man- ner—that the purchaser is the client of the broker and has been procured by the broker to purchase the specific piece of property at the price and upon the terms desig- nated. 64 Although it is not essential that the broker should have introduced the buyer to the owner, or even have known the buyer, or that the owner should know that the broker was the producing cause of the sale to the buyer, 65 yet it must affirmatively appear that the pur- chaser was induced to apply to the owner through the means employed by the broker. 66 It is not necessary that the broker should bring the proposed purchaser into the physical presence of the owner, especially so where the owner positively refuses to go on with the sale under any terms. 67 Where, how- 81 Lew v. Wolf, K4 Pac. 313 (Cal. 1905). (citing Tyler v. Parr, 52 Mo. 249; Jones v. Artier. 34 Mrt. 447). And see g 96 supra. ,_ _. . "Church v. Dunham, 14 [daho 782 (1908), (citing Wood v. Broderson, 12 Idaho 190; 85 Pac. 190; Le n v. l)e Wolf, s:> Minn. 405; 95 N. W. 31C ; note to Ward v. Cobb, 12 Am. St. Hep. 589). •eColonlal Trusl <',,. v. Pacific Co.. ins Fed. 280 (1907). '■" K.ilfsK-in v. Jackson, 132 App. Div. 1 (N. Y. 1909); Hafner v. nerron, 105 111. 246 (1SP7). »? Uetzelsohn v. Donnelly, 00 Misc. 1G4 (N. Y. 1906). 134 COMMISSIONS AND THEIR RECOVERY. ever, ' ' the broker introduces one party to the other and a sale results, unless he is able to show employment, that fact does not entitle him to compensation." 68 And in Patten v. Willis, 134 111. App. 651 (1907), the court quotes from Fessenden v. Doane, 188 111. 228-231, as follows: " One claiming commission for the sale of real estate cannot rightfully claim the benefit of introducing to the defendant a purchaser for the property who had already been introduced to him as such by another party, with and through whom negotiations were already in progress and were continued to a consummation of the sale." The production by the broker of a contract of purchase signed by the purchaser is legally equivalent to the production of the purchaser himself. 69 § 128. Advertising. Where a broker is employed to sell property and he advertises it, and an intending purchaser is attracted by the advertisements, and submits an offer to the broker and this is communicated to the owner, and the negotia- tions are then continued without interruption until a sale is consummated, the broker is entitled to commis- sions, even though the sale appears to have been finally consummated between the owner and the purchaser directly. 70 But where the broker advertised the property in the newspapers, and the broker's attention was attracted to a prospective purchaser by the advertisements of such purchaser, and wrote letters to him, but never saw the purchaser or received any answers to his letters, nor ever introduced the purchaser to the owner, the effective- ness of the broker's instrumentality in bringing about «« Bright v. Canadian Int. Stock Yard Co., 83 Hun 482 (N. Y. 1895). See also "Employment," §§ 10.'i-112 supra. 89 Young v. 'Ruhwedel, 119 Mo. App. 242 (1900). 7° Doran v. Bussard, 18 App. Div. 387 (N. Y. 1897); Bell v. Kaiser, 50 Mo. 150 (1872) ; Goffe v. Gibson, 18 Mo. App. 4 (18S5) ; Latta v. King, 6 D. C. 310 (1808). BROKER MUST BE PROCURING CAUSE OF SALE. 135 the sale must affirmatively appear if commissions are to be recovered. 71 § 129. Consummation of Sale by Another Broker. Where a broker opens negotiations for the sale of property and the proposed purchaser abandons the broker, the owner may sell to the same purchaser in- duced to purchase by another broker, without becoming liable to the first broker for commissions. 72 But where the principal interferes and assists another broker to bring about the sale by authorizing the second broker to sell for less than the first brokers were authorized to sell, and this while the first brokers were still negotiating with the proposed purchaser, the principal cannot escape liability to the first broker on a sale made to such pro- posed purchaser. 73 Although the parties are originally brought together by the broker, but no terms are agreed upon, and some weeks later the matter is taken up by another broker who finally consummates the sale by bringing the parties to terms, the first broker is not entitled to commissions. To earn his commission the broker must do something more than get authority from the owner to negotiate the sale. He must be the effectual cause of the sale. He must find the purchaser, or at the very least induce a purchaser to buy the property at a price acceptable to the owner. 74 Where one whose attention was called by the owner's broker to the fact that certain property was for sale re- fused to make such broker an offer, but immediately after- wards bought the property through another broker whom n Halterman v. Leinlng, 4. r > Misc. 397 (N. Y. 1904). WWylle v. Murine Nat. Bank. 61 N. Y. 415 (1875); Bureh v. Hester, 109 S. W. 399 (Tex. 1908); Maraoella v. Odell, 3 Daly 123 (N. Y. 1869). n Holland v. Vinson, 124 Mo. App. 417 (1907). See also "Employment of Sev- eral Broken," §5 97. 98 wpro. _ «Dc Zavala v. Bogallner, 15 Misc. 430 (N. Y. 1904). But see Crone v. Trust Co., 85 Mo. App. 001 (1900). 136 COMMISSIONS AND THEIR RECOVERY. she represented to the owner to be entitled to the commis- sions, it was held that the owner's broker could not re- cover his commissions from either the purchaser or her broker. 75 It is further held in the same case— Oppenheimer v. Barnett, 131 App. Div. 614 (N. Y. 1909) -that where the owner's broker calls the attention of a person to the fact that the property is for sale, that in no way obligates such person to make the purchase through him; on the contrary, such person may go directly to the seller and make the best trade he can with him, or he may purchase through some broker whom he selects himself. In either case, the broker whom the seller had originally employed would have no cause for complaint against the purchaser or against the broker to whom the seller paid the com- missions. If the broker is entitled to commissions at all, it is from the seller, and if the broker is the procuring cause of the sale, he must look to him and not to the purchaser. The purchaser of real estate is not obligated to see that a broker employed by the seller gets the com- missions to which he claims he is entitled. In another case where the broker at least opened up negotiations which were concluded in good faith by an- other broker, the first broker was awarded a recovery of commissions. Here defendant placed certain property in the hands of various agents for sale, and plaintiff, who was one of them, showed the property to a prospective purchaser, who objected to the price, whereupon it was agreed between plaintiff and defendant that the latter should negotiate with the prospective purchaser, and see if terms could not be reached. Defendant tried to obtain an interview with the purchaser, but was unsuccessful, after which the purchaser employed a broker to purchase the property for him, and defendant, without knowledge that the sale was for the benefit of the same purchaser, n Oppenheimer v. Barnett, 131 App. Div. 614 (N. Y. 1909). BROKER MUST BE PROCURING CAUSE OP SALE. 137 contracted to convey the property to the broker's party for a less price. Held, that plaintiff was the procuring cause of such sale, and was entitled to commissions. 76 § 130. Consummation of Sale by Principal. Where the agent is the procuring cause, he is entitled to commissions even though the negotiations were con- ducted and concluded by the principal in person. 77 " It is sufficient to entitle a broker to compensation that the sale is effected through his agency as its procur- ing cause, and if his communications with the purchaser were the cause or means of bringing him and the owner together, and the sale resulted in consequence thereof, the broker is entitled to recover. ' ' 7S In the case of Lloyd v. Matthews, 51 N. Y. 124 (1872) just quoted from, it was also held no error for the court to charge that where a buyer goes directly to the owner and shows such familiarity with the terms of sale of the property— the price asked, for instance— as to lead the owner to believe that the purchaser must have acquired his knowledge from some one who knew, it may become the duty of the owner to inquire from the purchaser who gave him his information, in order that the owner may inform himself whether or not the purchaser derived his information from any of the brokers into whose hands the owner had given the property for sale. 79 And some of the authori- ties hold that the fact that the owner did not know that the purchaser had been sent to him by his broker is im- material. 80 In Quist v. Goodfellow, 99 Minn. 509 (1906), it was ™Scliultz v. Zelman, 111 S. W. 770 (Tox. 1908). "Morgan v. Keller. 194 Mo. 079 (190.->i. w Llovd v. Matthews, 51 N. Y. 124 (1872); Finch v. Betts. 134 111. App. 475 (1907i; Boqua v. Marshall, ill S. W. 714 (Ark. 1908); Goldsmith v. Coxe, Gl S. E. r,:,r> (S. C. 1908). See also §§ 100, 1"1 supra and §§ 240, 241 infra. ™ See also Hennlnger v. Bnrch, 90 Minn. 4:! (1903) so See Colonial Trust Co. v. Pacific Co., 158 Fed. 280 (1907). In which the court refers to Graves v. Bains. 78 Tex. 92; Bryan v. Abert, •"• App. D. C. 180; Adams v. Decker ".t ill. App. 17; Kelly v. Stone. 9i Iowa 318; Mlllan v. Porter, 31 Mo. App. 563; Tyler v. Parr, 52 Mo. 249; Ross v. Mnskowltz, 95 S. W. (Tex. Civ. App.) 80. 138 COMMISSIONS AND THEIR RECOVERY. said: " Some of the authorities hold that a real estate broker is entitled to his commission where his efforts were in fact the procuring cause of a sale though made by the owner in good faith and in ignorance of his ef- forts. * * To entitle the broker to a commission in such case, where there is no exclusive agency, it must appear that the owner knew, or from the circumstances ought to have known, that the broker was instrumental in inducing the purchaser to enter into the contract. Such was the rule laid down in Cathcart v. Bacon, 47 Minn. 34; 49 N. W. 331, and it is the law in other states. 81 We are aware of the fact that the authorities are somewhat conflicting upon the subject. (19Cyc. 264.) " In another case, 82 it was said: " While the broker must produce, as well as find, a purchaser, 83 it is not in- dispensable that he participate in the negotiations im- mediately resulting in a sale, or even that the owner know that the purchaser was the broker's customer. 84 A charge to the effect that, in the absence of the broker, it was the duty of the owner to ascertain from the pur- chaser who sent him was held correct in Bickart v. Hoff- man, 46 N. Y. St. Repr. 886. But it was intimated by this court in this department that there might be circum- stances in which the fact that the owner was ignorant that the purchaser was the broker's customer would be controlling." 85 " The fact that the defendant did not know, at the time of making the sale to Shumaker, that the latter had been procured by the plaintiffs is immaterial. The right to a recovery by the plaintiffs depended upon the fact « Citing Soule v. Deering, 87 Me. 365 ; 32 Atl. 998 ; Gamble v. Grether, 108 Mo. 340; 83 S. W. 306; Tinges v. Moale, 25 Md. 480; 90 Am. Dec. 73; Wylie v. Marine, 61 N. Y. 415. sajungeblut v. Gindra, 134 App. Div. 293 (N. Y. 1909). ss Citing Gerding v. Haskin, 141 N. Y. 514; Rae Co. v. Kane, 121 App Div. 494. s* Citing Lloyd v. Matthews. 51 N. Y. 124; Sussdorff v. Schmidt, 55 N. Y. 319; Wylie v. Marine National Rank, 61 N. Y. 415. * Citing Metcalfe v. Gordon, 86 App. Div. 368. BROKER MUST BE PROCURING CAUSE OF SALE. 139 that they had procured the purchaser, and not upon the knowledge on the part of the defendant of that fact at the time of the sale." 86 Where a broker employed to sell lands merely called the attention of a prospective purchaser to the property without notifying his principal and without taking fur- ther steps in the matter, he is not entitled to commissions if the owner, five or six months afterwards, sells the land to the customer without knowledge of the broker's nego- tiations. 87 Where a broker employed to sell at a specified price procures a proposed purchaser and opens negotiations with him, the fact that the employer, without terminat- ing the agency or the negotiations so commenced, takes it into his own hands and concludes the sale at a lower price, or upon modified terms, does not deprive the broker of his right to commissions. 88 But where the broker opens negotiations, but fails to bring the customer to the specified terms and abandons the negotiations, the employer may subsequently sell to the same person at the price fixed, without liability for commissions. 89 Where negotiations are, in good faith, broken off and abandoned, and a sale is finally effected wholly through the influence of another broker, the first broker is not entitled to commissions. 90 And so when negotiations with a prospective purchaser are broken off and the broker attempts to sell him property of other persons, he is not entitled to commissions when the owner, a month afterwards, sells to the proposed purchaser on different terms. 91 A contract employing a broker to sell lands, and giv- MMllIan v. Porter .*!1 Mo. App. 57C. (1888), (citing Tvler v. Parr, 52 Mo. 250; OofTc v. Gibson, 18 Mo. App. 4). " Waters & Son v. Rafalsky, 134 App. Div. 870 (N. Y. 1009). B8 Hobba v. Edgar, •_•:•. Misc. 618 (N. Y. 1898); Wright v. McCllntock, 136 111. App. 142 (1907); Pblnlzy v. Bnsh, 129 Oa. 486 (1907); Morris v. Francis, 75 Kans. 580 (1907) : s. c, 89 Pac. 001 ; Cook v. Forst, 116 Ala. 396 (1S96). BMarkns v. Kenneally, 43 N. Y. Snppl. 1056 (1897). 80 Walker v. Baldwin, loo Md. 632 (1007). 81 Miller v. Vinlng, 112 App. Div. 304 (N. Y. 1906). 1 40 COMMISSIONS AND THEIR RECOVERY. ing him commissions " in case of the sale or conveyance of said property at any time within one year from this date," should not be construed to mean that the broker was entitled to commissions if the property were sold by the owner without the aid of the broker, but, on the contrary, only entitles the broker to commissions if he was instrumental in bringing the owner and purchaser together. 92 And where a broker voluntarily interposes in a transaction between the principals, but even then fails to bring the purchaser up to the terms of the seller, he is not entitled to a commission when the principals later get together in continuation of the negotiations and come to an agreement. 93 »2 Parkliurst v. Tryon. 134 App. Div. 843 (N. Y. 1909). See also subject of exclusive agency in §§ 99 supra ?nd 239 infra. »3 Willard v. Ferguson, 125 App. Div. 868 (N. Y. 1908). See also Kiernan v. Bloom, 91 App. Div. 429 (N. Y. 1904), quoted supra § 96. CHAPTER XII. SALE MUST BE ON EMPLOYER'S TERMS. § 131. General Statement. The broker must produce a purchaser ready, willing and able to purchase on the principal's terms. (§§ 132, 133.) But if he does not accomplish the precise thing which he was employed to do, but what he does accom- plish is accepted by the principal, the broker is entitled to a commission. (§§ 134, 135.) If a price is fixed, the broker must procure a pur- chaser at that price; but the price may be increased by the principal on timely notice to the broker. (§§ 136, 137.) The broker must procure a purchaser during the term of his employment, and where no definite time is fixed he has a reasonable time. (§ 138.) The broker is not obligated to make a sale unless he expressly contracts to do so. (§ 139.) § 132. Purchaser Must Agree to Seller's Terms. Whatever may be the terms and conditions upon which the broker's right to compensation depends, they must be performed as a condition precedent to a right of action for a commission. 1 Where the terms of the sale are all given to the broker in advance, he must pro- duce a purchaser ready, willing and able to purchase on those terms, and the owner may refuse any proposed pur- i Frnsor v. Wvcknff. 63 N. Y. 445 (1875) : Monson v. Kill, 144 111. 255 (180H); Jepsen v. Marohn, ll!t N. \V. 888 (S. D. 100!)): Crnsthwiiite v. Lebus, 14G Ala. 525 (1900). As to vuriatiou of terms by owuer, see §§ 134, 135 infra. 141 142 COMMISSIONS AND THEIR RECOVERY. chaser who is not willing to purchase on all of those terms. 2 On the other hand, if the broker produces a person ready, willing and able 3 to purchase on the terms pre- scribed by the principal, the latter may not impose new or different terms. 4 A change of terms comes too late after the broker has negotiated a sale. 5 A broker who has procured a purchaser for lands to whom the defend- ant gave a written receipt for earnest money paid, stating all the terms of the sale, but providing for the execution of a formal contract, is entitled to recover his commissions although the sale was not consummated by reason of the fact that the vendor subsequently, at the time fixed for signing the contract, insisted that the pur- chaser pay accumulated taxes in addition to the price agreed upon. 6 If no terms are laid down beforehand by the princi- pal, the broker takes the hazard. In such case the broker cannot recover commissions unless he produces a pur- chaser ready, willing and able to purchase on the terms, whatever they may be, then stated by the principal. 7 § 133. All of Seller's Terms Must be Met. All the terms must be agreed upon. "The particular terms of the contract must be complied with and no performance upon other terms will suffice, unless accepted by the principal. * * The purchaser found by the broker must be not only ready, willing and able to purchase, but to purchase upon the terms specified in the contract of employment. ' ' 8 2 Smith v. Allen, 101 Iowa 608 (1897). » See §§ 117-119 supra. * Milne v. Ingersoll Co., 120 App. Div. 465 (N. Y. 1907). See also §§ 134, 135, 147 infra. 6 Com. & Inv. Co. v. Real Estate Co., 120 Mo. App. 437 (1906). •Phillips v. Kraft, 136 App. Div. 859 (N. Y. 1910). 7 See § 147 infra. ... 8 Newton v. Conness, 106 S. W. 894 (Tex. 1908) ; Wolner v. Chambers, 128 111. App. 624 (1906). SALE MUST BE ON EMPLOYER'S TEEMS. 143 Where the broker produces a proposed purchaser who enters into a writing in which some of the terms are agreed upon, but others are left to be agreed upon in the contract of sale, the broker is not entitled to commission if the parties are unable to agree on these other matters. 9 Where a broker is employed to sell a whole parcel of land, but produced purchasers for only two portions, and after the lapse of a reasonable time, the owner, in- dependently of the broker, sold the two portions to the purchasers the broker had found, the broker is not en- titled to commission on the two portions sold. Before the broker can recover on such a contract he must show performance of the entire contract. 10 If the purchaser insists upon more onerous terms in the contract than those which were verbally agreed upon between the parties, the owner is not bound to execute such a contract, and under such circumstances the broker does not produce a purchaser willing to execute a contract upon the terms prescribed. 11 And so where the broker's purchaser refused to consummate the purchase unless the vendor would agree to give him a warranty deed, which the vendor refused to do, and the parties could not agree as to the form of the deed, the broker is not entitled to commissions. This was the case in Garcelon v. Tibbets, 84 Me. 148 (1891), in which the court said: " The efforts of the plaintiff to complete the sale failed, not through any fault of the defendant, but by reason of the purchaser and the defendant not being able to agree in reference to the form of conveyance. The purchaser demanded more than the law exacts where there is no agreement, and no form of conveyance is agreed upon. The title was in the defendant. A deed of release or quit claim of the usual form would have conveyed the defendant's title and es- » Shapiro v. Nadler, 51 Misc. 13 (N. Y. 1900). See Mainhart v. Poerschke, 32 Misc. !i" (N. Y. 1900), where the time of closing title had not been agreed upon. 10 Carpenter v. Atlas Imp. Co., 123 App. Div. 700 (N. Y. l!)O.S). But see § 134 infra. " Weiss v. Kubinsou, 112 App. Dlv. 270 (N. Y. 190G). 144 COMMISSIONS AND THEIR RECOVERY. tate as effectually as a deed of warranty. R S., Chap. 73, £ 14. An agreement or covenant to convey a good title does not necessarily entitle the covenantee to a warranty deed. Kyle v. Kavanagh, 103 Mass. 356, 359." 12 The broker cannot even call upon his principal to go to the place of business of the other party and there make the contract or negotiate for its terms. 13 § 134. Acceptance by Owner of Different Terms. Where the broker does not accomplish the precise thing which he was employed to do, but what he did is accepted by the owner as being satisfactory, the broker is entitled to commission. 14 If the broker negotiates a contract different from that prescribed by his employer and the employer sub- sequently ratifies it, and thus a contract is finally made which is satisfactory to him, then the broker has earned his commission. 15 This applies where the broker has acted in good faith, and the contract made is either signed by the employer himself or is approved or rati- fied by him. 1r fuller discussion of broker acting for both parties. 7 Sc<> Plotner v. Cliillson, 95 Pac. 777 (1908), (citing McKinley v. Williams, 74 Fed. 95; 20 C. C. A. 313). 152 COMMISSIONS AND THEIR RECOVERY. of the vendors for effecting the sale. 8 In Hess v. Galla- gher, 64 Misc. 95, 96 (N. V. 1909), it was said: "As agents for the defendant, the plaintiffs might not directly buy from or sell to the defendant and recover for services upon their own contract as his agents; because, as agents, they were and would be under legal obligation to respect the confidence reposed in them as such, and could not unite, Jekyll and Hyde like, in their same persons the character of principal, which would naturally tend to a violation of the confidence reposed in them as agents and by whose active instrumentality an acceptance of de- fendant's offer was effected, if at all; and, therefore, they would and did disentitle themselves to recover for services therein, because ' contracts which are opposed to open, upright and fair dealing are opposed to public policy. A contract by which one is placed under a direct inducement to violate the confidence reposed in him by another is of this character. ' ' ' § 144. Broker Must Accept Largest Offer. An agent to sell stands in the place of and represents the vendor and is therefore bound to discard every feel- ing of friendship toward a proposed buyer, to know no self-interest, to act, as in his judgment the interests of the vendor would induce the vendor to act, if present in person instead of being present by an agent. It is his duty, of two offers, to accept the one which would most benefit his client. 9 " In commenting on the relation of real estate brokers to their principals it was said in Rich v. Black el al, 173 Pa. 92, 99, that ' the relation which such agents bear is confidential and disarms the vigi- lance of their principals; it affords peculiar facilities for obtaining exclusive information in respect of the prop- erty entrusted to them for sale; their employment implies b s<*. 55 r,!)-71 supra, 151, 152 infra. " Dictum in Haydocfe v. Stow, 40 X Y. 369 (18C9), citinj* authorities. See also Plotner v. Chill son, 05 I'ac. 770 (Okla. 11)08); Bunn v. Keach, 214 111. 264 (1905). BEOKEK MUST ACT IN GOOD FAITH. 153 that they have superior advantages for making sales and that they will use every effort and means to obtain the highest price for the benefit of their principal.' See also Addison v. Wanamaker, 185 Pa. 536." 10 " If, after receiving instructions to sell property on certain specified terms, the agent learns that other and more advantageous terms can be obtained, it is his plain duty and he is under every legal and moral obligation to communicate the facts to the principal, that he may act advisedly in the premises." 11 Thus where a broker was authorized to sell for $105,000 or more, and he pro- cured a purchaser at $105,000 when he might have pro- cured a purchaser at $110,000, he is not entitled to re- cover commissions. 12 Where the brokers secure a purchaser at the price asked by the seller, but, fraudulently concealing the fact that the purchaser has acceded to the terms, endeavor to beat the vendor down on the price, they cannot be said to have acted in good faith. And so it was held, even in a case where the broker finally submitted the offer originally asked for and the owner apparently accepted it but later refused to sign the contract. 13 And where the broker retains part of the price he obtains, he is guilty of fraud and forfeits his commission. 14 And while it may be bad faith for the broker to en- deavor to get his client to pay more for the property than is really asked by the owner, yet that would not apply with the same strictness to an exchange in which the broker is acting for both parties with their knowledge, and he endeavors to have one party pay or allow more for the property he is to take in order to equalize the equities and thus bring about an exchange. 15 ^Wilkinson v. McCullough, 190 Pa. St. 208. 209 (1900). 11 Holmes v. Cathcart, 60 L. It. A. 7?.4 (Minn. 1903). " Llcbteosteln v. fns<\ 99 App. r>iv. 570 (N. Y. 1904). "Martin v. Uliss, 57 Hun l. r ,7 (N. Y. 1890). »« Deter v. Jackson, 70 Kims. 568 (1907). See 5§ 145, 250 infra. is Featberston v. Trone, 102 S. W. 197 (Ark. 1907). 1 ,") 1 COMMISSIONS AND THEIR RECOVERY. § 145. When Refusal to Disclose Information is Not Bad Faith. Where an owner of land agrees to pay another person as compensation for securing a purchaser for the land, all above a minimum sum per acre and a fixed sum in addition, and such person sells the land for an amount above the minimum, the fact that he refuses to tell the owner for how much he sold the land, or states to him that he sold it at the minimum, will not deprive him of his right to recover the additional fixed sum agreed upon. In such a case there is no such relation of trust and con- fidence between the parties as will require a disclosure to the owner of the terms of the sale. There is no prin- ciple of law that obliges one who has made an honest con- tract with another, to communicate to that other any- thing subsequently happening that might be an induce- ment to that other to repudiate his contract. 16 i« Fulton v. Walters, 216 Pa. St. 56 (1906). CHAPTER XIV. AVAILABILITY OF PURCHASER. § 146. General Statement. The broker must produce a purchaser who is ready, willing and able to purchase on the seller's terms. (§§ 147, 148.) To procure a party who merely takes an op- tion does not entitle the broker to commission. (§ 149.) But having produced a purchaser ready, willing and able to jDurchase, the broker cannot be deprived of his com- missions by a subsequent change of mind on the part of the seller. (§ 150.) The principal has the right to demand to know who the purchaser is; but may waive this right. (§§ 151, 152.) The proposed purchaser must not only be ready and willing, but also able to purchase on the terms of the seller. But the seller cannot avail himself of the objec- tion that the customer is not financiallv able, after he has accepted the purchaser as satisfactory and has en- tered into an enforceable contract with him. (§§ 153- 155.) § 147. Ready and Willing to Purchase. The broker must produce a purchaser ready, willing and able 1 to purchase on the seller's terms. 2 The minds of the seller and purchaser must be brought to meet, through the broker's agency. 3 And it should always be 1 As to aliilitv of purchaser, see §§ 153-155 infra. • Nolan v. East. 132 111. App. Vi34 (1907) ; King Powder Co. v. Dillon, 96 Pac. 441 (Colo. 1908): Cook v Forst. 116 Ala. 397 (1896). 3 ttunyon v. Wilkinson, 57 N. J. L. 422 (1894). 155 1 .")(') COMMISSIONS AND "III.! II KKCOVEBY. borne in mind thai sonic authorities hold that the broker is not out it led to commissions until he has procured an executed contract. 4 If the seller lays down his terms to the broker before- hand, and the broker produces a purchaser ready and willing to purchase on the terms laid down, the commis- sions are earned. 5 If, on the other hand, no terms have been laid down, then the purchaser produced by the broker must be ready and willing to purchase on the terms exacted by the seller. 6 § 148. Purchaser Not Ready and Willing. The requirements of authorization to find a purchaser are not complied with by producing a person willing to take a lease for a long term with the privilege of purchas- ing. 7 Where no statement is made to the broker that the property is free and clear, and the only terms laid down by the owner are that he would sell at a satisfactory figure, the broker is not entitled to commissions for pro- ducing a proposed purchaser at a figure satisfactory to the owner, if the proposed purchaser, learning that there are restrictions on the property, refuses to pay the owner's price and offers a smaller amount. 8 If the pro- posed purchaser capriciously or unjustifiably refuses to contract, he cannot be regarded as a ready and willing purchaser. 9 Where one whose attention was called by the owner's broker to the fact that certain property was for sale, re- fused to make such broker an offer and immediately afterwards bought the property through another broker, whom she represented to the owner to be entitled to the * See §§ 117-110 supra. s Forrester v. Price, <: Misc. 308 (N. Y. 1S93). See § 150. « Forrester v. Price, supra; Fairchild v. Cunningham, S4 Minn. 524 (1901); Runyon v. Wilkinson, •" N. J. L. 421 (1894). TWooley v. Schmal, 5 Ohio Cir. Ct. 7C (1890). BWeibler v. Cook. 77 App. Div. 637 (N. Y. 1002). eSheinnonse v. Klueppel, 80 App. Div. 445 (N. Y. 1903). AVAILABILITY OF PURCHASES. 157 commissions, the owner's broker has not produced a pur- chaser, ready and willing, and cannot recover his com- missions, either from the purchaser or her broker. 10 Where the broker presents a person who assumes to represent an organization desiring to purchase, and such person is unable to produce his authority for enter- ing into a contract on behalf of the organization, and refuses to enter into the contract personally, it was held in Kirwan v. Barney, 29 Misc. 614 (N. Y. 1899) that the owner is not liable for commissions. In the case cited, the court quotes from Bennett v. Egan, 3 Misc. 421 (N. Y. 1893), as follows: " As long as the vendor insists upon something he has a right to insist upon as a con- dition of sale, and to which the vendee refuses to assent, in consequence of which disagreement the vendee re- fuses to enter into an enforceable contract of sale, it can- not be held that the broker has procured a complete meeting of the minds of the vendor and vendee." If the purchaser insists upon more onerous terms in the contract than those which were verbally agreed upon between the parties, the owner is not bound to execute such a contract, and under such circumstances the broker does not produce a purchaser willing to execute a con- tract upon the terms prescribed. 11 Where a broker produced a proposed purchaser and an informal writing was entered into, according to which the parties were to meet subsequently and execute a writ- ten contract of sale, it was held in Feiner v. Kobbe, 13 Misc. 499 (N. Y. 1895) that the broker is not entitled to commissions if the purchaser fails to attend and execute the written contract. This, on the ground that the pur- chaser was apparently not ready and willing to purchase the property. In the case cited, however, the court concluded its 10 Oppenbeimer v. Rnrnptt, 131 App. Piv. 014 (N. Y. 1009). 1 Weiss v. Bublnson, 112 App. Div. 270 (N. Y. 1900). 158 COMMISSIONS AND THEIR RECOVERY. opinion as follows: " The defendant insisted upon hav- ing a formal contract in writing giving in detail all the terms and conditions of the exchange, and had a right to impose this condition before assenting to a trade, or mak- ing himself liable for brokerage. The failure to effect the exchange is not chargeable to any misconduct of the defendant, but is owing to inexcusable absence of New- borg, the proposed purchaser, whom the plaintiff im- pliedly undertook to produce at the time and place ap- pointed for the execution of the formal contract." § 149. Procuring Person who Takes Option. A broker is not entitled to a commission for procur- ing a party who enters into an option which gives him the right to purchase but does not obligate him to do so, even though a deposit is paid on such option. 12 And so, if the broker merely produces a person who, without himself agreeing to buy, obtains a written agreement from the owner to sell and afterwards refuses to take title, this does not entitle the broker to commissions. 13 If the purchaser enters into a contract which, as one of its conditions, reserves to him the privilege of annul- ling the contract under certain contingencies, there is no completed transaction. 14 Where the proposed purchaser insists on a clause in the contract that in case he rejects title on account of encroachments, which would not otherwise constitute ground of rejection, his deposit shall be returned, the broker is not entitled to commis- sions, as the contract is thus rendered a mere option. 15 If the broker is employed by a prospective purchaser 12 Mllstein v. Doring. 102 App. Div. 349 (N. Y. 1005) ; Runek v. Dimmick. Ill S. W. 779 (Tex. 1908); Wilson v. Ellis. 10(> S. W. 1152 (Tex. 1908); Block v. Ryan, 4 A fi.. Cas. I). C. 283 (1894). See also Lawrence v. Rhodes, 188 111. 100 (1900). where are cited Aider v. Carpenter Co., 51 Kans. 718; Kimberlev v. Henderson, 29 Md. 512; Zeidler v. Walker. 41 Mo. App. 118; Dwyer v. Raborn, 6 Wash. 213. And see §§ 1G3, 351 infra. 13 Kampf v. Dreyer, 119 App. Div. 134 (N. Y. 1907) ; Runck v. Dimmick, supra. "Crockett v. Orayson, 98 Va. 354 (1900). See also Ch. XV, "Transaction Must tie Complete." 15 Hough v. Baldwin, 53 Misc. 284 (N. Y. 1907). AVAILABILITY OF PURCHASER. 159 to obtain an option, the above rule does not, of course, apply, and the broker is entitled to compensation for his services if he accomplishes the object of his employ- ment. 16 § 150. Change of Mind by Vendor. Wilful, arbitrary, capricious or fraudulent refusal of the vendor to sell when a purchaser is produced, does not deprive the broker of his right to commissions. 17 " The production of a responsible purchaser on terms which are satisfactory to the employer at the time the contract of brokerage is entered into, is sufficient to entitle the broker to his commissions, and he cannot be deprived of his right to them by a mere change of mind on the part of the vendor." 18 But where there is no time fixed, the vendor, before his proposition is accepted, may change his mind and withdraw his proposition if he does it in good faith. 19 § 151. Disclosure of Purchaser. The broker must produce the purchaser to his prin- cipal. The principal is entitled to know who the pro- posed purchaser is and with whom he is expected to enter into a contract, and as long as there is uncertainty as to the purchaser the broker cannot claim performance of his contract and demand his compensation. 20 But it is held in Young v. Ruhwedel, 119 Mo. App. 242 (1906) that the production by the broker of a contract of purchase signed by the purchaser is legally equivalent to the pro- duction of the purchaser himself. The true identity of the purchaser may be sometimes i« See Roarrlman v. Hanks, 185 Mass. 555 (1904). "Flower v. Davidson. 44 Minn. 48 (1890). "Martin v. Werman. 107 App. Dlv. 482 (N. Y. 1905). See also SibbaUl v. Beth- lehem Iron Co., 83 N. Y. 378 (1880); nnneock v. Stacy. 116 S. W. 177 (Tex. 1909). "Arthur v. Porter, 118 S. W. Oil (Tex. 1909). See also "Time of Performance, 8 138 mipra. 2°Gerdlne v. Haskln, 141 N. Y. 514 (1894). loO COMMISSIONS AND THEIR RECOVERY. a material fact which ought to be known to the principal, since such knowledge might affect his action.- 1 "Ob- viously a broker cannot keep his customer in the dark and allow him (the principal) to fall into the trap of agreeing to pay another broker, or of taking a less price for the property in the belief that no commissions are to be paid, and then recover his commission." — AVhere the broker misleads his principal and gives him a false name as that of the prospective buyer, the principal is not liable to the broker for commission if he sells, either directly or through another broker to the very customer who was in fact the customer of the broker, but whose real identity was concealed. 23 § 152. Waiver of Right to Disclosure of Purchaser. But while the seller is entitled to know who the pro- posed purchaser is, and with whom he is expected to enter into contract, he may relinquish that right by waiv- ing the production of the intending purchaser and the consequent information. 24 Thus where the principal does not ask for it, the broker need not disclose the name of his customer. 25 And where the broker has not dis- closed the name of the proposed buyer, and the seller interposes no objection thereto, but refuses to make the sale after the broker notifies him that a purchaser has been procured, he (the seller) waives the right to the de- fense that the broker is not entitled to commissions be- cause he did not communicate the name of the proposed purchaser. 26 On the other hand, " an agent cannot be deprived of his commission merely because the actual purchaser 21 Veasey v. Carson, 177 Mass. 117 (1900), (citing Young v. Hughes, 32 N. J. Eq. 372; Pratt v. Patterson, 112 Penn. St. 475). M Jungeblut v. Gindra, 134 App. Div. 2!t.°.. 294 (N. Y. 1909). 23 Id. -* Simpson v. Smith, 30 Misc. 815 (N. Y. 1902). 2S Hovey v. Aaron, 133 Mo. App. 583 (1908). 88 Duclos v. Cunningham, 102 N. I. 078 (1886). AVAILABILITY OF PURCHASER. 161 takes title in another's name." 27 The deed to the pur- chaser is admissible in evidence to show who the pur- chaser really was. 28 § 153. Financial Ability of Purchaser. The rule requires that the proposed purchaser must not only be ready and willing, but also able to purchase, on the seller's terms. 29 By this is meant that the pro- posed purchaser must be financially able to make the purchase. Where no contract results, in order to re- cover, the broker must show the financial ability of the proposed purchaser. 30 In Iselin v. Griffith, 62 Iowa 668 (1883), the owner sold the land to another after notice of a sale made by the broker. The court said: " We think that, in order to entitle plaintiffs to recover, something more than a mere offer to purchase should be shown by them. Such an offer could be made by one without means, and who is in no condition to comply with the terms of the sale, and against whom a claim for damages resulting from a fail- ure to perform the contract of purchase, could not be enforced. An offer from such an one ought not to be considered as constituting the performance of plaintiffs' undertaking to negotiate the sale of the land. As the pecuniary responsibility of the purchasers was or ought to have been known to plaintiffs, and as upon it depended the performance of their contract with defendant, the burden rested upon them to show it. These conclusions are supported by Coleman's Exrs. v. Mead, 13 Bush. 358, and McGavock v. Woodlief, 20 How. 221. Contra see Cook v. Kroemeke, 4 Daly 268, and Hart v. Hoffman, 44 How. Pr. 168." 27 Konncr v. Anderson, 32 Misc. 511 (N. Y. 1900), (citing Randrup v. Schroeder, 22 Misc. 367 (N. Y. 1S9S) ). 28 Myers v. Cohen. 4 Misc. 185 (N. Y. 1893). 20 I.unney v. Healev. 44 L. R. A. C19 (1898). 30 Cornin v. M. & T. Bank, 121 App. Div. 744 (N. Y. 1907). But see McDermott v. Mahoney, 115 S. W. 38 (Iowa 1908). L62 COMMISSIONS AND THEIR RECOVERY. Where no contract of sale was entered into and the sole question was whether the broker had produced a purchaser who was able to purchase on the defendant's terms, and one of the terms was a cash payment of con- siderable amount, the broker was required to show that the proposed purchaser had available funds. And as- sets consisting of stock in business and claims against third parties were not held sufficient. 31 Where an informal contract is agreed upon, and the proposed buyer is to pay $450 on the signing of the for- mal contract, and a large amount at the closing of title 32 and the vendor refuses to execute the formal contract as agreed, the question of the financial ability of the pur- chaser, it seems, should be whether he was financially able to pay the deposit at the time agreed, not whether he was then able to pay the entire purchase price. 33 § 154. When Financial Ability of Purchaser Need Not be Shown. The purchaser's ability is generally presumed unless the contrary appear. 34 The owner cannot avail himself of the objection that the customer procured by the broker is not able to pay for the premises, after he has accepted such purchaser as satisfactory and has entered into an enforceable con- tract of purchase and sale with him. 35 Where a contract of sale is actually made, the broker, to recover his com- missions, need not show the financial ability of the pro- posed buyer. 36 So where all the terms of the sale are agreed upon and the vendor accepts the proposed pur- » Schnitzer v. Price. 122 App. Div. 409 (N. Y. 1907). 3 - *<•<• ^ 364 infra as to meaning of the term "closing of title." "Levy v. Buff, 4 Misc. 180 (N. Y. 1893). »*McFarland v. Lillard, 2 Ind. App. 166 (1891). 30 Alt v. Doscher, 102 App. Div. 344 (N. Y. 1905); Watkins Co. v. Thetfonl. 96 S. W. 72 (Tex. 1906); Parker v. Walker. 80 Tenn. 571 (1888); Phinizy v. Bush. 12!) Ga. 486 (1907); Glade v. Eastern 111. Ming. Co., 107 S. W. 1005 (Mo. 1908), (citing Wright v. Brown, 68 Mo. App. 577). 39 Beekley v. Morton, 140 111. App. 304 (1908). AVAILABILITY OF PURCHASER. 163 chaser, the broker need not show the financial abilitv of this purchaser. 37 Nor need he show it, it has been said, where the vendor refuses to sell for reasons other than the financial inability of the purchaser. 38 Thus where the purchaser stated that he had a certified check to pay on account of the purchase price, and was willing to make the contract, and the owner refused to make the contract because he had since advanced the price, an actual ex- hibition of the tender of the check was held not neces- sary. 39 Financial ability of the purchaser is not a proper sub- ject of inquiry where the contract has been executed, and no. question is raised concerning same by the vendor, and where there is no question of bad faith or that the broker induced the vendor to execute the contract by represen- tations as to the financial ability of the purchaser. 40 Nor is it essential to show the financial ability of the pur- chasers if the agent is employed to effect a sale on speci- fied terms to designated persons. 41 But what has already been said must also be consid- ered from another viewpoint. As we have seen, 42 there are cases which hold that the broker's obligation is not completed until the purchaser produced by him carries out his contract. Where such rule prevails, the force of the decisions above referred to is necessarily limited, or fails altogether. 43 And " it is, of course, possible for a broker, by special contract, to make his compensation contingent upon the actual payment of the purchase price. Thus, where, by special contract, a broker's commission depends upon fulfillment by the purchaser of his contract to purchase, S7 Brand v. Najrle. 122 App. Div. 490 (N. Y. 1907). 88 McFarland v. Lilian!. 2 Ind. App. 100 (1891). s » Harrell v. Veith, 13 N. Y. St. Rep. 738 (1888). » Fleet v. Barker, 120 App. Div. 45. r ) (N. y. 1907). 41 Stoutenburgh v. Evans, 120 N. W. 59 (Iowa 1909). * 2 §§ 117-119 xupra. "See Moore v. Irvin, 20 L. R. A. (N. S.) 11C8, and notes; s. C, 116 S. W. 062 (Ark. 1909). Hi I COMMISSIONS AND THEIR RECOVERY. he cannot recover his commission where the purchaser docs not perform because of financial inability, although, after his default, the contract was cancelled by mutual agreement of the parties." 44 § 155. Burden of Proof as to Financial Ability of Pur- chaser. " Whether in actions generally by agents to recover commissions for procuring purchasers, where there has been no consummation of the sale, the burden is upon the agent to show the ability of the proposed purchaser to pay the consideration, or upon the seller to show the want of that ability, is a question about which there is a conflict of authority. Some hold that solvency and abil- ity are to be presumed; others maintain the opposite doctrine. In view of the particular facts of the case (the purchaser had been accepted without condition or inquiry), we deem it unnecessary to express an opinion upon the broad question. Whatever doubt there may be as regards the general question above stated, we are of the opinion that when the principal accepts the purchaser without question of his ability to perform, and the sale fails of consummation of his own fault or failure to make good his offer, the burden is upon him, in order to defeat the agent's rights to compensation, to show the pur- chaser's want of ability. 45 In that case, where the facts were quite like those in this, the court said : ' Upon this question the authorities are conflicting, but we think the true rule is this: That as a general proposition, a broker who has been employed to sell is not entitled to recover his commission unless he shows that he procured a per- son willing, ready and able to purchase upon the terms "Moore v. Irvin, 20 L. R. A. (N. S.) 1172 (Ark. 1909) where other authorities are cited. « Citing Davis v. Morgan, 9G Ga. 518, 520 ; 23 S. E. 417. AVAILABILITY OF PURCHASER. 165 prescribed by his principal; but where it appears that the proposed purchaser was accepted by the principal, the burden is upon the latter to show that the purchaser was not able to comply with the terms of the con- tract.' " 46 «« Dotson v. Milliken. 27 App. D. C. 515, 516 (1906), (citing Lockwood v. Halsey, 41 Kans. 166, 169; 21 Pac. 98; Fairly v. Wappoo Mills, 44 S. C. 227, 248; 29 L. R. A. 215; 22 S. E. 108). See also §§ 153, 154 supra. CHAPTER XV. TRANSACTION MUST BE COMPLETE. § 156. General Statement. The broker must bring about a completed trans- action, which requires that all the details of the bargain must be agreed upon. (§§ 157-160.) Procuring a person who merely takes an option on the property does not entitle the broker to commissions. (§ 163.) Where the broker fails to bring the customer up to the specified terms and abandons the negotiations, he is not entitled to commissions though the principal subse- quently sells to the same person at the price fixed. (§ 164.) § 157. What Constitutes a Completed Transaction. The broker must bring about a completed transac- tion. 1 On this the authorities are agreed. They differ, however, on the question as to what constitutes a com- pleted transaction. Some authorities hold that when the broker has produced a purchaser ready, willing and able to purchase on his principal's terms, his obligation is performed. Others hold that the broker must bring about a valid enforceable contract of sale. The subject has already been presented and the authorities cited. 2 No extended argument is necessary to show that in those jurisdictions where the broker is required to bring about an enforceable contract of sale, he has not brought 1 Buxton t. Beal, V> Minn. 2.30 (1892). 2 §§ 117-119 supra. 166 TRANSACTION MUST BE COMPLETE. 167 about a completed transaction until the contract is ac- tually executed. This chapter, therefore, deals only with the question as to what constitutes a completed transac- tion in those jurisdictions where the broker earns his commissions by producing a purchaser ready, willing and able to purchase on his principal's terms. § 158. General Rule as to Completeness of Transaction. 3 There must be a meeting of the minds of both buyer and seller on all the terms of the transaction. 4 Where the owner gives the broker the price and par- ticular terms upon which the property is to be sold, and the owner thereafter capriciously refuses to make the sale to a person procured by the broker, able and willing to purchase on those terms, the broker earns his commis- sion. But where the terms have not been definitely pre- scribed, the broker assumes the hazard of being able to find a person whose terms are so satisfactory to the owner that a definite arrangement might be made, and in respect to which the minds of the parties might, as a result, meet, and his commission is not earned until their minds do so meet. 5 § 159. All Details of Sale Must be Agreed Upon. 6 A broker is not entitled to commission unless he shows that the parties to the proposed sale reached an agreement, not only as to the price but as to the terms of payment, the time of taking title, and all the details incident to such sale. 7 Thus, under the customary con- tract of brokerage, a broker though he procures a pur- 3 See § 157 nupra as to scope of this chapter. 1 Runyon v. Wilkinson. 57 N. J. L. 422 (1894) ; Rockwell v. Newton, 44 Conn. 333 (1H77». See 55 147. 148 supra. « Forrester v. Price, C Misc. 308 (N. Y. 1893) ; Fairehlld v. Cunningham, 84 Minn. 524 (1901). 8 See § 157 supra as to scope of this chapter. i Peace v. Ross, 123 App. Dlv. 611 (N. Y. 1908) ; Caston v. Quimby, 178 Mass. 153 (1901). L68 COMMISSIONS AND THEIR RECOVERY. chaser who is willing and able to pay the price asked, is not entitled to commissions if the minds of the parties do not meet in a contract, the details of which are worked out and understood between them, the sale not being consummated by reason of a lack of agreement as to its terms and conditions, as for instance, a failure to agree on a time when the title should be closed, 8 or the refusal of the vendor to obligate himself to dig a well. 9 § 160. Effect of Special Conditions on Completeness of Transaction. 10 Where the purchaser's assent to buy is qualified by a statement that he accepts the vendor's offer and has forwarded contract to be signed, it is really an accept- ance according to the contents of such contract, but un- less the contract is satisfactory, or complies with the vendor's proposition, no completed transaction can be said to have resulted. 11 AVhere the broker has brought a purchaser ready and willing to purchase on the owner's terms, and an infor- mal agreement is reached, but the vendor refuses later to make a formal contract, the fact that the broker subse- quently endeavors to have the parties agree on new terms does not amount to a waiver of his right to commis- sions. 12 And in a Nebraska case, it was said that " when the price of property and terms of payment are fixed by the seller, and the broker's engagement is to procure a pur- chaser at that price and upon those terms, if, upon the procurement of the broker, a purchaser is produced with whom the seller himself negotiates and effects a sale, although the terms may be changed and even the sale BHaase v. Schneider, 112 App. Div. 336 (N. Y. 1906). See § 364 infra 83 to meaning of "closing of tide." "Smith v. Allen, 101 Iowa 608 (1897). 10 See § 1"7 supra as to scope of this chapter. u RiiNvon v. Wilkinson. 57 N. J. L. 423 (1894). See also § 163 infra. "Levy v. Ruff, 4 Misc. 180 (N. Y. 1893). TRANSACTION MUST BE COMPLETE. 169 itself finally abandoned, he is entitled to his commis- sion." 13 So where the broker was authorized to sell, nothing being said about the character of the deed to be given, and the owner refuses to contract only because the pur- chaser produced by the broker insists on a warranty deed, which the owner declines to give on account of a supposed defect in part of the title, the broker cannot recover commissions, since it cannot be said that the minds of the parties met. 14 And it was held in Guth- mann v. Meyer, 31 Misc. 810 (N. Y. 1900) that a broker is not entitled to commission where his principal and the proposed purchaser failed to consummate a sale because of a dispute over taxes. But where the broker produces a purchaser ready, able and willing to purchase, and the only objection of the owner is that the purchaser's acceptance did not pro- vide for the same terms of interest required by the owner, and the broker offered to have the acceptance complied with and to pay the difference then and there, the broker was held entitled to his commissions, the court deeming the owner's objection too trivial. 15 And where an owner listed his property with two brokers to one of whom he had given a fixed price ($12,400), and a buyer not know- ing this, proposed to buy the property from the other broker at a higher price ($13,000), but later discovering the facts, negotiated with the first broker at $12,400, and the owner, though duly notified thereof, refused to ac- cept, preferring the larger offer, it was held that the broker with the $12,400 offer had earned his commis- sion. 16 And where a broker procures a customer to whom his employer agrees to sell, he is entitled to recover commis- " Potvin v. Currnn. 13 Nebr. 302 (1882). "Hess v. Bloch, 56 Misc. 4*0 (N. Y. 1907). See also § 133 supra. 1B Rlker v. Post. 125 App. Div. 607 (N.Y. 1908). M Lovett v. Clench, 115 App. Dlv. 635 (N. Y. 1900). 170 COMMISSIONS AND THEIR RECOVERY. sions notwithstanding that thereafter the employer re- fuses to enter into a formal contract of sale because a building upon the land intended to be conveyed en- croaches upon adjoining land. 17 § 161. Effect of Failure to Contract. As stated in § 157, those jurisdictions which require an executed contract of sale before the broker is entitled to commissions are expressly excluded from the con- siderations of this chapter. It may therefore be stated broadly that it is sufficient if the broker duly employed has found a purchaser ready, willing and able to enter into such a contract, or to purchase on his employer's terms. 18 It is not necessary that a written contract of sale should have been entered into between the parties in order to entitle the broker to his commissions, 19 nor that a conveyance of the property intrusted to him for sale should actually be consummated between his em- ployer and customer. 20 So long as an agreement has been reached, though not reduced to writing, the owner is liable for broker's commissions even though he recedes from the agreement before it has been reduced to writing. 21 But the broker may obligate himself not only to find a purchaser but to procure a contract of sale in writing, and when this is the arrangement he can claim no com- mission until such written agreement to purchase is fur- nished. 22 In Norman v. Reuther, 25 Misc. 161 (N. Y. 1898), it 17 Cusack v. Aikman, 93 App. Div. 579 (N. Y. 1904). "See § 96 supra; also Duelos v. Cunningham, 102 N. Y. 678 (1896): Lunney v. Healey, 44 L. H. A. 601 (1898). i» McFarland v. Lillard. 2 Ind. App. 163 (1891); Vaughan v. McCarthy, 59 Minn. 202 (1894); Millan v. Porter, 31 Mo. App. 576 (1888), (citing Keys v. Johnson, 68 Pa. St. 43; Tyler v. Parr, 52 Mo. 249, and other Missouri cases). * Martin v. Bliss, 57 Hun 157 (N. Y. 1890). 21 Levy v. Ruff, 4 Misc. 180 (N. Y. 1893), (citing Barnard v. Monnot, 3 Keyes (N. \.) 203; Krahner v. Heilmnn, 30 N. Y. St. Rep. 434; Kalley v. Baker, 132 N. Y 1; Gilder v. Davis, 137 N. Y. 506). ■* McFarland v. Lillard, 2 Ind. App. 165 (1891). TRANSACTION MUST BE COMPLETE. 171 was held in the case of an exchange, that the broker must show that lie had procured a valid contract for exchange. § 162. Modification of Terms. Where a broker has procured the making of a con- tract, he is entitled to commission, although the parties subsequently agree to a modification thereof without the intervention of the broker. 23 And where the parties are brought into communication by the broker's agency, the principal, by negotiating with the purchaser on different terms, waives the terms given to the broker. 24 § 163. Options and " Alternative " Contracts. We have already seen, 25 that a broker is not entitled to commission for procuring a person who merely takes an option to purchase. A distinction must, however, be made between a mere option to purchase, the bringing about of which gives the broker no right to commissions, and a contract entered into between the seller and the purchaser which provides for liquidated damages in case of non-performance. An option is an exclusive privilege to buy. It binds the one who makes it, but not the one to whom it is made, unless he accepts, when it becomes binding upon both. 26 Acceptance of the option does not mean the mere receiving of the agreement, but means an acceptance of the offer contained in the option according to its terms. 27 On the other hand, a contract of sale which provides for liquidated damages in case of the default or non-performance of either party, is none the less a contract of sale and not an option. Parties are not released from performing their agreement by inserting "a Jones v. Henry. IB Misc. 151 (N. Y. 1895). 2« Davis v. Cassette, ."50 111. App. 44. 45 (1888). See also §§ 134, 135 supra. a" 8 14!) mora. 2« "Benedict v. Pincus, 191 N. Y. 382, 383 (1908). "Pomeroy v. Newell, 117 App. Div. 802 (N. Y. 1907). 172 COMMISSIONS AND THEIR RECOVERY. a penalty for non-performance. Specific performance may, nevertheless, be had. 28 "The question always is, what is the agreement? Is it that one certain thing shall be done, with a penalty added to secure its performance, or is it that one of two things shall be done, namely, the performance of the act, or the payment of the sum of money? If the former, the fact of the penalty being an- nexed will not prevent equity from enforcing perform- ance of the very thing and thus carrying out the inten- tion of the parties; if the latter, the contract is satisfied by the payment of a sum of money and there is no ground for equitable procedure against the party having the election. Stipulating the damages and promising to pay them in case of default in the performance of an other- wise absolute undertaking, does not constitute an alter- native contract. ' ' 29 The contract for the sale of real estate may provide for the payment of a sum of money as liquidated damages by the party failing to perform, and thus the contract may in a certain sense be optional with either party, yet if the employer signs or approves the contract, there is no reason to doubt that in such a case, although in the end the purchaser may not take a conveyance of the real estate, preferring to pay the liquidated damages, the broker has earned his commissions. 30 If in such a case the employer wishes to be exempt from the payment of commissions or to confine the commissions to the amount of the liquidated damages paid in lieu of performance, he should stipulate for such exemption in the contract with his broker. 31 Where, however, a contract was procured by the broker, and approved and confirmed by the principal pre- 29 Phoenix Ins. Co. v. Continental Ins. Co.. 14 Abb. Pr. N. S. 266 (N. Y. 1873); Zimmermann v. HerzoK. 13 App. Div. 213 (N. Y. 1897). 28 Crane v. Peer. 43 N. J. Eq. 558, 563. 3° Hut Bee Lawrence v. Rhodes, 188 111 90 (1900); Moss v. Wren, 118 S. W. 149 (Tex. L908). « Gilder t. Davis. 137 N. Y. 506 (1893). TKANSACTION MUST BE COMPLETE. 173 scribing that a certain amount was to be paid down on account of the purchase price, which was done, and the balance was to be paid as soon as a company to be organ- ized by the purchaser was formed and enough stock sub- scribed to meet the payment, and that in event of the failure of the purchaser to organize the company and ob- tain enough subscriptions to pay the balance of the pur- chase price within a specified time, the payment on ac- count of the purchase price should be forfeited to the seller, and it was so forfeited, the New York Court of Appeals thought it a just view that the broker should at least receive his commissions upon the sum paid and for- feited by the purchaser. And this is so, notwithstanding that the seller informed the broker that he should not be entitled to commissions until the final purchase money was paid and the broker expressed his satisfaction with the arrangement. The Court in fact went even further, stating that while it was not necessary to be determined it was by no means clear that the broker was not entitled to his full commissions. 32 But a broker is not entitled to commissions upon ef- fecting a provisional agreement for a sale, 33 which fails because the purchaser avails himself of a reserved privi- lege to recede from the purchase upon the happening of a specified contingency not dependent upon the action of the vendor. 34 § 164. Abandonment by Broker. Where a broker opens negotiations, but, failing to bring the customer to the specified terms, abandons them, and the employer subsequently sells to the same person at the price fixed, he is not liable to the broker for COm- aa Glider v. Davis, 137 N. Y. 50C (1893). as Barber v. nildebrand, 42 Net>r. 405 (1894). ** Condiet v. Cowdrey, 139 N. Y. 273 (1893). And see Lawrence v. Rhodes, 188 111. 90 (1900); Block v. Ryan, 4 App. D. C. 283 (1894). 174 COMMISSIONS AND THEIR RECOVERY. missions.™ " The fact that a sale or exchange of the property is finally brought about by the efforts of the principal or another broker, with a person with whom the first broker had previously negotiated without suc- cess, will not furnish a legal basis for a claim for commis- sions by the first broker, especially when it appears that the first broker has for a long time ceased negotiations with the purchaser, and abandoned all efforts to induce him to take the property on the proposed terms. ' ' 36 Abandonment by the broker is matter of defense. 37 m Markus v. Kenneallv, 19 Misc. 517 (N. Y. 1897) ; Moore v. Cresap, 109 Iowa 749 (1899) ; Singer v. Hutchinson, 61 111. App. 308 (1895). See also Davis v. Gas- sette, 30 111. App. 45 (1888). , , , „, *> Davis v. Gassette. 30 111. App. 45 (1S88), (citing Lipe v. Ludewick, 14 111. App. 372: Sibbald v. Bethlehem Iron Works, 83 N. Y. 378). See also §§ 97, 98 supra and 237 infra. . „ , _. ** Moore v. Boehm, 45 Misc. 622 (N. Y. 1904). See also § 336 infra. CHAPTER XVI. FAILURE OF PRINCIPAL TO COMPLETE. § 165. General Statement. If, after the broker performs his obligation, the seller is unable to consummate the sale, or refuses to do so, the broker is nevertheless entitled to his commissions. (§§ 166-170.) § 166. The Broker's Obligation. Here, as in the preceding chapter, it must be kept in mind that there is a conflict in the decisions as to what amounts to a performance of the broker's obligation. Briefly, the difference is this, — some cases hold that the broker must procure an enforceable contract of sale be- fore he has earned his commissions, while others hold that the broker has earned his commission when he pro- duces a purchaser ready, willing and able to purchase on his principal's terms. The latter may be regarded as the prevailing rule. Some of the cases even go so far as to hold that the broker is not entitled to his commissions unless the sale is actually accomplished by the delivery of the deed of the land from the vendor to the vendee and the payment of the purchase money by the latter, or unless it is proven that the sale is prevented by the fault of the vendor. 1 These conflicting views are thus briefly referred to in order that the statements of the present chapter may be 1 See §§ 117-119 supra and footnotes thereto. 175 176 COMMISSIONS AND THEIR RECOVERY. considered accordingly, and so that the authorities given may not be confused and the attempt be made to apply them in jurisdictions where the prevalence of one or the other of the rules set forth might make these authorities inapplicable. § 167. General Rule as to Failure of Principal to Com- plete. 2 If, after the broker produces a purchaser ready and willing to purchase the property upon the terms fixed by the seller, the seller is unable to consummate the contract or refuses to do so, the broker is nevertheless entitled to his commissions. 3 The broker's right to commission is not to be defeated by any default of the principal. 4 ' ' If defendants (the owners) employed plaintiffs (the bro- kers) to find a purchaser for this property, the compen- sation was earned when they produced the purchaser upon the prescribed terms, and the inability of defend- ants to convey was an independent matter, for which they, and not plaintiffs, were responsible. The cases are uniform in this respect." 5 " The just and well-settled rule of law requires that the agent shall be paid his compensation when he pro- cures a purchaser who is acceptable to the principal, and ready, able and willing to buy on the agreed terms, though in fact the sale be not ultimately consummated, provided its consummation is prevented by the fault, re- fusal or defective title of the principal." 6 2 Sep § ICO supra as to scope of chapter. * Mooney v. Elder. 56 N. Y. 238 (1874); Braekenridge v. Claridge, 43 L. R. A. 593 (1898) ; Ayres v. Thomas, 110 Cal. 143 (1897) ; McDermott v. Maboney, 115 N. W. 37 (Iowa 1908) ; King Powder Co. v. Dillon, 90 Pac. 441 (Colo. 1908). « Ryer v. Tnrkel. 70 Atl. 72 (N. J. 1908). E McLaughlin v. Wheeler, 1 S. D. 521 (1891), (citing Hamlin v. Schulte, 34 Minn. 534 ; 27 N. \V. Rep. 301 ; Mooney v. Elder, 50 N. Y. 238 ; Hannon v. Moran, 71 Mich. 201 ; 38 N. W. Rep. 909). 8 Cheatham v. Yarbrough. 90 Tenn. 79 (1891). (citing Mech. on Agency, §§ 966, 967; 2 Am. & Eng. Knew of Law, r>7N, 581; 2 Add. on Contracts (Morg. Ed.), § 931; McGavoek v. Woodlief, 20 now. (TJ. S.) 221; Koch v. Emmerling, 22 How. (TJ. S.) 69; Frazer v. Wyckoff, 63 N. Y. 448; Cook v. Fish. 12 Gray 493; 88 Ind. 104, (s. c, 45 Am. B. 447); 07 Cal. 224; 31 Md. 270; Gilchrist v. Clarke, 2 Pickle 585; Parker FAILURE OF PRINCIPAL TO COMPLETE. 177 That the seller's wife refused to consent to the ar- rangement cannot deprive the broker of commissions, if the general requisites of an earned commission exist. 7 And when the broker produces a purchaser able and will- ing to perforin, who is accepted by the seller, the seller cannot escape payment of the commission by thereafter declaring the deal off. 8 And it has been said that where no sale is actually consummated, the broker must either have procured a valid obligation to buy, or have brought the proposed purchaser and the vendor together, so that a contract of sale might have been entered into if the latter so elected. 9 § 168. Defective Title as Cause of Failure. 10 When the broker procures a party who contracts with his principal, it is no answer to the broker's claim for commissions that the principal is unable to make title, 11 unless the broker was apprised of the defective title and undertook, with such knowledge, to find a purchaser. 12 Where there is a defect in the vendor's title which is known to the broker, and he assures the vendor that the purchaser will take the property notwithstanding, he is not entitled to commissions when the purchaser later re- fuses to take the property on account of such defects, these not having been brought to his attention. 13 The law is well settled," says the court in Gerhart i i v. Walker, 2 Pickle 569, and dissenting opinion in the same case, 573). See also Dotson v. Milliken, 27 App. D. C. at 514 (1906). (citing Koch v. Emmerling, 22 How. 69; 16 L. Ed. 292 ; McGavoek v. Woodlief, 20 How. 221 ; 15 L. Ed. 8S4 ; Bryan v. Ahert, 3 App. D. C. 180, 181; Cheatham v. Yarbrough, 90 Tenn. 77. 79; 15 S. W. 1076: Wash- burn v Bradley 169 Mass. 86, 88; 47 N. E. 512; Holden v. Starks, 159 Mass. 503; 38 Am. St. Sep. 451; 34 N. B. 1069; Knapp v. Wallace. 41 N. Y. 477; McFarland v. I.illard. 2 Ind. App. 160, 166; 50 Am. St. Rep. 234; 28 N. E. 229). i Goldberg v. Gelles, 33 Misc. 793 (N. Y. 1901); Branch v. Moore, lOo S. W. 1180 (Ark. 1907); 1'urdv v. Wilson, ins s. W. 1124 (Mo. 1908). "Miller v. Barth, 35 Misc. 372 (N. Y. 1901). See also § 150 supra. » Flvnii v. Jordal, 124 Iowa 458 (1904). w See 8 166 mpra as to scope of chapter. u Knapp v. Wallace, 41 N. Y. 477 (1869); Parker v. Walker, 8(, Tenn. .»i2 (isssi ; Ticket! v. Powley, 130 111. App. 99 (1906); Gillespie v. Dick, 111 S. W. 004 (Tex. 1908); Phinizy v. Bush, 129 Ga. 486 (1907). '- Parker v. Walker, supra. » Hynes v. Brettelle, 70 Mo. App. 344 (1897). 17S COMMISSIONS AND THEIlt RECOVERY. v. Peck, 42 Mo. App. 651 (1890), " that when the owner of land employs a real estate agent to negotiate a sale only, it is always implied that the owner has a good title to the land. The agent, by his agreement to negotiate a sale, assumes no obligation in reference to the title unless it was made a part of his duty to have the title examined before attempting to effect a sale. Therefore, in such a case, if the agent finds and produces a purchaser, ready and willing to buy according to the owner's terms, or if he procures a valid contract from a solvent buyer and the sale is not effected in consequence of a defect or apparent defect in the title, and the owner refuses or declines to take any steps to remove the defect or cloud, or to pro- duce to the purchaser evidence that the title is not in fact faulty, then the agent is entitled to his commissions the same as if he had consummated the sale." And where the broker brings about an exchange, the party employing him cannot resist a claim for commis- sion on the ground that the title of the other party to the exchange is defective and he is therefore unable to per- form the contract. 14 In some of the states, contracts of sale provide that if the purchaser finds any defects in the title the vendor shall have a specified time to remedy them, if that can be done. 15 § 169. Special Agreements as to Title. 16 The owner of property may engage the broker under such an arrangement as to relieve himself from liability for commissions in case his title is defective, or in case the purchaser refuses or fails to carry out the contract, 17 but if the broker is employed to find a purchaser without l « Kalley v. Baker, 132 N. Y. 1 (1892). See also "Commissions on Exchanges," Ch. XVIII infra. 15 See the various forms of contracts of sale in Ch. XXXIX, infra. 16 Sec § Kit! snjira as to sco|>e of chapter. 17 Flower v. Davidson, 44 Minn. 49 (1890). FAILURE OF PRINCIPAL TO COMPLETE. 179 any statement by the principal with respect to his title, and the broker has no personal knowledge of its char- acter, the broker has a right to assume that the title is unobjectionable and to negotiate a sale upon that assump- tion. 18 If the principal reveals to the broker the real state of his title, and it is agreed that the broker shall not be paid commissions unless he finds a purchaser who wil 1 take such title as the principal can make, the broker cannot recover unless he complies with this requirement. The opinions of lawyers, conveyancers or title guar- antee companies on the marketability of a title are not admissible. 19 This is because the marketability of the title is a question of law for the court to determine. But lawyers' opinions are admissible on the validity of a title to property located in another state. 20 This is so, because what the law is in another state is regarded as a question of fact upon which the court must have evidence before it may make a determination. § 170. Special Causes of Failure. 21 When a broker, duly employed, procures a customer to whom his employer agrees to sell, he is entitled to re- cover commissions, notwithstanding the fact that there- after the employer refuses to enter into a formal contract of sale because a building upon the land intended to be conveyed encroaches upon adjoining land. 22 Also when the broker produces a purchaser at the price asked by the owner, he is entitled to commissions even though a contract of sale is not entered into, this failure resulting from the refusal of the owner to sign w Cheatham v. Yarbrough. 90 Tenn. 77 (1891). i»Moser v. Cochrane, 107 N. Y. 35 (1887); Hess v. Eggers, 37 Misc. 846 (N. Y. 1902), (citing Catling v. Central S. V., 67 App. Div. 50 (N. Y. 1902) ). 20 Barber v. Hildebrand, 42 Nebr. 407 (1894). 21 See § 160 supra as to scope of chapter. 22 Cusack v. Aikraan, 93 App. Div. 579 (N. Y. 1904) ; Brackenridge v. Clarldge, 43 L. B. A. 595 (1898). ISO COMMISSIONS AND THEIE RECOVERY. unless a provision were inserted providing for the pay- ment of a forfeiture in case he could not carry out the contract, 23 or resulting from the owner's refusal to sell. 24 Nor can the broker's claim be defeated by the whimsical or unreasonable refusal of the seller to comply with his contract.-'"' The rule that where a party gives a reason for his (•(induct and decision, he cannot after litigation has been begun, change his ground and put his conduct on another and a different ground, applies only to defects in form and matters of detail,— objections which a party could easily, and, it is to be presumed, would have removed had they been objected to, so that an after insistence upon them is an injustice, they not being of the substance of the contract. Therefore, when a principal did not put his refusal to accept an offer upon the ground that it was not in accordance with the terms he had given the broker, he may still insist that the broker did not prove an offer in accordance with the terms given him. 26 23 McQuillen v. Carpenter, 72 App. Div. 595 (N. T. 1902). 24 Caruthers v. Reesor, 134 111. App. 370 (1907). * Crockett v. Grayson. 98 Va. 357 (1900), (citing McGavock v. Woorllief, 20 How. 221: Koch v. Emmerling, 22 How. G9 ; Tombs v. Alexander, 101 Mass. 255). See also § 150 supra. 28 Rand v. Cronkrite, G4 111. App. 223, 224 (1S9G). See also § 193 infra. CHAPTER XVII. FAILURE OF CUSTOMER TO COMPLETE. § 171. General Statement. When the contract of sale is executed, the broker has earned his commission (§ 172), except in a few jurisdic- tions where the performance of the contract is held essential to entitle the broker to commissions (see §§ 117-119 supra), or where the broker has made a valid and binding agreement to some other arrangement. (See §§ 227-235 infra.) The authorities are quite unanimous that the right of the broker to his commissions does not depend upon the performance of the contract by the purchaser. (§ 172.) But where the purchaser abandons the broker or re- fuses to deal through him, he is not entitled to commis- sions. (§ 173.) Whether the broker is entitled to commissions where the sale is not completed, but would have been completed but for the misrepresentations of the vendor, quere. (§ 174.) § 172. General Rule as to Failure of Customer. 11 The general rule is that when a broker employed to negotiate a sale of real estate brings to his employer a responsible purchaser willing to buy upon the terms pre- scribed, he has earned his commissions. 1 Where the con- 1 But see §§ 117-119, 157, 166 supra. 181 L82 COMMISSIONS AND THEIE ItECOVERY. tract of sale is executed between the employer and the purchaser, the right of the broker to his commissions does not depend upon the performance of the contract by the purchaser. 2 If from a defect in the title of the vendor, or from a refusal to consummate the contract on the part of the purchaser for any reason in no way attribu- table to the broker the sale falls through, nevertheless the broker is entitled to his commissions for the simple reason that he has performed his contract." 3 If the vendor enters into an enforceable contract of sale with the purchaser, the failure of the purchaser to carry out the contract does not deprive the broker of his right to commissions. 4 But where the broker, knowing of defects in the title, fails to bring these to the attention of the purchaser, and assures the vendor that the pur- chaser will take the property notwithstanding the de- fective title, he is not entitled to commissions when the purchaser refuses to consummate the purchase on ac- count of these defects. 5 § 173. Abandonment of Broker by Customer. Where a broker presents the name of a customer, and the customer through no fault of the owner of the prop- erty, refuses to enter into any negotiations through such broker, the latter is not entitled to commissions if the premises are thereafter sold to the same customer through another broker. 6 In Oppenheimer v. Barnett, 131 App. Div. 617 (N. Y. 1909), it is said that where the owner's broker calls the attention of a person to the fact that property is for sale, that in no way obligates such person to make the pur- *Taekett v. Powley. 130 111. App. 100 (1906). * Glider v. Diivi.s, 137 N. Y. 506 (1893); and see note in Lunney v. Healey, 44 L. R. A. 623 (1898). * Plnkerton v. Hudson. 113 S. W. 35 (Ark. 1908). Cf. §§ 117-119 supra. o Hynes v. Brettelle, 70 Mo. App. 344 (1897). 'Sampson v. Ottinger, 93 App. Div. 226 (N. Y. 1904). FAILURE OF CUSTOMER TO COMPLETE. 183 chase through, him; on the contrary, such person may go directly to the seller and make the best trade he can with him, or he may purchase through some broker whom he selects himself. In either case, the broker whom the seller had originally employed would have no cause for complaint against the purchaser or against the bro- ker to whom the seller paid the commissions. If the broker is entitled to commissions at all, it is from the seller, and if the broker is the procuring cause of the sale, he must look to him and not to the purchaser. The pur- chaser of real estate is not obliged to see that a broker employed by the seller gets the commissions to which he claims he is entitled. § 174. Misrepresentations by Vendor. Where the sale would have been completed but for the misrepresentations of the vendor, the broker has been held entitled to his commission. 7 On the other hand, where the broker was familiar with the property and the owner misstated the dimen- sions, and the proposed buyer, after making a deposit, refused to enter into a contract, because the dimensions were less than stated, the broker was denied commis- sions. 8 And where the owner stated the frontage of the lot, and it turned out that the frontage was less than stated and the purchaser produced by the broker refused to make contract on account of such shortage, the broker was held not entitled to commissions, the Second Depart- ment of the Appellate Division of the New York Su- preme Court holding that it was the broker's duty to procure a purchaser for the plot " just as it was." 9 t Gillespie v Dick, Ill S. W. 664 (Tex. 1908); Dotson v. MiUiken, 20!) II. S 237 dims,; man v. Hess. -«: Misc. 482 (N. Y. 1907), misstatement of rente; and see Crocketl » Grayson. 98 Vn. 357 (1900). and Hngill v. Weekley, lo L. B. A. (N. h.) 1262 ■ r c 61 S. K. 360 (W. Va. 1908). s Hansman v. Herdtfelder, 81 App. Dlv. 46 (N. Y. 1903). "Keough v. Meyer. 127 App. Dlv. 273 (N. Y. 1908). 184 COMMISSIONS AND THEIR RECOVERY. And in another New York case, 10 it was said that there is no duty on the part of a real estate owner to in- form a broker as to whether there are covenants as to nuisances in his chain of title, unless he is asked about it, and that it is the duty of the broker to ask, if he wants to know. 11 i» Rancor v. Lee, 66 Misc. 144 (N. Y. 1010). 11 See § lt>S supra as to the vendor's liability for commissions where the consum- mation of the sale is prevented by the defective title of the vendor. For a general dis- cussion of misrepresentations, see Part IV, " Fraud," §§ 279 et seq. CHAPTER XVIII. COMMISSIONS ON EXCHANGES OF PROPERTY. § 175. General Statement. The same rules apply to an exchange of property as to its sale. (§§176-178.) Authority to sell does not imply authority to ex- change. (§ 179.) While under the general rule a broker cannot recover commissions from both sides, yet where both agree in the contract to pay the broker, their knowledge of the situa- tion appears. (§ 180.) If a contract of exchange is brought about by the broker, he is entitled to his commission even though one of the parties be unable to fulfill the contract. (§§ 181- 183.) § 176. Conflicting Decisions as to When Commissions are Earned. Some decisions hold that the broker is not entitled to commissions until he has brought about a valid enforce- able contract, and some that the contract must be actu- ally performed, while others hold that the commissions are earned when the broker has produced a customer ready, willing and able to purchase on his principal's terms. 1 There is the same conflict of decisions as to when commissions on an exchange are earned. Save as to those sections dealing with failure to ful- fill contract, 2 the authorities presented in this chapter deal primarily with the situation as it is affected by the »See §§ 117-119, 157, ICC supra. * See '§§ 181-183 infra. 185 ISO COMMISSIONS AND III KIR RECOVERY. rule thai commissions are earned when the broker pro- duces a party ready, able and willing to meet the require- ments of the broker's employer. 177. Commissions on Exchanges. The broker may, as in a sale, obligate himself to vari- ous conditions which will affect his claim to commis- sions. 3 Under the ordinary employment, however, his commissions are earned when he produces a person ready, able and willing to perform his part of the agree- ment upon the terms named by the broker's employer. 4 11 To entitle a real estate broker to compensation," says the court in Mutchnick v. Davis, 130 App. Div. 419 (N. Y. 1909), " he must produce a customer not only willing but able to purchase his client's property upon the terms fixed by such client. The same rule applies to a proposed exchange of real estate. ' ' 5 Commissions are earned when a customer is procured ready to make an exchange on terms satisfactory to the employer. 6 § 178. Employment. We have already seen that one of the requisites to a broker's commissions, is employment. 7 The same applies to an exchange. 8 A volunteer has no claim to commis- sion. Thus, where a person ascertained that A desired to sell or exchange, and presented A's card to B, which resulted in an exchange, it was held that the broker was not entitled to commission.'-' s See §§ 113-119 supra. « Lock wood v. Halsey, 41 Kans. 170 (1880): Suydam v. Healy, 93 App. Div. 396 (N. Y. 1004i ; cf. Norman v. Reuther. 25 Misc. 101 (N. Y. 1808). See also §§ 181-183 infra. i See also Schulte v. Meehan. 13."? 111. App. 400 (1007). • Hannan v. Prentiss. 124 Mich. 410 (1900). Where a person refuses to enter into an exchange effected l>y the broker, sec Mulhall v. Bradley, 50 App. Div. 179 (N. Y. 1900), as to whether the limber is entitled to recover as damages the commissions the other party to the exchange was to pay him. 7 Sec Ch. x supra > See Form 38 infra, Ch. XL, "Authority of Broker to Exchange Property." "See Walton v. M'Morrow, 03 App. Div. 147 (N. Y. 1901); aff'd, 175 N. Y. 493 (1903), no opinion. COMMISSIONS ON EXCHANGES OF PROPERTY. 187 § 179. Authority to Sell Does Not Give Authority to Exchange. Though a broker has authority to sell, this does not in itself either give or imply authority to exchange. "In the absence of any trade usage, the power to sell does not carry with it or imply the power to barter or exchange." 10 l S' § 180. Commissions from Both Sides. The rule that a broker cannot act for both sides, with- out their knowledge if he is vested with any discretion, applies to an exchange. 11 But the broker may recover his commissions from both parties where they knew that he was acting for both sides, and this would appear where the contract provides that each of the parties is to pay the broker a commission. 12 It has even been intimated that the principals might reasonably assume that, in an ex- change of property, a broker receives commissions from both sides. 13 * § 181. Rule When Contract Has Been Executed. As has been shown, the broker's commissions are not earned until he has produced a customer not only ready and willing, but able to exchange. This requires a valid title to the property proffered by the customer and the broker is not entitled to a commission on the transaction until this requirement is met. When, however, an en- forceable contract of exchange has been entered into, the conditions are different. " The ordinary rule is that, in 10 Kearns v. Niokse, (50 At'.. 779 (Conn. 1907), (citinjr Woodward v. Jewell, 140 U. S. 253; ::r, I.. Ed. 481; 11 Sup. Ct. Rep. 7*4 : Hayea v. Colby. 60 X. II. 193; 18 Atl. L'."l . Drury v. names. i".i ill. App. ice,: Cleveland v. State Bk. 16 Ohio Si. 236; ss Am. Dee 145; Trndo v. Anderson, 10 Mich. •■'.• r >7 : si Am. Dec 79. r > ; Brown v. Smith, 67 N. C. 245); Moran v. James, 20 Misc. 'S.:~< (N. v. 1897); Davis v. Gassette, ::<> III. App. 44 iisssi. See also Menifee v. Biggins, 57 III. 50 (1870). 11 See t) "'1 supra. '- Willi, er v. Seale, 127 App. Div. 180 (N. Y. 1908). "Marks v. O'Donnell, 66 Misc. 117 (N. Y. 1910). See §§ 48-53 supra as to broker's right to act for both sides. L88 COMMISSIONS AND THEIR RECOVERY. the absence of an express agreement to the contrary, a real estate broker employed to effect an exchange of real estate is entitled to his commissions, where, through his procurement, a contract for the exchange of properties has been agreed upon and entered into between his cus- tomer and the person with whom the exchange was to be effected, even though one of the parties be unable to ful- fill the contract." 14 Thus, where the broker is employed in the ordinary way to bring about an exchange and the defendant en- ters into a contract for the exchange, and it then devel- ops that the person who entered into the contract with the defendant had no title to the property which he agreed to exchange for the defendant's property, the broker is entitled to his commissions. 15 Where the broker is employed to effect an exchange, he has earned his commission when the principal makes a valid agreement with the customer produced by the broker, even if it turns out that the customer cannot make a good title, provided the broker acted in good faith. There is no distinction between a sale and an exchange in this respect. 16 The case just cited (Roche v. Smith, 176 Mass. 595) says that the ground on which this is settled is that by entering into a valid contract with the customer, the principal accepts the customer as able, ready and willing. Where one of the parties to an exchange fails to per- form the written agreement of exchange previously en- tered into and the exchange is not made, the broker who brought the parties together may recover his commissions from his principal, even though the exchange was not made and the broker's principal was not at fault. 17 And " Norte n v. Genesee Nat. Savings & Loan Assn., 57 App. Div. 520 (N. Y. 1901), (citing K alley v. Baker, 132 N. Y. 1 (1892) ) ; Charles v. Cook, 88 App. Div. 81 (N. Y. 1 903 i . Ir ' Ranmann v. Nevins, 52 App. Div. 290 (N. Y. 1900). i« Roche v. Smith. 170 Mass. 595; 51 L. It. A. 510 (1900). 17 Leete v. Norton, 43 Conn. 219 (1875). COMMISSIONS ON EXCHANGES OF PROPERTY. 189 this is particularly so where the contract of exchange pro- vides that if either of the parties neglect or refuse to per- form the same, the other shall be entitled to a fixed amount as damages. 18 It must be noted, however, that while the broker is not a guarantor of the title offered, and broker's commissions cannot be defeated because of a defect in the principal's title, yet where it was a condition of an exchange that perfect title should be shown by an abstract to be fur- nished for that purpose, the terms are not complied with and the commissions are not earned unless a person is produced who is able to show the title required by the contract. 19 § 182. Reason for Rule. 20 " In an action by a broker to recover commissions upon a proposed exchange of real property, it is necessary for him to show," says the court in Mutchnick v. Davis, 130 App. Div. 419 (N. Y. 1909), " that the customer produced by him was the owner of the property offered to be ex- changed as well as that, after the terms of the exchange had been agreed upon, the client refused to carry them out. 21 Where the agreement to sell or exchange real prop- erty no longer remains executory but has been consum- mated by an actual execution of a written contract there- for the rule is different, and in the absence of any stipula- tion to the contrary the broker's commissions are earned when the contract is signed by the client, and a defect in title under such circumstances becomes unimportant and constitutes no defense to the payment of the commis- sions. 22 The distinction between these two situations " Id. »• Barber v. Hildebrand, 42 Nebr. 407 (1894). 20 See § 176 supra as to scope of this chapter. 2i Citing Woollev v. I.owensteln, 83 Hun 155 (N. Y. 1894); Alt v. Doacher, 102 App. Div. .'544 (N. Y. 1905). 22 Citing Kalley v. Baker. 132 N. Y. 1 (1892); Gilder v. Davis, 137 N. Y. 504 (1893). 190 COMMISSIONS AND THEIR RECOVERY. is very wide and very apparent. Tn the absence of any stipulation to the contrary a marketable title to real prop- erty is always presumed to be bargained for; 2:$ and when a broker produces a person who proposes to exchange property with his client, that person must have good title to the property which is proposed to be given in exchange. On the other hand, if the client sees fit to execute a con- tract and exchange property, whether the other person has a good title or not, the broker has performed his serv- ice to the satisfaction of his client and has earned his commission." 24 Where the broker brings about an exchange, the party employing him cannot resist a claim for commission on the ground that the title of the other party to the exchange is defective and that he is therefore unable to perform the contract. 25 In Baumann v. Nevins, 52 App. Div. 290 (N. Y. 1900), the court said : " If the defendant employed him to effect the exchange, and he brought parties ready and willing so to do, and a contract was entered into binding upon them, it was an acceptance by the defendant of the purchasers proposed by the plaintiff, and he became entitled to his commission, entirely independent of the fact as to whether the defendant could convey or not. The plaintiff was not an insurer of the defendant's title. If he chose to employ a broker to dispose of property to which he had no title, and the broker brought purchasers who were acceptable to him, and a contract was entered into between them for the purchase, it was entirely immaterial to the broker as to whether his employer had title or not. His work was ac- complished, and his commission did not depend upon the fact of the ability of his employer to carry out his con- tract. The provision in the contract in regard to the time a Citing Scndder v. Watt. 98 App. Div. 228 (N. Y. 1904); Burwell v. Jackson, 9 N. Y. 5.' J ,r> (1854 1. '-* See the authorities under Chap. XVII supra. - 5 Kallcv v. Baker, 132 N. Y. 1 (1892); Roche v. Smith, 170 Mass. 595; 51 L. R. A. 510 (1900). See also § 108 supra. COMMISSIONS ON EXCHANGES OF PEOPERTY. 191 for the completion of the purchase was entirely for his benefit, and his default in conveying the title could not de- feat the plaintiff's claim for commissions." Of course the broker must have acted in good faith in such a case. It is somewhat difficult to follow the words of this opinion, for in its course the court speaks at one and the same time apparently about the proposed purchasers not having title 26 and then about the defendant not having title, while the facts of the case seem to indicate that the only question was as to the proposed purchaser's title. It may be that the court in speaking about the defendant's position in not being able to convey, intended that as a statement of the law if the facts had been that way, while on the other hand it may mean that as the proposed pur- chasers were unable to convey their property, therefore the defendant was unable to convey his in exchange. In a dissenting opinion, Justice Ingraham says: " I do not understand that a broker complies with the terms of his employment until he brings a customer, not only ready and willing, but also able to purchase the property upon the terms proposed ; and the production of a person ready to sign a contract, but who was manifestly unable to perform it, does not comply with the conditions of em- ployment under which the broker is entitled to recover his commissions." Also in Norman v. Keuther, 25 Misc. 161 (N. Y. 1898), it was held (in an exchange), that the broker must show that he had procured a valid contract of exchange, and that it was not sufficient to show that the broker had se- cured a person who was not the owner of the property, to sign a contract for the exchange. 27 § 183. Rule as Affected by Broker's Bad Faith. Where a written agreement for an exchange was pro- "" Nop § 181 supra. « Sw also § 183 infra. H)2 COMMISSIONS ANO THEIR RECOVERY. cured by the broker, but it turned out that the other party to the exchange did not own all the land which he agreed to convey and was not able to make a title at the appointed time, and the broker knew that the party he procured did not own the property he was to convey in exchange, and such party became financially irresponsible, and went into insolvencv, the lower court refused the broker commis- sions. The Supreme Judicial Court sustained the judg- ment, 28 but apparently only because of the exceptional facts, saying: " In view of the state of the evidence, we do not regard this as an abstract unqualified ruling that in all cases in order to entitle a broker to his commission, the contract of sale or exchange must be one which could be enforced specifically ; we construe it rather as a ruling on the specific facts which the Judge expressly or prob- ably found. We think that the Judge only meant to say that a broker does not earn his commission by bringing a person to his employer who assumes to contract as owner, when, in fact, he is not owner, as the broker knows and the employer does not know, and who, within the few days allowed for performance turns out unable to perform his contract and irresponsible. 29 We regard this proposition as correct, and as consistent with the well-settled law that, in general, commissions are earned when a binding contract of sale is made." 30 2« Rurnliam v. Upton, 174 Mass. 409 (1809). »Referrlng to Butler v. Baker. 17 R. I. 582; Greusel v. Dean, 98 Iowa 405; 4 Am. & Eng. Kncy. of Law (2nd Ed.), 972-975, Sub. V. "Brokers." *> Citing Rice v. Mayo, 107 Mass. 550 ; Ward v. Cobb, 148 Mass. 518, 521. CHAPTER XIX. COMMISSIONS ON LOANS. § 184. General Statement. In some jurisdictions commissions on loans are not earned until the loan is actually made, or refused because of the fault or miscarriage of the principal. Elsewhere they are held to be earned when the broker has procured a lender ready, willing and able to loan on the principal's terms. (§§ 185-190.) Defects in title to property may defeat a loan but do not deprive the broker of his claim for commission. (§ 191.) The broker must have been duly employed, and the loan must be procured on the terms of his principal. (§§ 192-193.) And the broker is entitled to his commis- sion after a loan has been found, even though the prin- cipal refuses to accept. (§ 194.) § 185. Commissions for Procuring Loan. We have seen that there is some conflict in the deci- sions on the question as to when the broker has earned his commissions on a sale of property. 1 And so, there is a difference of opinion as to when the broker is entitled to his commissions with reference to procuring mortgage loans on real estate. The conflict of opinion on the sub- ject with respect to loans is, however, somewhat different than that with respect to sales, or, at least, must be stated differently. i See §§ 117-119 supra. 193 194 COMMISSIONS AND THEIR RECOVERY. There are authorities which hold that the broker's ob- ligation in the matter of a loan is not regarded as fully performed until the prospective lender actually makes the loan, or refuses because of the fault or miscarriage of the principal. Among the decisions to this effect are those of the courts of New York State. 2 The above rule will therefore be called the " New York rule " in this chapter. On the other hand, there are authorities which hold that a loan broker is entitled to his commissions when he has procured a lender who is ready, willing and able to lend the money upon the authorized terms. This type of cases is also illustrated in the present chapter. § 186. New York Rule. A broker employed to procure a loan on real estate is not entitled to his commissions on mere proof that he secured a person able and willing to make the loan, who was accepted by his principal. The contract of broker- age in the matter of a loan differs from one with respect to a sale of real estate, in that it is not regarded as fully performed until the prospective lender actually makes the loan or refuses because of the fault or miscarriage of the principal. 3 In Henken v. Schwicker, 174 N. Y. at 302 (1903), the New York Court of Appeals said, though per- haps obiter, that in the absence of more definite specifi- cations, the broker's commissions are earned when he procures a lender ready and willing to make the loan. But where a broker has secured the acceptance of a loan, but the loan is not made because the owner's title is defective, the broker is entitled to his commissions. Tn such case, the broker must show clearly that the title is defective and that the money was not advanced for that 2 See § 1SP, infra. a Duckworth v. Rogers. 100 App. Div. 168 (N. Y. 1905); Ashfield v. Case, 93 App. Div. 452 (N. Y. 1904). COMMISSIONS ON LOANS. 195 reason. The mere fact that the title was rejected by law- yers or title guarantee companies, does not have the effect of establishing that the title was defective as a matter of fact. The specific facts must be shown evidencing the de- fect. 4 And in such a case the broker cannot recover under an allegation of full performance. He must allege the fact of non-performance and the reason or excuse there- for. 5 § 187. New York Rule as Affected by Failure of Prin- cipal. 6 And while ' ' the general rule applicable to the employ- ment of brokers to procure a loan is that their commis- sions are not earned unless the loan is made," 7 this rule would not be applicable where the negotiations fall through on account of the principal's misrepresentation as to the security to be given. 8 This condition emphasizes the importance of having most satisfactory proof of the ability, readiness and willingness of the party to make the loan and to show that the failure to consummate the same was solely owing to the failure of the broker's prin- cipal. 9 " In other words," says the court, 10 " there may be a liability for a breach of a contract where a person after employing a broker to make a loan on certain se- curities discovers that his securities are not as valuable as he supposed and that he would be unable to perform a contract to furnish securities for a loan according to his representations to his broker, but that would not afford a basis for a recovery by the broker of commis- sions as for full performance on his part." « Gatllng v. Central Spar Vereln, 67 App. Dlv. 50 (N. Y. 1902). See also §§ 168, 169 supra. . 529; Knapp v. Wallace, 41 N. Y. 477; Gonzales v. Broad. 57 Cal. 224; Green v. Reid, 3 Frost & F. 22t; ; Green v. Lucas, 31 Law T. (N. S.) 731; Mecnem on Ag.. § !i?o. 18 See § 185 supra. 17 Hackmann v. Gutweiler, OG Mo. App. at 249 (1896). COMMISSIONS ON LOANS. 199 the customer procured by the broker agrees to lend the money; and that this applies to a case where (as in the case at bar) the loan is not made because, by reason of a defect in her title, the borrower is not able to give the mortgage she stipulated to give to the customer procured by the broker." The Court said: " We are of opinion that this contention is not correct. 1 ' The duty which a broker is employed to perform is to find a customer for that for which his principal directs him to find a customer ; in the case at bar, for a loan to be made by the customer, secured by a first mortgage on a specified lot of land, to be made by the principal. The broker found a customer ready to make that loan, and the transaction fell through because the defendant, the brok- er's principal, did not have a good title to the land in question, that is to say, because of the principal 's inability to produce that for which he employed the broker to get him a customer. " When a broker has found a customer for that for which his principal has employed him to find a customer, the broker has performed his duty, and has earned his commission, or, as the proposition is usually stated, if the person produced by the broker is able, ready and willing to buy, sell or lend, as the case may be, the bro- ker's commission is earned. 18 " When the broker has produced a customer, his duty is at an end ; so far as his rights or his duty are concerned it is immaterial whether a contract is, or is not made, or, if made, whether it is or is not performed. The broker's right to a commission is no more dependent upon or af- fected by the fact that a contract is, or is not, drawn up and executed, than it is by the fact that the contract, if is Citing McC.avoek v. Woodllef, 20 now. 221, 222; flrewi v. Lucas. 33 1„ T. (N. s.i 584, 587; Mlddleton v. Thompson, 163 Penn. St. 112; Slbbald v. Hcthlehera Iron Co., 83 N. Y. 378, :',s:s, 384; Dados v. Cunningham, 102 N. Y. 07S ; Fischer v. Hell. !ii ItmI. 243; Vinton v. Baldwin, 88 hid. 104, 105; Poet v. Sherwood, 48 Minn. 447, 44K ; Cheatham v. Yarbrough, 90 Tenn. 77; Budd v. Zoller, 52 Mo. 238, 242; Buckingham v. Harris, 10 Col. 455. 200 COMMISSIONS AND THEIR RECOVERY. drawn up, is, or is not carried into effect. Making or not making a contract with the customer produced, enforcing or not enforcing a contract, if made, are matters for the broker's principal to do or not to do, as his ability and inclination determine; they are matters with which the broker is not concerned and on which his right to a com- mission is not dependent. " That it is no part of a broker's duty to draw up and see to the execution of a contract between his principal and the customer produced by him, is settled. 19 " That a broker's right to a commission is not de- feated if a contract is made and not carried out by reason of his principal's inability to perform," is stated in the court's opinion on the authorities given in the footnote. 20 § 191. Failure to Complete on Account of Defects, etc. 21 A broker who procures a mortgage loan as requested, is entitled to his commissions even though, on account of defects in the title to the property, the loan is not finally made. 22 Where the proposed borrower agreed that his title was free and clear of incumbrances, and the broker procured a person ready, willing and able to make the loan, but on examination of the title it developed that the same is not free and clear, and the proposed lender therefore refuses to complete the loan and advance the money, the broker is entitled to his commissions. 23 In addition to the broker's commissions, the applicant i» Referring to Cook v. Welch, 9 Allen 350 ; Desmond v. Stebbins, 140 Mass. 339, 342; Middleton v. Thompson, 103 Penn. St. 112; Keys v. Johnson, 08 Penn. St. 42, 43 ; Duclos v. Cunningham, 102 N. Y. 078. 20 Green v. Lucas, 33 L. T. (N. S.) 584; Sweeney v. Ten Mile Oil & Gas Co., 130 Penn. St. 193; Middleton v. Thompson, 103 Penn. St. 112; Holly v. Gosling, 3 E. D. Smith IN. Y.) 202; Peet v. Sherwood, 43 Minn. 447; Cheatham v. Yarbrough, 90 Tenn. T'.». 2i See § 185 supra. -"-' Ilevi'a v. Lopardo. 127 App. Div. 189 (N. Y. 1908) ; Peet v. Sherwood, 43 Minn. 448 (1890), (Citing Vinton v. Baldwin. 88 Ind. 104; Holly v. Gosling, 3 E. D. Smith 202: Doty v. Miller. 4:'. Barb. 520; Knapp v. Wallace, 41 N. Y. 477; Gonzales v. Broad, 57 Cal. 224: Green v. Reid. 3 Frost & F. 220; Green v. Lucas, 31 Law T. (N. S.) 731; Mechein on An., § 970). See also S,§ 108, 172 supra. s»Finck v. Bauer, 40 Misc. 218 (N. Y. 1903). COMMISSIONS ON LOANS. 201 for the loan may incur further expenses, such as fees for examination of the title. In fact it has been held that when a contract provides that compensation for services in searching a title is payable, whether the title be ac- cepted or not, the owner is liable for such services. 24 But where the refusal to finally make the loan was be- cause the application for the loan incorrectly stated the width of the lot, and the broker who made out the applica- tion was aware that the owner at the time he signed the application was uncertain as to the dimensions, the broker is equally at fault with the owner in not disclosing such situation to the proposed lenders, and is not entitled to commissions. 25 And where the agreement is not the ordi- nary employment of a broker to procure a person able and willing to make a loan, but is that the principal will ac- cept a loan from a certain company and pay the broker his commission by deducting it from the amount of the loan, the broker is not entitled to commission if the pro- posed lender refuses to make the loan on account of alleged defects of title. 26 That the broker is not a guarantor of the title offered, and broker's commissions cannot be defeated because of a defect in the principal's title, has already been shown. 27 § 192. Employment and Written Authority. 28 There must, of course, have been an employment of the broker by the principal, either express or implied. The subject of employment is presented in another chap- ter. 29 Whether the broker's authority to negotiate a loan must be in writing or not, depends upon local statutes and ordinances and the inclination or disinclination of the courts to sustain such statutes and ordinances. The « Title Guarantee & Trust Co. v. Sternberg. 110 App. Dlv. 28 (N. Y. 1907). W Shropshire v. Frnnkel. 45 Misc. 016 (N. Y. 1004). =« Hess v. Eggers, 37 Misc. 845 (N. Y. 1902). 2' See §§ 107. 108, 170 supra. a* See § 185 supra. » See Ch. X supra. 202 COMMISSIONS AND THEIR RECOVERY. matter has already been presented at some length. 30 The same is true with respect to whether or not the broker must obtain a license or pay a tax in order to carry on the vocation. 81 Various forms of applications for loans are also given in Part VII of the present volume. 32 Including the amount of the broker's commission in the statement of the expenses the borrower is to be at in obtaining the loan, does not convert a written application for a loan into a special stipulation that the broker shall not be entitled to commission in accordance with the general rule. 33 § 193. Terms of Principal. And, of course, the broker must procure a loan as ap- plied for, that is, on his principal 's terms. 34 Where, for instance, the broker was employed to obtain a loan of not less than $220,000, but failed to secure anything better than $210,000, and then abandoned the matter, he is not entitled to commissions when his principal subsequently takes a loan of $200,000 from the same party. 35 And so, a broker employed to procure a loan for three years is not entitled to commissions for procuring a loan which was not accepted because subject to the lender's right to enforce payment on sixty days' notice in case of the passage of a law changing the rate of taxation of mortgages. 36 Nor where the lender insists ona" gold clause ' ' in the mortgage. 37 And where the principal authorizes the broker to pro- cure a loan so that he may pay off certain encumbrances on his property and the broker obtains an offer of a loan on the property, provided all encumbrances are paid off, so Sw Ch. Ill supra. 81 See Ch. II supra. az See Forme 40-43 infra.. Ch. XL. »s Fitzpatrirk v. Gilson, 17G Mass. 481 (1000). »* See Ch. XII supra. "Stone v. Plaut, 96 N. Y. Suppl. 1030 (1005). 88 Kronenberger v. Tesehemaeher. 52 Misc. 130 (N. Y. 1007). *'Caston v. Qulmby, 178 Mass. 153 (1901) ; Peabody v. Dewey, 153 111. C57 (1894). COMMISSIONS ON LOANS. 203 and no part of the loan is to be advanced until that is done, no commissions accrue. 38 But where the broker secures a loan, and the owner refuses to take same because he feels that the commis- sions claimed by the broker are excessive, he cannot after- wards justify his refusal by claiming that a new element had been introduced into the transaction by the accept- ance of the loan on condition that the rules of the accept- ing company be complied with and the loan accepted within ten days, and that the procurement of the loan on this condition was not a fulfillment by the broker of his contract of employment. 39 § 194. Recovery on Breach by Principal. 40 "Where the principal refuses to accept the loan after the broker procures it upon the authorized terms, the broker is entitled to his commissions. 41 When the broker, at the request of his principal, " has secured a lender ready, willing and able to make the loan on a good title the broker is entitled to his commission when, after that is done, the borrower, without any excuse, declines to complete the loan which he had engaged the broker to obtain for him and prevents the loan from being made by making the loan elsewhere." 42 When the broker secures the loan, he need not tender the money to his principal. When the money is secured and the principal is notified thereof, it becomes his duty to act. 43 Where defendant agreed to pay a broker a cer- tain amount for procuring a loan, which the defendant refused thereafter to accept, the defendant may prove MWest v. Stoeckel, 10 Am. Law Reo. 308 (Cinn. 1882). as Hotchklss v. Eacbler, so App. Div. 205 (N. Y. 1903). See also § 170 supra as to rlghl "f a person \>< change M* ground or reason. ' 40 See § 18". supra. « Stein'metz v Paneoast, 17 Phila. 185 (1884); Ilackmann v. Gutweller, 00 Mo. App. 24ft (1896). <■" Masterson v. Knights, 135 111. App. 548 (1907), (citing Swlgart v. Hawley, 140 111. 180; Springer v. Orr. 82 111. App. 558). « Telford v. BrlnkerhofT, 45 III. App. 586 (1892). 204 COMMISSIONS AND THEIR RECOVERY. thai the broker had agreed to pay the lender one-half of the commission, and such one-half must be deducted in arriving at a verdict for the broker on the principle that a recovery for breach of contract must be confined to the actual loss sustained. The broker cannot derive a greater advantage from a breach than from a performance. 44 § 195. Amount of Commissions on Loan. The question of the amount of the commissions is taken up later. 45 There is also given in Part VII of the 1 tresent volume the rates charged in the larger cities. 46 It may be also, that the amounts of commissions are regu- lated by statute or ordinance in particular localities, and the local statutes and ordinances should be consulted. In New York, for instance, a statute formerly regu- lated the subject with respect to loans. In this state, prior to April 27, 1895, the amount of commissions on loans was restricted to fifty cents on each $100, or, in other words, one-half of one per cent, upon the amount of the loan. Although the statute was not generally ob- served in real estate loan matters, yet it was enforced if insisted on by the borrower. 47 Under this statute it was said that " it may be allowable to pay for extra services not usually necessary in procuring loans, in addition to the prescribed brokerage; but it should be separated so that it may be seen whether the compensation is reason- able, or only a cover for demanding a larger commis- sion." 48 By Chapter 467 of the Laws of 1895, loans on real es- tate security were excepted from the statute. 49 ** Finds v. Pierre. 53 Misc. 554 (N. Y. 1907). « See Ch. xxn infra. ** Xt-f Forms 1-16 infra, Ch. XXXVIII. « Anderson v. Dwyer, 61 N. Y. Suppl. 1114 (1S99); aff'd, G3 N. Y. Suppl. 201 (1900) : ::i» Misc. 'X. Y.) 793. «* Took v. Phillips. 56 N. Y. 310 (1874). « Vol. 1. Cummlngs & Gilbert's General Laws. Ed. of 1901. p. 430; now § 380 of the General Business Law, which is Ch. 20 of the Cons. Laws of New York. CHAPTER XX. COMMISSIONS ON LEASES. § 196. General Statement. In some jurisdictions it is held tliat the commissions on a lease procured by a broker are not earned until the lease is negotiated, or a valid contract for a lease has been executed. But a failure of the lease due to the landlord's misstatements or unreasonable requirements will not de- feat the broker's claim for commissions. (§ 197.) The general requirements for recovery of commissions for procuring a lease are the same as in the case of com- missions on a sale. (§ 198.) A tenant is not liable to the broker for commissions unless some service has been performed at his request by the broker. (§199.) The broker's commission for procuring a lease is usually a percentage upon the agreed rental though some- times a percentage on the values involved. (§200.) The failure of a lease does not ordinarily affect the broker's right to commissions (§ 201), as the landlord has a remedy against the tenant for unpaid rents, and the broker cannot be held responsible for the landlord's fail- ure to collect. (§ 202.) § 197. When Broker's Obligations are Performed. In regard to leases, as in the case of sales and loans, 1 there is a conflict of opinion as to when the broker is deemed to have performed his obligation. In New York it is held that where a broker undertakes to procure a * See §§ 117-119, 185 supra. 205 206 COMMISSIONS AND THEIR RECOVERY. person to take a lease of the owner's property, he cannot recover until he establishes that he has earned his com- missions either by negotiating a lease or procuring the execution of a valid and binding agreement for such a lease. It is not sufficient that the parties were brought together in a negotiation, unless that negotiation ended in a lease or a valid agreement for one. This is so held in Crombie v. Waldo, 137 N. Y. 129 (1893), where there seems to have been nothing further than the usual under- taking of a broker in similar matters, but the court as- sumed that the broker entered upon an employment to procure a tenant to take a lease of the defendant's prem- ises, and undoubtedly that is what a broker in such cases undertakes. But in the same case 2 it is said that the actual execu- tion of a lease in every case is not necessary. Thus, where real estate brokers are duly employed by a land- lord and procure a tenant who agrees to every term and condition originally proposed by the landlord so that the minds of the parties meet, but no lease is signed, owing to the landlord's insistence on new and unreasonable terms, the brokers are entitled to commissions, 3 and this is also so where the lease fails on account of misstate- ments made to the prospective tenant. 4 In Mears v. Jones, 102 Me. 490 (1907), there is a dic- tum to the effect that to earn his commission it is enough for the broker to secure one willing to become a tenant upon the principal's terms, and bring him to the prin- cipal for acceptance as such. § 198. General Requirements for Recovery of Commis- sions. All the usual requirements as to recovery of commis- * Cromble v. WaUlo. 137 N. Y. 120 (1893). » Tanenbaum v. Roehm, 126 App. Div. 731 (N. Y. 1908). * Washburn v. Bradley, 1G9 Mass. 86 (1897). See also §§ 172-174 supra. COMMISSIONS ON LEASES. 207 sions must be met to entitle the broker to recover his commissions for negotiating a lease. He must show em- ployment, express or implied, as well as the other essen- tials. 5 A custom to the effect that where brokers nego- tiate a lease the owner pays the commission, cannot fasten upon a property owner any liability as the em- ployer of a broker, simply because this owner consents to let his property to a tenant who is induced to lease it through the agency of the broker without any request, express or implied, on the part of the owner. 6 § 199. Liability of Tenant for Commissions. Where a broker comes to the tenant apparently as the agent of the landlord, and after negotiations are begun, states that the landlord will pay no commissions, a prom- ise on the tenant's part to pay the commissions is with- out consideration, unless there can be found either an employment of the broker by the tenant, or the perform- ance by the broker of some service at the request, ex- press or implied, of the tenant. 7 § 200. Amount of Commissions for Procuring Lease. A subsequent chapter is devoted to a consideration of the amount of commissions. 8 The rates charged in the larger cities appear in Part VII of the present volume. 1 ' From the lists there given it will be seen that the bro- ker's charge is usually a percentage on the agreed rental, although in some instances the charge is based on a per- centage on the value of the ground, or on the appraised value of the property or otherwise. As to this latter method it was, however, said in Daube v. Nessler, 50 111. * See Cta. IX supra. • Rrartv v. American Maeh. Co.. 86 App. Dlv. 269 (N. Y. 1903). TMvcrs v. Dean, 132 N. Y. 65 (1892). See also § 121 supra. 8 See Ch. XXII infra. » See Forms 1-1(5 infra, Ch. XXXVIII. 20S COMMISSIONS AND THEIR RECOVERY. App. 166 (1892): "It is absurd to suppose that com- missions for services in negotiating a lease can be meas- ured by the value of the fee, regardless of the terms of the lease; the same for a term of one year as for ninety- nine." Where the broker's commissions are, by agreement, fixed at a specified amount, there would, of course, be neither occasion nor right to resort to charging the cus- tomary rates. 10 Or where, as is sometimes done, the agreement is made that the broker is to get all above a certain specified rental, the broker is entitled to nothing unless the lease he obtains provides for a sum in excess of that named, and he is, of course, entitled to all in ex- cess of the agreed amount. Where the agreement was, "All you get above $2,000 per year you may have as your commission," and the broker obtained a five-year lease at a rental of $2,200 per year, the agreement was construed to mean that the broker gets nothing unless the annual rent of the tenant he secures is over $2,000; but beyond this that he is entitled to the excess over $2,000 per annum for the life of the lease, and not only to the excess of the first year's rental. 11 § 201. Effect of Failure of Lease. As stated in § 172, and the other sections there re- ferred to, the failure of a customer to perform his con- tract does not affect the broker's commissions. In other words, when applied to procuring a lease, it means that when the landlord and the tenant produced by the broker have entered into a lease, the full commissions are earned, and the failure of the tenant to subsequently carry out the lease will not affect the broker's right to retain or recover his full commissions, unless, of course, JO See §? 213, 222 infra. "Goldstein v. D'Arcy, 201 Mass. 312 (1909). COMMISSIONS ON LEASES. 209 the landlord and the broker had agreed otherwise. Thus in Mears v. Jones, 102 Me. 490 (1907), the broker pro- cured a lease for five years subject to the landlord's right to terminate the same if he meanwhile sold the property, the lease also giving the tenant the first right or option to purchase at the same figure which the landlord might be offered by any other prospective purchaser. At the end of the second year the property was sold to the ten- ant 's wife and the question was then presented whether the broker was entitled to commissions for the three years following the sale of the property. The court said: " The commission of a real estate broker is usually understood to be a certain percentage upon the consideration paid, or offered to be paid or re- ceived. In the case of a sale, the problem is easy. The consideration is a single amount. In the case of a lease with annual rentals for a specified term, it would be rea- sonable to expect that the amount of commissions would depend, in some respects, at least, upon the length of the term contracted for. It would not be natural to expect that the parties understood that so large a commission would be earned in securing a lease for one year as one for five years. And that the parties in this case under- stood that the commission was earned and was to become payable in annual installments, is, we think, reasonably to be inferred from the annual payments made while the lease was in force. And we agree with the plaintiff that he was entitled to annual commissions for the full term of the lease. But what was the full length of that lease? We think it was not for five seasons absolutely. It was for five seasons unless the property was sold in the mean- time. It was a lease for five seasons, but determinable by a sale with in that term. It was made determinable by the very lease which the plaintiff procured. He there- fore did not procure a lease for full five seasons, but a lease which might lawfully end sooner. He is entitled to 210 COMMISSIONS AND THEIR RECOVERY. his earnings for the kind of a lease he secured. He was employed to get a tenant for one or more years. The longer the term he secured, the greater the amount of rentals, and naturally the larger the amount of his com- missions in the whole. He took the chances of sale. It matters not that the. limitation in the lease was for the defendant's benefit, and may have been made, as it prob- ably was, at the defendant's direction. If it Was so lim- ited at the instance of the defendant, it was just the same kind of a lease which the plaintiff undertook to procure and did procure. And the amount of the rentals which was the consideration of the lease, and which naturally would be the basis of commissions, would vary according to the length of time which should elapse before the lease was determined by sale." § 202. Operation of Rule as to Failure of Lease. As a practical proposition, the rule that commissions for the full term of a lease are earned when the lease is signed, regardless of any subsequent failure on the part of the tenant, may sometimes work a hardship on the landlord, as he may have paid or be compelled to pay the broker more for his commissions than he collects rent from the tenant, should the tenant fail to pay his rent under the lease. As a legal proposition, however, the landlord has his remedy against the tenant by suit to collect the rent as it becomes due, as long as the lease runs and the property fails to bring the rental agreed on in the lease. If the tenant is financially irresponsible and judgment against him would be uncollectible, the situation is still the same. The law gives the landlord a remedy by suit, but the law does not guarantee success- ful collection of any judgment obtained by the remedy. Moreover, the landlord having entered into the lease with the tenant, the former is deemed to have accepted the COMMISSIONS ON" LEASES. 211 latter as satisfactory, and if the landlord has not satis- fied himself of the financial standing of the proposed tenant before entering into the lease, he has himself to blame. 12 Further, in some states, New York for one, if the land- lord dispossesses the tenant for non-payment of rent, such dispossess puts an end to the lease unless the lease specifically provides to the contrary. 13 And the provi- sion in the lease to the contrary must be explicit. Hav- ing dispossessed the tenant and thus put an end to the lease, the landlord cannot recover any rent subsequently accruing, unless, as stated, the lease specifically so allows. " See §§ 153-155 supra. " N. Y. Code of Civil Procedure, § 2253. CHAPTER XXI. WHO IS LIABLE FOR COMMISSIONS. § 203. General Statement. As a general rule, the person who engages the broker is liable for the commissions. (§ 204.) A mere promise to pay commissions may, under some circumstances, create no liability. (§ 205.) Persons not owning the property may become liable for the commissions if they engage the broker. (§ 206.) Persons acting in a representative capacity, such as trustees, executors, or guardians, engaging a broker, are personally liable for his commissions. (§ 207.) While generally it is the vendor who pays the com- missions, the purchaser may become liable therefor by special agreement or where he engages the broker to buy. (§§ 208-210.) § 204. The Employer is Usually Liable for Broker's Commissions. As a general rule, the person who engages the broker is liable for the commissions if the broker brings about a sale. While, generally, the owner of the property— that is, the vendor— either himself or through an agent en- gages the broker, and is, therefore, liable for the com- missions, 1 it is not at all necessary that the broker should show that the person he seeks to hold is the owner of the property. 2 In all cases, the broker must, of course, show » Downing v. Ruck, 135 Mich. C38 (1904). * See § 200 infra. 212 WHO IS LIABLE FOE COMMISSIONS. 213 that the necessary prerequisites exist which entitle him to commission. 3 Where the vendor, by means of fraud, secures the broker's release of his claim for full commissions, the broker may still recover the amount, less what he has already received. 4 Where the question is as to which of a set of brokers is entitled to the commissions, the collu- sion of the principal with one set of brokers to defeat the commissions of the other, is material. 5 Where the separate owners of distinct parts of an en- tire tract jointly employ a broker to sell the whole tract, an action may be maintained by such broker against all jointly, but, if such contract be not proved, the suit may fail upon the general issue. 6 § 205. Promises to Pay Commissions. Without an employment, or the performance by the broker of some service at the request, express or implied, of the principal, a promise by the latter to pay commis- sions has no consideration for its support, and no liability to pay is created by it. 7 And even where the owner actu- ally promises to pay the broker commissions, under the belief that the broker was the procuring cause of the sale, he may nevertheless resist payment, and successfully too, if in fact the broker was not the procuring cause. 8 An admission by the owner that the broker is entitled to a commission may be considered as evidence. 9 And acknowledging in the contract an indebtedness to the broker to the amount of his customary commission may be taken as an admission that the sale was effected 3 See Oh. IX. supra. « Bowe v. Gage, 112 N. W. 4G9 (Wis limit; 12 L. R. A. (N. S. ) 205. c Haven v. Tarter. 124 Mo. App. 691 (1907). See also §§ 97. 98 supra. « MeGlll v. Pressley, 62 Ind. 193 (1878). ■Myers v. Dean, 132 N. Y. 71. 72 (1892). » Bellesfieiin v. Palm. 54 App. Div. 77 (N. Y. 1900). As to consideration for prom- Ise to pay l.r< >kt r tlmiiL,'li lie is nut successful, see Kimmel v. Skelly, 130 Cal. 555 (1900). •Metcalfe v. Gordon, so App. Div. 370 (N. Y. 1903). L'l I COMMISSIONS AND TI1EIH RECOVERY. through the agency of the broker. 10 But a clause in the contract between vendor and vendee as to how and by whom the commission is to be paid, is not a contract with the broker for the payment of the commission. 11 And where the promise to pay commission is made after the sale is already consummated there is said to be no con- sideration for the promise. 12 And so it has been said in New Jersey that in the absence of a written contract of employment, as required by the New Jersey statute, a subsequent promise to pay commission is without consid- eration. 13 "By a written contract for the sale of real estate the vendee agreed 'to pay all commissions or brokerage aris- ing by reason of the sale of said property.' The title proved defective, and the contract was never performed. In an action against the vendee for commissions plaintiff alleged that the vendor employed him to sell the property on condition that the vendee should pay the commission, and that defendant, with knowledge of this fact, agreed to pay plaintiff's commission. Held, that plaintiff had no cause of action on the contract between the vendor and vendee; he could only recover on defendant's oral agreement with him; and testimony was admissible that defendant agreed to pay his commission only if the title proved good." 14 § 206. Liability of Persons Not Owning the Property. The fact that the party who employs the broker is not the owner of the property does not relieve him from lia- bility for broker's commissions. 15 "It is matter of com- mon knowledge that in the business world men do w RedfleM v. Tegg. 38 N. Y. 214 (18C8). u Barber v. Hildebrand, 42 Nebr. 405 (1894). U WolvertOD v. Tuttle. 94 [*ac. 903 (Ore. 1908). 13 Leimbacb v. Rejmer, 70 N. J. L. 609, 610 (1904). i* Headnote in Bab v. Hirscbbeln, 12 N. Y. Suppl. 730 (1891). See also § 209 infra. 10 Sauebea v. Yorba, 97 I'ac. 205 (Cal. 1908). WHO IS LIABLE FOR COMMISSIONS. 215 frequently obtain what are termed options upon real prop- erty—that is to say, the right to purchase, and then em- ploy brokers to negotiate a sale at an enhanced price, the title being all the while in others. * * * A may possess such knowledge as justifies him in his judgment in con- tracting to sell, or in contracting with a broker to sell for him, or to find a purchaser for property which he does not own. If he does so, without so guarding his agree- ment as to save himself in case of failure to secure title to the thing he has authorized to be sold, he cannot be heard to complain of the result of his own folly or lack of foresight. ' ' 1Q A broker is not required to search his customer's title to the property, but may assume that the customer's title thereto is perfect. He relies upon his employment, and his only duty is to comply with the terms thereof by pro- ducing a purchaser ready, willing and able to take the property upon the vendor's terms. 17 Where title is in the wife, and the husband puts the property in the broker's hands for sale without disclosing the fact that he is acting as agent for his wife, the husband may be held for the commission. 18 This is on the ground stated, that a person may become liable to the broker for his commission even though that person is not the owner of the property. If a person places property in the hands of a broker for sale, and employs the broker to sell it without at the same time stating that he is not really the owner but only acting for the owner, that person becomes liable for the commission, even though the broker afterwards discovers that the person was only acting for the owner. Thus in Whiting v. Saunders, 23 Misc. 332 (N. Y. 1898), the wife of the defendant Saunders owned the property. The de- "' Martin v. Kile, 103 Cal. 101 (1894). « I [anvil v. Vt-ith, 13 N. Y. St. Hep. 738 (1888). See Chap. XI. §§ 117-119 supra, as to < Met of opinion as to when the broker's obligation is performed. IBJarvla V. Schaefer, 105 N. Y. 289 (1887); Hounds v. Alee, 110 Iowa 345 (1902). 216 COMMISSIONS AND THEIR RECOVERY. fondant placed it in the plaintiff's hands, a broker, for sale. There was some dispute as to whether the defend- ant told the broker at the time that his wife owned the property. The broker drew the contract when he se- cured a purchaser, and the contract appears to have been drawn "Thorndike Saunders, attorney for Emma Saun- ders, party of the second part," and it was claimed that this was evidence that the broker knew that Saunders was acting for his wife. In the lower court the jury had returned a verdict for the broker against Saunders on this conflicting proof. In affirming this judgment, the court (Appellate Term of the Supreme Court) said in part: " There can be no doubt that plaintiffs were aware of defendant's agency before the contract of exchange or sale between Mrs. Saunders and Mrs. Boschen, by their attorneys, was exe- cuted or even drawn up; but we are of opinion that there is some evidence tending to show that plaintiffs did not know of defendant's agency until after they had un- dertaken the employment of finding a purchaser and had brought the transaction, practically, to a close. The subsequent disclosure of the principal came too late, for a person, contracting as agent, will be personally respon- sible, where, at the time of making the contract (of brok- erage), he does not disclose the fact of his agency but treats with the other party as being himself the princi- pal; for in such case it follows, irresistibly, that credit is given to him on account of the contract. He must dis- close the fact that he is acting only as agent, in order that the other party may determine whether he will accept the responsibility of the principal in the transaction. See Ashner v. Abenheim, 19 Misc. 288; Story Ag., § 266." \Vhen a husband acts for his wife in the management or disposition of her property, and when his action nat- urally tends to accomplish her known wishes in regard to it, it needs but little evidence to warrant an inference WHO IS LIABLE FOE COMMISSIONS. 217 that the action was authorized by her. 19 "A wife may act as the agent of her husband, and if he permits her so to act in any particular transaction, he adopts and is bound by her acts and admissions, and they may be given in evidence against him; and a subsequent acknowledg- ment or ratification of her acts by the husband must be * * * evidence of and equivalent to an original au- thority." 20 § 207. Trustees, Executors and Guardians. A person acting in a representative capacity, such as trustee, executor or guardian, is personally liable for the broker's commission. 21 As stated in Hickman v. Leg- gett, 100 Pac. 1072 (Cal. 1909), "It is well settled that an executor or administrator cannot create any liability against the estate in his charge by his employment of attorneys, brokers or others to assist him in the perform- ance of his duties. The attorney, broker, or other per- son employed has no action or claim against the estate. Whatever claim he has, whether it be absolute or condi- tional, is against the executor or administrator in his individual capacity, who, in turn may, if the expenditure was made in good faith and was proper, be credited therewith in the settlement of his accounts with the es- tate." One of two trustees who employs a broker to find a purchaser for the trust real estate, is liable in his indi- vidual capacity upon the contract of employment, and the other trustee need not be made a party defendant. 22 Where an executor employs the broker, the executor is 10 Simes v. Rockwell. 156 Mass. 372 (1892). » Hopkins v. Mollinicux. 4 Wend. 465 (N. Y. 1830). HMcGovern v. Bennett, 14r, Mich. . r ><;2 (1906), (citing Pncknrd v. Kingman, 109 Midi l!)7 ; Lathrop v. I)uffl«'l Misc. 43 (N. Y. 1893). si Cole v. Mendenhall, 117 App. Div. 78G (N. Y. 1907). 220 COMMISSIONS AND THEIE RECOVEKY. had incurred, is founded upon a sufficient consideration. And it seems this is so whether or not the contract from which the purchaser was released would have been en- forceable. 32 If a proposed purchaser promises to pay the commission in case he purchases, because the vendor would pay no commission, and the property is subse- quently sold to a third party who in turn sells to the pro- posed purchaser, the question whether the commission was earned should be submitted to the jury. 33 210. Broker Employed by Purchaser. Where a real estate broker is employed to buy real estate, he earns his commission when he has in good faith brought to his employer a seller who makes a written contract with him for the sale of the property, and it is no answer to his claim for commission against such em- ployer, that the seller could not make perfect title, and was therefore unable to carry out his contract of sale. 34 Likewise, where the broker is employed by the purchaser, but with the understanding that he should receive his pay from the vendor, a refusal on the purchaser's part to comply with the contract to purchase, by reason of which the broker is deprived of his commissions, renders the intending purchaser liable for the damages thereby in- flicted on the broker. 35 "It would seem to be immaterial whether in the original negotiation or the sale the plaintiff (the broker) was the agent of the vendor or the purchaser. The com- plaint here is for the violation of the contract to pur- chase, from which violation damages directly result to plaintiff." 30 Where a person agrees to pay a broker s = Rniwn v. Jennett, 100 N. W. 747 (Iowa 190G) ; s. c, 5 I,. It. A. (N. S.) 725. See also § 205 supra. 83 Mutchnick v. Friedman, 135 App. Div. 350 (N. Y. 1909). S4 Knapp v. Wallace, 41 X. Y. 477 (1809). ss Livermore v. Crane. 20 Wash. 529 ; 57 L. R. A. 401 (1901), (citinsr Bishop v. Averill, 17 Wash. 209; 49 Pac. 237; 50 Pac. 1024: Cavendar v. Wadilingham, 2 Mo. Ali].. 551; Atkinson v. Pack. 114 N. C. 597; 19 S, B. 02S). 38 Livermore v. Crane, supra, WHO IS LIABLE FOE COMMISSIONS. 221 a commission if he succeeds in getting an owner to sell to the purchaser at a price named, and the broker suc- ceeds in so doing, he is entitled to his commission from the proposed purchaser, 37 notwithstanding the pur- chaser refuses to take the property because he is unable to get a reduction in the price. 38 The fact that a purchaser who employed a broker to negotiate a sale for him, takes the contract and the deed in his wife's name, does not, of itself, deprive the broker of his compensation. Whether he is to be treated as the actual purchaser or, as agent for his wife, an undisclosed principal, the question of his liability is for the jury and not for the court. 39 w Brunson v. Blair, 97 S. W. 337 (Tex. 1906). 38 Michaelis v. Roffmann, 37 Misc. 830 (N. Y. 1902). 8» Bloch v. Lowe, 51 Mise. 8 (N. Y. 190G). CHAPTER XXII. AMOUNT OF COMPENSATION. § 211. General Statement. Where the amount of commissions is expressly agreed upon, the broker is entitled to the agreed amount. (§§ 212-218.) Where no rate or special mode of compensa- tion has been agreed on, the broker is entitled to the cus- tomary rate. (§ 219.) A custom or usage, when it is reasonable, uniform, well settled and not contradictory to fixed rules of law or the express terms of the agreement, is generally deemed to form a part of the contract. ( §§ 219, 220.) A custom, to bind the parties, must either be known to them or must be so general that they must be supposed to have contracted with reference to it. (§§ 221, 222.) A cus- tom may be established by presumptive as well as by di- rect evidence. (§§ 223, 224.) Rules of real estate boards are binding upon members but not upon non- members, unless such rules are established as a custom. (§ 225.) In the absence of an agreed amount, or of a custom fixing the rate, the broker is entitled to the fair value of his services. (§ 226.) § 212. Commissions. How Fixed. The amount of the broker's compensation is fixed by (1) express agreement of the parties; (2) custom; or (3) by the reasonable value of his services. 1 i Knaus v. K. B. Co., 142 N. Y. 77 (1894); Walker Mfg. Co. v. Knox, 136 Fed. 339 (1905) ; Jones v. Moore, 30 Ky. Law Rep. 005 (1907). 222 AMOUNT OP COMPENSATION. 223 § 213. Agreed Compensation. Sometimes brokers name a fixed amount as their compensation. When this is done and agreed to by the broker's employer, it constitutes an express agreement. An express agreement, however, need not necessarily specify a fixed sum. It is an express agreement if the broker and his employer agree that the broker shall have as his compensation all in excess of a fixed sale price, 2 or that the broker shall have a certain part of the "profits" on a sale. When the broker has an express agreement as to his compensation, such agreement controls in case the broker brings about a deal. Such situations are gov- erned by the rules applicable to all contracts. Where there is a valid express contract, there is no place for re- covery on a quantum meruit? Where on buying property the principal agreed to pay the broker a part of the profits when he sold, and no time for a sale was fixed, it was held that the principal or his representatives could not refuse absolutely to sell; that a sale must be made within a reasonable time, and that after repudiation of the broker's rights he was en- titled to recover his part of the "profits" in cash, based upon the then value of the land, less the amounts which would be properly chargeable against a sale price before the net profit could be arrived at. 4 § 214. Measure of Compensation. Where the seller causes a breach of the contract of employment and the broker is entitled to damages on ac- count thereof, the measure of damages is either the com- mission agreed upon, or reasonable compensation for the - See §§ 215-218 infra. 3 Reams v. Wilson, 147 N. C. 304 (1908), (citinpr Reed v. Reed, 82 Pa. St. 420; Phelan v. Gardner, 43 Cal. 300; Doty v. Miller, 43 Barb. 529; Bailey v. Chapman. 41 Mo. 5:17 ; Monroe v. Snow, 131 111. 130; Rreekenridse v. Clarldge, 43 L. R. A. 593). * KaufTman v. Baillie, 89 Pac. 548 (Wash. 1907). 224 COMMISSIONS AND THEIR RECOVERY. broker's services. 6 And it has boon held that whore a broker contracted to soil land at a specified price for an agreed commission of five per cent., I mi a sale was made to the broker's purchaser by the principal for loss than the price specified in the agreement, the broker was not entitled to recover the agreed commission but was only entitled to receive reasonable compensation. A broker may also in effect, by bis conduct or other- wise, waive bis right to commissions which bo has earned. As an illustration,— where a certain amount is agreed upon as commission in case a sale is made, and the broker makes the sale but his principal refuses to complete, the commissions are earned, but if the broker thereafter makes efforts to again sell the property for his principal without demanding the commissions already earned, the broker on making a subsequent sale is not entitled to commissions for the first sale but only on the second. 7 § 215. All in Excess of Fixed Price. It is not uuusual for persons to list property with brokers and fix a not sale price, the brokers to retain as their compensation all they can secure in excess of this net price. When such an arrangement is entered into, it should not be allowed to rest on a mere understanding or oral agreement between the owner and the broker. On the contrary, an explicit agreement should be entered into, showing conclusively that the broker is to receive for his compensation all ho gets above a certain price, as distinguished from the not uncommon arrangement un- der which a broker is merely authorized to sell at a price not less than a fixed sum. The difference, which is ma- terial, is discussed in the following section. « Dal v. Fischer, 107 N. W. 534 (S. D. 1000). 'SchultZ v. Zolman, 111 S. \V. 770 (Tex. 1008). 7 Deford v. Shepard, C Kans. App. 428 (1897). AMOUNT OF COMPENSATION. 225 § 216. Agreements for All in Excess of Fixed Price. Commission agreements for "all in excess of a fixed price" should, as stated, be as explicit as possible. Losses to the broker or to the vendor may result from disregard of this caution. If the intention is to permit the broker to have all in excess of a fixed sale price as his compensation, and this is not clearly expressed, the courts may adopt a construc- tion of the agreement quite fatal to the broker. For ex- ample, in an Arkansas case where the owner of land au- thorized a broker to sell her property at " $3 per acre net to her," it was held that this would not entitle the broker to all he could get in excess of the specified amount, but that it meant that the land must bring to the owner $3 per acre over and above all expenses and deductions; that the specification of the amount was only a limita- tion of the broker's power to sell; that it was still his duty to sell the land for the highest price obtainable and to account to the owner for the proceeds, less a compen- sation not greater than the excess of the purchase money over $3 per acre net, and at the same time not exceeding a reasonable compensation. 8 The same ruling has been applied in other juris- dictions. Thus, where property was listed with a broker at a fixed sum net to the vendor, the intention was held to be that the property should bring him the fixed amount free of all expenses, and not that the brokers should receive as compensation all the purchase money above the fixed sum. In this case, 9 the court said: "We do not mean to hold that if the real estate brokers who are plaintiffs in this case had alleged an express contract that * * * they might have as compensation for their services all that they might sell the property for, above SBovsen v. Robertson, 70 Ark. 56 (1002); s. c, 68 S. W. 243. » M.itheney v. Godin, 130 Ga. 713 (1008), (citlni; Turnley v. Michael. 15 S. W. (Tex.) 912). 226 COMMISSIONS AND THEIR RECOVERY. a fixed sum, they would not be entitled to such excess as compensation for their services, in case they procured a purchaser. But where the owner agrees with brokers for them to sell property for a named amount 'net to him' such language will not be held to import by implication a contract to allow the brokers, as a fee or profit, all of the purchase price in excess of the sum so named." On the other hand, if it is merely intended to give the broker a net price which is to be the lowest selling price, it is equally fatal to the land owner if the language used may be construed to mean that the broker may retain as his compensation all above the net price. Agreements of the latter nature are, as already said, legitimate, and as will be seen, enforced. The intention should therefore be expressed so clearly that no adverse construction is possible. § 217. Rule as to All in Excess of Fixed Price. Where the broker is given a net sale price, and is to retain for his compensation all he may secure in excess of such net price, he is not, of course, entitled to compen- sation if he brings about a sale for a price only equal to or less than the net price. Thus, where the vendor agrees to take a stated amount "net," all above such amount to belong to the broker for his commission, the broker can claim no commission from the vendor where he procured a purchaser for the net amount only. 10 On the other hand, he may legally claim all he secures in excess of such net price. "When lands are placed in the hands of a broker for sale at a net price to the owner, with the understanding that his commission or compen- sation depends entirely upon what he may be able to get for the land over and above the net price to the owner, he is entitled to the excess for which he sells." u i" Wolverton v. Tuttle, 94 Pac. 903 (Ore. 190S). See also § 232 infra. "Jeffries v. Robbins, 6C Ivans. 430 (1903). AMOUNT OF COMPENSATION. 227 In other words, where the broker is to receive for his commission all in excess of a fixed price, he can claim commissions only in the event he procures a purchaser at a price in excess of the fixed amount ; the excess being the measure of his commission. 12 Where the broker is to get all or a part of all above a certain price per acre or a certain price in gross, the amount of the mortgage on the property purchased should be considered a part of the price paid when arriv- ing at the net amount received by the seller, and upon which the commissions are to be computed, at least it has been so held where nothing was said about any mortgage in the written employment of the broker. 13 § 218. Rule as to All in Excess of Fixed Price when Vendor Intervenes. When the broker is to sell for a net price and keep the excess and secures a purchaser at a price in excess of the net price, and the owner sells to the purchaser, know- ing him to be the broker's client, the owner is liable to the broker for a commission equal to the difference be- tween the net price and the price the purchaser was ready, willing and able to pay to the agent for the prop- erty. 14 If the broker's purchaser to whom the vendor sells the property, in fact agreed to pay more than the fixed amount, and the vendor is informed of that fact before completing the sale, and he takes a less sum, the vendor is liable. 15 Where an owner agreed to give the broker all above $1,400 obtained for his property, and also agreed not to is Iloleomb v. Stafford, 102 Minn. 233 (1907). (citinp Antisdel v. Canfleld. 119 Mich. 229; 77 N. W. !)44 ; P.eattv v. Bnssell, 41 Nclir. ."J21 ; 59 N. W. 919; Ames v. Lamont, 107 Wis. 531; 83 N. W. 780). See also Beaumont v. Samson, 90 1'ae. 839 (Cal. 1907). 13 Holiurt v. Stewart, 99 Minn. 394 (1900). "Church v. Dunham, 14 Idaho 776 (1908). it Iloleomb v. Stafford, 102 Minn. 233 (1907). 228 COMMISSIONS AND THEIR RECOVERY. sell the property without giving the broker notice, and the broker brought a customer for $1,500 and learned, it then being February, that the owner had sold the prop- erty in January for $1,350 without notice to the broker, it was held that this being a valid express contract, there was no place for a recovery on quantum meruit, and that the broker was entitled to recover the stipulated com- pensation amounting to $100. 16 § 219. Compensation in Absence of Agreement. "Where a broker has been employed and no rate or special mode of compensation has been agreed on, the customary rate forms the proper rule of value for his services." 17 Under such circumstances he is entitled to a reasonable compensation, evidence of which is the usual and customary charge for making such sale. 18 It is not unusual for brokers to say nothing at all about the amount of their compensation when the prop- erty is placed with them for the purpose of selling or renting it. In such case, unless a fixed compensation is subsequently agreed upon, the broker relies on recover- ing the "customary" compensation. This customary rate may vary in different localities. 19 Where no price is fixed and the broker is merely instructed to get an offer, the implied agreement is that the owner will pay commissions upon the sale price in the event the owner agrees upon a figure and sells to some person introduced by the broker. 20 But it seems that in an exchange where the values of both properties have been purposely inflated, the w Reams v. Wilson. 147 N. C. 305 (1908), (citing Reed v. Reed, 82 Pa. St. 420; Phelan v. Gardn >r. 4.3 Cal. 300; Doty v. Miller. 43 Barb. 529; Bailey v. Chapman, 41 Mo. 5.37; Monroe v. Snow, 1.31 III. 1.30; Brackenridge v. Claridge, 43 L. R. A. 593). " Erben v. Lorillard, 2 Keyes 572 (N. Y. Court of Appeals, 1S06) ; Monroe v. Snow. 131 111. 130 (1890). is Jones v. Moore, .30 Ky. Law Rep. 005 (1907). i« Sec Schedules of Rates. Forms 1-16 infra, Part VIII. -"Martin v. Fegan, 95 App. Div. 157 (N. Y. 1904). AMOUNT OF COMPENSATION. 229 broker's percentage should be based on the real value of the property. 21 § 220. Custom as Part of the Agreement. Parties are presumed to contract in reference to the custom or usage of the particular place or trade in or as to which they enter into agreement, when the custom or usage is so far established, and so far known to the par- ties that it must be supposed that their contract was made in reference to it. 22 "Custom or usage relating to a particular business in order to be available for the purpose of determining the rights of the parties must be uniform, notorious and reasonable." 23 Every legal contract is to be interpreted in accordance with the intention of the parties making it. A custom or usage when it is reasonable, uniform, well settled, not in opposition to fixed rules of law, not in con- tradiction of the express terms of the contract, is gener- ally deemed to form a part of the contract, and to enter into the intention of the parties. 24 In Heistand v. Bateman, 41 Colo. 23 (1907), it was said: "Evidence of custom may be resorted to for the purpose of ascertaining the meaning and intent of parties to a contract where the terms employed are general in their nature. Experience has taught that men of affairs, in making contracts, are not always careful to express themselves with completeness and particularity, and that in dealing with one another, they leave part of their in- tention unexpressed, in silent reliance on the usages mu- tually understood, to enter into and form a part of their agreement. 25 Hence, it follows, that when such a con- '-'» Porter v. Helllngsworth, 30 Misc. 028 (N. Y. 1900) ; C2 N. Y. Suppl. 70(1. «* Walla v. Bailey, 4!) N. Y. 469 il^TL'i; Steldtmann v. Lay Co., 234 III. 84 i 1908). 28 Heistand v. Bateman, (1 •'<>!<•. 22 (1007), (citing Savage v. Pelton, 1 Colo. A pp. 148; Leach v. IVrkins. 17 Me. 162). 2* Walls v. Bailoy. 49 N. Y. 400 (1872). * Citing 20 Am. & Eng. Enc. Law (2d Ed.), 422. 230 COMMISSIONS AND THEIR RECOVERY. t ract becomes the subject of litigation, the presumption is indulged, if the parties have not expressed a contrary intention, that they intended to incorporate therein a usage known to them, and evidence of such is admissible, not to vary or contradict the terms of the contract, but to interpret it, as it was understood by the parties at the time it was made." 26 A custom that where brokers negotiate a lease the owner pays the commission, cannot fasten upon a prop- erty owner any liability as the employer of a broker sim- ply because he consents to rent his property to some one who is induced to lease it through the agency of the broker without any request, express or implied, on the part of the owner. 27 A custom between brokers to divide commissions, gives no right of recovery in the absence of an agreement to divide or of facts from which such agreement may be implied. 28 § 221. Custom and Usage Defined. "Strictly speaking, custom is that length of usage which has become law. It is a usage which has acquired the force of law. ' ' 29 The words ' ' custom ' ' and ' ' usage ' ' are often used as convertible terms. 30 § 222. When Custom Binds the Parties. "A custom or usage which binds the parties to a con- tract does so only upon the principle either that they have knowledge of its existence or that it is so general that they must be supposed to have contracted with ref- erence to it." 31 Where a usage is local, its existence ^Citing 20 Am. & Eng. Enc. Law (2d Ed.), 423, et seq. -" Brady v. American Much. Co.. 86 App. Div. 20!) (N. Y. 1903). m Hedenberg v. Seeberger, 140 111. App. 618 (1908). 29 Walls v. Bailey, 49 N. Y. 471 (1872). 30 Id., 472. 31 Harris v. Tumbridge, 83 N. Y. 92, 100 (1880). AMOUNT OF COMPENSATION. 231 must be clearly proved to have been known to the party sought to be charged thereby, at the time. 32 Not only the existence of a usage, but whether knowledge of it ex- ists in any particular case is a question of fact for the jury. 33 Evidence of usage is received as is any other parol evidence, when a written contract is under consid- eration. 34 Some cases hold that the custom may be proved without being pleaded. 35 Where there is an express contract as to the amount of compensation, and the contract is not vague or uncer- tain, it cannot be altered or affected by any proof of usage, and proof of custom in such a case is therefore in- admissible. 36 In other words, where the contract covers the point involved, proof of custom as to such point is not proper. 37 It has been said that where a person brings about a sale and attempts to recover commissions at the rate usu- ally charged by brokers, he must show that he himself is a broker. 38 In another case, 39 it was said that ''in an action for reasonable compensation by one employed to sell real estate, and who effects a sale, but who is not regularly engaged in that business, evidence of the cus- tomary charges of real estate agents for such services is relevant; but such customary charges are not conclusive in fixing the compensation of the person making such sale in such circumstances." 40 Again, in the same case 41 it was held that, "The right of one rendering services for another to have their value estimated under a quantum meruit upon a basis of com- MHlggina v. Moore, 34 N. Y. 425 (1800). m Walls v. Bailey, 49 N. Y. 470 (1*72). :, « hi., 470. w Sleidtmann v. Lay Co., 2.!4 111. 89 (1908). As to pleading custom, see Poland v. Hollander, 62 Misc. 523 (N. Y. 19091. ■■'■" Male v. Eagle, 1 E. I). Smith 619 Larson v. Burroughs, 131 App. Div. R77 (N. Y. 1909). 2 i Citing Seymour v. St. Luke's Hospital, 28 App. Div. 119 (N. Y. 1898). " Benedict v. Pincus, 134 App. Div. 555 (N. Y. 1909). "Id. WHEN COMMISSIONS ARE DUE. 243 would make the payment of his commissions conditional upon payment by the purchaser. § 231. Valid Agreements Deferring Payment of Com- missions. By special agreement, however, the broker's commis- sion may be made to depend upon the actual signing of a contract or passing of title, or other contingency. Agreements by which the broker is to wait for his com- mission, in order to be binding upon him, must be made before the broker actually has earned his commission, or else must be founded upon some consideration. Where the principal states that no commissions are to be paid unless title actually passes, or imposes any other condition and does this at the time he engages the broker, the agreement is binding, since it is a part of the contract of employment, and if the broker accepts the employment under such conditions, he must abide thereby. While the statement in a contract of sale that a cer- tain person is the broker who brought about the sale, may be evidence upon which to hold the seller or the buyer, as the case may be, for commissions, yet such a clause is of no force as to the broker, unless he is a party to the contract. Hence, where such a clause provides that com- missions are only to be paid on the transfer of title, it does not bind the broker where he is not a party to the agreement. 24 § 232. Contingent Commission Agreements. If the broker has made a valid agreement that his commission shall depend upon some contingency, 25 he "Wlllner v. Sealo, 127 App. Dlv. 180 (N. Y. 1908). * See § 231 supra. 24 ! COMMISSIONS AND THEIR RECOVERY. must show thai the contingency has happened, or that it was defeated through some fault of the obligor, before he can recover. 26 Where the agreement with the broker provides that "commission or brokerage will be paid only to the one who actually makes and finally completes the sale and has the contract signed," it must be shown that a con- tract was signed, before commission can be recovered. 27 AVhere the agreement provides that the commission is to be paid ''when a contract for the sale is signed," the securing of a parol offer, which is accepted by the principal, where no contract of sale is signed, and the person making the offer fails to complete the purchase, does not entitle the broker to commission. 28 Where commissions were not to be paid until and un- less title passed, and the purchaser failed to complete his purchase, no right to commissions accrued. 29 And where it was agreed between the vendor and the broker that the commission should not be due and pay- able until title passed, and title did not pass on account of defects therein, the broker is not entitled to commis- sion. 30 That the broker was to receive his compensation out of the proceeds of sale does not make his right to com- pensation necessarily dependent upon the completion of the sale. If the broker performs his part of the contract and the trade is defeated by the inability of the principal to make a good title, then the broker is entitled to com- pensation for his services, though it cannot be paid, as agreed, out of the purchase money. 31 Where the broker is to receive as commission all he 2° Hinds v. Henry. 30 N. J. L. 333 (1873). 27 Reiebard v. Wallach, 91 N. Y. Suppl. 347 (1904). See also Bureh v. Hester, 109 S. W. 399 (Tex. 1908). 28 Schlanskv v. Hillman, 111 N. Y. Suppl. 090 (1908). See also MeDerniott v. Mahoney, 115 N. W. 32 (Iowa 1908). a> Fittictaauer v. Van Wvck. 92 X. Y. Suppl. 241 (1905). 30 Couper v. O'Neil, 53 Misc. 319 IN. Y. 1907). But see § 233 infra. 81 Cheatham v. Yarbrough, 90 Tenn. 77 (lsnit. See also Berg v. San Antonio Co., 17 Tex. Civ. App. 291 (1897). WHEN COMMISSIONS AEE DUE. 245 can get above a fixed price, he is entitled to no compen- sation until the principal receives the price fixed upon, unless his failure to receive it is his own fault. Hence the agent has no right to retain advance money forfeited by a proposed purchaser, such money belonging to the principal. 32 And at least where the rule prevails that the broker must bring about a consummated sale to earn his commission, 33 the broker cannot retain from the ven- dor the forfeit money paid by a purchaser who fails to complete. 34 § 233. Construction of Agreements to Wait Until Title Is Closed. Even where commissions are to be paid "at the clos- ing of title, ' ' it has been held to mean, not when the title is actually closed, but the day when the title was agreed to be closed. 35 Where a so-called " binder" for the sale of property provided for a time when the formal contract was to be executed, and also contained the following clause, "com- missions to be paid to * * * on closing of title," the court held that the provision merely fixed the time when the brokerage should be payable if the contract was per- formed, and that the actual closing of the title was not a condition precedent to recovery of the brokerage. 36 The court further said: "The case of Fittichauer v. Van Wyck, 92 N. Y. Suppl. 241 (1905), does not apply, be- cause there the broker's commissions were not to be paid until and unless title passed. Haase v. Schneider, 112 App. Div. (N. Y.) 336 (1906), Peace v. Ross, 123 App. Div. (N. Y.) 611 (1908) and Shapiro v. Nadler, 51 Misc. 3= Burned v. I'otts, 2."f*> 111. 100 (1908). See also § 215 supra. •■-' So- §§ 117-110 supra. "Chambers v. Herring, 88 S. W. 371 (Tex. 1005). » Morgan v. Calvert, 126 App. Div. ."$27 (N. Y. 1008). Ami see Plnkerton v. Hudson, 113 S. \v. 35 (Ark. 1908). a" Meltzer v. Straus. Gl Misc. 253 (N. Y. 1909), (citing Morgan v. Calvert, 120 App. Div. 327 (N. Y. 1908)). 246 COMMISSIONS AND THEIR RECOVERY. (N. Y.) 13 (1906) are inapplicable," to such a case, "for the reason that, in those cases, the parties had not agreed upon the terms of the contract, while, in the present case, there was sufficient evidence to warrant the jury in find- ing that the parties fully reached an agreement as to terms." Where the agreement is that the broker shall have as commission all he secures above a fixed price, part to be paid on execution of contract and balance "at the closing of the title," the court thought that "the fair reading of the contract does not make the actual closing of the title a condition precedent to the right of the plaintiff (the broker) to his commission. * * * The mere fact that by reason of the defendant's defective title he is unable to complete his contract at that time does not operate to postpone the plaintiff's right to payment." 37 In another case, 38 it was held that where the broker agreed that no commission should be paid until title passed, assuming such an agreement to be good, 39 one party cannot arbitrarily refuse to complete the sale and be relieved of liability for commission. The fair intend- ment of such an agreement is that the broker's commis- sion fails only in case title is not passed on account of some circumstance beyond the party's control. And where the commission was to be paid out of the final pay- ments made by the purchaser, the fact that the final pay- ments were not made, because the purchaser objected to the validity of the title, and the vendor thereupon re- turned the payments on account, does not deprive the broker of his right to recover. 40 Where the seller deposits a sum with the purchaser's attorney to be delivered to the broker upon the seller's order when title passes, and the purchaser does not com- *t Morcan v. Calvert, 126 App. Div. 327 (N. Y. 1908). as Creenwald v. Rosen, 61 Misc. 260 (N. Y. 1909). 38 See §§ 230 gupra, 234 infra. v> Bankers Loan Co. v. Spindle, 108 Va. 426 (1908). WHEN COMMISSIONS AEE DUE. 247 plete his purchase, the seller has a right to the return of the money irrespective of whether the broker earned his commission as the deposit was subject to the seller's order. In such case if the broker has earned his com- mission and the seller refuses to give the order, the matter is one between the broker and the seller. 41 § 234. Deferred Commissions and Vendor's Warranty as to Title. In a Texas case 42 it is said: "In the case of Gauthier v. West, 47 N. W. Rep. 656, it is stated that if the broker agrees to wait for his commission until the sale is fully completed, there is an implied contract that the defend- ant had the ability and would confer upon the purchaser a perfect title to the property. We think this is sound. And we are unable to see any difference between cases where the owner agrees to pay the agent generally, and where there is a stipulation that he is to receive his pay when the sale is completed, or out of the proceeds when they are received. In the latter case it is true, the agent would have to await the completion of the sale, or the re- ceipt of the proceeds after the sale. So far his compen- sation would be conditional. In cases where he is to be paid upon the completion of the sale, the authorities are that the broker is, nevertheless, entitled to compensation, if the sale was not completed, because of the owner's in- ability to give a good title. This being the case, how can it be said that a stipulation that he was to await the pay- ment of the purchase money, or be paid out of the pur- chase money when received, relieves the owner from the implied warranty that he has a good title, when this sale is defeated and thereby the fund out of which the agent was to be paid is defeated, for such reasons ? If the agent « Bofrart v. Rolch, 128 App. DIv. 854 (N. T. 1908). « Berg v. Street Railway Co., 17 Tex. Civ. App. 301, 302 (1897). 248 COMMISSIONS AND THEIR RECOVERY. can recover in the one case he should in the other. As a matter of course, an agreement might be made whereby the broker will not be entitled to compensation if the sale is defeated by reason of the title, or for any other reason. There is nothing in the contract that can be so construed. It is plain and unambiguous. It was agreed that he should have for his services in selling appellant's bonds, the excess over a fixed sum net, to be paid in cash as the same should be received from the purchasers. In other words, if he sold the bonds for a surplus over the fixed sum, he was to be paid this surplus, but as to deferred payments, having to await their payment, to this extent only his pay was conditional. There was no condition that if the sale failed for any reason, he was to receive no commissions. If such had been his agreement, it may be that it would have done away with all implied war- ranty, as was held in Flower v. Davidson, 46 N. W. Rep. 308. It may be proper to state in this connection that in a later case in Minnesota, Cromer v. Miller, 57 N. W. Rep. 318, the doctrine announced in Flower v. Davidson was, it seems, applied to a case where the agent's commission depended upon the payment of the purchase money, and the Court held in that case, citing Flower v. Davidson, in effect, that such a stipulation did away with the im- plied warranty concerning the title. There is no refer- ence to Gauthier v. West, which seemed to hold the con- trary, a case decided by the same court. We are of opin- ion that it requires more than the agreement shows in the present case to be construed to exclude such war- ranty. ' ' § 235. Commissions on Instalment Sales. Lots in the suburbs are frequently sold on the instal- ment plan. Urban property is sometimes also so sold. Where land companies are engaged in selling suburban WHEN COMMISSIONS AKE DUE. 249 property on the instalment plan, they usually have an agreement, or at least an understanding with their sell- ing agents as to how the commissions shall be paid. 43 In the absence of any agreement, the broker need not wait for his commissions until collection of deferred pur- chase money payments. 44 He is not a guarantor of de- ferred payments or covenants, and is entitled to his com- mission when he has brought about a sale on his princi- pal's terms or upon terms satisfactory to the principal. The broker does not therefore have to wait until all de- ferred payments are paid and all covenants on the part of the purchaser are complied with. 45 But where the broker brings a purchaser who agrees to pay for the land in instalments, and the vendor agrees with the broker that the latter is to receive his commis- sions as each instalment of the purchase price is paid, the broker is entitled to commissions only on the amounts of the purchase price actually paid. 46 On the other hand, where commissions were to be paid out of the purchase money as it was paid to the vendor in instalments and some of the payments were made, but before all were made the purchaser became insolvent and the vendor foreclosed and bought in the land at a price equal to the amount still due him, it was held that the broker was entitled to recover the balance of his commis- sion. 47 The same would be true had someone else bid in the property at the foreclosure sale, and the original vendor thus received the balance of the purchase price. So long as the original vendor received the balance of the purchase price, in any of the ways contemplated by the contract of sale, the broker could recover the balance of commissions remaining unpaid. 48 43 Sec Form 39 infra, Part VII, for a comprehensive agreement of this nature. "Hancock v. Dodge, 85 Miss. 228 (1004). « Morgan v. Keller. 104 Mo. 080 (1905). "Murray v. Rickard. 103 Va. 132 (1904). See also Moore v. Irvln, 20 L. It. A. (N. S.) 1172 (Ark. 1909). "Crane v. Kddy, 191 111. 045 (1901). « Id. PART III. -PRINCIPAL AND AGENT. CHAPTER XXIV. PRINCIPAL'S RELATIONS TO AGENT. § 236. General Statement. An owner may employ several brokers for the sale of the same property and is liable for commissions only to the broker who effects the sale. (§ 237.) Although an owner employs several brokers, he may negotiate and sell the property himself without liability for commissions. (§ 238.) If the owner gives an exclusive agency, he subjects himself to liability for breach of contract if he engages or avails himself of the aid of another broker for the same purpose, but the owner himself may negotiate per- sonally unless he has also precluded himself from so do- ing. (§ 239.) If while the broker is negotiating, the owner inter- venes and concludes the sale, the broker is still entitled to his commissions. (§ 240.) But if the broker's ef- forts fail or his authority is in good faith terminated, the owner is not precluded from negotiating thereafter with purchasers who were introduced by the broker. (§§ 241, 242.) § 237. Principal May Employ Several Brokers. "An owner may employ several brokers for the sale of the same property, and is of course only liable for com- 250 principal's relations to agent. 251 missions to the one who effects the sale." 1 "A person may place his property with as many brokers to sell as he sees fit, but it is only the one who produces a buyer, ready and able to purchase on the employer's terms, that becomes entitled to commissions." 2 § 238. Negotiations by Principal. The employment of one broker does not disable the owner from employing another, or from negotiating a sale in person, since the right of the principal to do in person or by another that which he has empowered his agent to do, is an implied condition of every agency. 3 The owner does not agree that he will not during the time sell the property himself or through the agency of another broker. 4 Where the agency is not exclusive 5 the mere fact that property is left in a broker's hands to sell does not preclude the owner from selling it aside from the broker. 6 The owner may always in good faith sell inde- pendent of the broker unless he has agreed not to do so. 7 And if he sells the property himself, he is not liable to any one for commissions. 8 § 239. Exclusive Agency. If the owner employs a broker with the understand- ing that the latter 's agency shall be exclusive, the owner subjects himself to liability for breach of contract if, notwithstanding, he engages or avails himself of the aid i SussdorfT v. Schmidt, 55 N. Y. 321 (1873); Hoadley v. Sav. Bk.. 71 Conn. 599 (1899) ; Cook v. Forst, 116 Ala. 396 (1896). See also Chap. IX supra. zFreedman v. Havenmeyer, :'.7 App. Div. 518 (N. Y. 1899). 3 Lew v. Rothe, 17 Misc. 103 (N. Y. 1896), (citing Chilton v. Butler. 1 E. D. Smith (N. Y. ) 150; Goldsmith v. Conk. :••!) N. Y. St. Rep. 57; Dole v. Sherwood, 5 Law. Rep. Ann. 720). See also Rothenburger v. Schoniger, 99 S. W. 1150 < Ky. 1907). ' Brlgga v. Boyd, 56 N. Y. 294 (1874); Hoadley v. Savings Rk.. 71 Conn. 599 (1899); Kimball v. Hayes, 199 Mass. 520 (1908). '■ Sec § 239 infra. • Cole v. Kosch, 116 App. Div. 718 (N. Y. 1907); Armstrong v. Wann, 2!) Minn. 126 (1882); Dolan v. Scanlan, 57 Cal. ■■!<■'< (1881). * Burch v. Hester. 109 S. \V. 399 (Tex. 1908); Cook v. Forst, 116 Ala. 390 (1896); Humphries v. Smith, 5 Ga. App. 843 (1908). » SussdorfT v. Schmidt. 55 N. Y. 321 (1873); Sibbald v. Bethlehem Iron Co., 83 N. Y. 384 (1880) ; Hoadley v. Savings Bk., 71 Conn. 599 (1899). 252 PRINCIPAL AND AGENT. of another broker for the same purpose. But the owner himself may negotiate personally, unless his agreement with his broker precludes him also from so doing. 10 But while a broker may have the exclusive agency to sell, there is nothing in that fact, unless the agreement so provide, which entitles him to commissions, unless he is the procuring cause of the sale. 11 § 240. Intervention of Principal. If the purchaser is found by the broker's efforts and through his instrumentality, he is entitled to compen- sation, although the owner negotiates the sale himself. 12 Also, if the owner, while the broker is treating for the sale of the property, interferes and makes a bargain himself with the same person for the sale, upon the terms prescribed for the broker, or upon any other terms, he is liable for the commissions. 13 Thus where a bro- ker employed to sell at a specified price, procures a pro- posed purchaser and opens negotiations with him, the fact that the employer, without terminating the agency or the negotiations so commenced, takes the matter into his own hands and concludes the sale at a lower price does not deprive the broker of his right to commissions. 14 § 241. Intervention of Principal after Broker's Failure or Termination of Authority. Where a broker opens negotiations, but fails to bring » Levy v. Rothe, 17 Misc. 403 (X. T. 1890). For forms for exclusive agency see Forms 36, 37 infra, Ch. XL. 10 Levy v. Rothe, supra; Dole v. Sherwood, 5 L. R. A. 720 (Minn. 1889). n Davis v. Van Tassel, 107 X. V. Suppl. 910 (1907); Wiggins v. Wilson, 45 So. 1014 (Fla. 1908), (citing Waterman v. Roltinghouse. 82 Cal. 659; 23 Pac. 195; Cath- cart v. Bacon, 47 Minn. 34; 49 X. W. 331; Blodgett v. Sioux C. & St. P. Ry. Co., 63 Iowa COO: 19 N. W. 799; McGavook v. Woodlief, 20 How. (U. S. ) 221; 15 L. Ed. ssl; Wvlie v. Marine Nat. Bk., 61 X. Y. 415; Babeock v. Merritt, 1 Colo. App. 84; 27 Pac. 882; Stephens v. Scott, 43 Kaiis. 285; 2.". Pac. 555; Henderson v. Vincent, 84 Ala. 99; 4 So. ISO; Illingswortb v. S1osm.ii. 19 111. App. 012; Cullen v. Bell, 43 Minn. 220; 4.". X. W. 428). See also §§ 99. loo supra. is Sussdorff v. Schmidt, 55 N. Y. .",22 (1873). See also § 100 sunra. 1 3 Briws v. Boyd, 50 N. Y. 294 (1874); Hovey v. Aaron, 133 Mo. App. 582 (190S) ; Hoadley v. Savings Bk., 71 Conn. 599 (1899). See also §§ 129, 130 supra. " Holibs v. Edgar, 23 Misc. 618 (X. Y. 1898); McG-overn v. Rennett, 140 Mich. 558 (1906) ; Glade v. Eastern 111. Min. Co., 107 S. W. 1005 (Mo. 1908). principal's relations to agent. 253 the customer to the specified terms and abandons the ne- gotiations, the employer may subsequently sell to the same person at the price fixed, without liability for com- mission. 15 Also, where there was no employment, and the owner sold the property to a person who had made an offer through the broker almost two years before, it was held that there was no ratification of an employment of the broker alleged to have been made by the owner's agent, especially where the owner himself knew nothing about any claim of the broker. 16 In Miller v. Vining, 112 App. Div. 304 (N. Y. 1906), where the negotiations with the prospective purchaser were broken off, and the broker undertook to sell him other properties of different people, and a month after- ward, without the intervention of the broker, the owner and the purchaser came together on different terms, re- sulting in a sale, the court, in holding that the broker was not entitled to commissions, said: "It is elemen- tary that to be entitled to commissions the broker must be the procuring cause of the sale, and if his efforts fail his employer is not precluded from thereafter negotiat- ing with the purchaser introduced by him, even on the same terms, without being obliged to pay commissions." § 242. Rule when Broker's Efforts Fail. In Schano v. Storch, 56 Misc. 484 (N. Y. 1907), the Appellate Term stated the rule thus : ' ' Where a bro- ker 's efforts fail, his employer is not precluded from thereafter negotiating with the purchaser found by the broker, even on the same terms, and the mere fact that the broker's efforts may have led to subsequent negotia- tions, which, under more favorable circumstances, re- ib Smith v. Kimball, 193 Mass. 585 (1907); West End Dry G. S. v. Maun, 133 111. App. 550 (1907); Falrcliild v. CunniiiKlinm. 84 Minn. 524 (1901); Marlius v. Ken- neally. 43 N. Y. Suppl. 1056 (1S97). "Conn v. Lee, 132 App. Div. 097 (N. Y. 1909). 254 PRINCIPAL AND AGENT. suited in a sale, does not alone entitle the broker to a commission." 17 But it is evident that this only applies where the broker's efforts have ended in failure. After the bro- ker's failure to bring about a sale, or after his authority is fairly and in good faith terminated, others may to some extent avail themselves of the fruits of his labors. In such case the principal may sell to the first party who offers the price asked and it matters not the sale is to the very party with whom the broker had been negotiat- ing. 18 But " if the efforts of the broker are rendered a failure by the fault of the employer; if capriciously he changes his mind after the purchaser, ready and willing, and consenting to the prescribed terms, is produced; or if the latter declines to complete the contract because of some defect of title in the ownership of the seller, some unremoved incumbrance, some defect which is the fault of the latter, then the broker does not lose his commis- sions." 19 » See also West End Dry G. S. v. Maun, 133 111. App. 550 (1907). is Hoadley v. Savings Bk., 71 Conn. 599 (1899); Emery v. Atlanta Exch.. 88 Ga. 329 (1891), (citing Livezy v. Miller, 61 Md. 336; Lipe v. Ludewick, 14 111. App. 372; and others). "Sibbald v. Bethlehem Iron Co., 83 N. Y. 383, 384 (1880). CHAPTER XXV. AGENT'S RELATIONS TO PRINCIPAL. § 243. General Statement. An agent is bound to exercise good faith, reasonable diligence and ordinary skill (§§ 244-24G), and he must not exceed his authority. (§ 247.) It is the agent's duty to disclose to his principal any information he may have relevant to the agency, and the presumption is that he does make such disclosure, except where he has some private purpose, the accomplishment of which would be imperiled thereby. (§ 248.) The agent may, as a necessary incident of powers ex- pressly conferred, make and endorse negotiable paper in the transaction of his principal's business. (§ 249.) In some jurisdictions an action against an agent for conversion of his principal's money will not lie, and the only remedy is an action on contract, but in New York an action in tort will lie to recover money which the agent refuses to deliver to his principal. (§ 250.) § 244. Agent's Responsibility to Principal. "An agent is bound not only to good faith but to reasonable diligence, and to such skill as is ordinarily possessed by persons of common capacity engaged in the same business. Whether or not he has exercised such skill and diligence is usually a question of fact; but its omission is equally a breach of his obligation and in- jurious to his principal, whether it be the result of in- attention or incapacity, or of an intent to defraud." 1 »Heinemann v. Heard, 50 N. Y. 35 (1872); Clark & Skyles on Agency, §§ 302 et teq. 255 256 PRINCIPAL AND AGENT. § 245. Agent Must Act in Interest of Principal. " It is a well-settled principle of morals as well as of law, that the agent must faithfully serve his principal. However unquestioned may be the honesty of the agent, or his impartiality between his own interests and those of his principal, he is bound to the exercise of all his skill, ability and industry in favor of his principal. As an agent to sell, it is his duty to get the highest fair price; and this duty is wholly incompatible with his wish to buy. In every trust this principle prevails. No agent or trustee can deal with the subject matter of his trust, except for the benefit of his principal. * * And the rule in equity is, that any act by an agent in respect to the subject matter of the agency, injurious to the prin- cipal, may be avoided by the principal, and where an agent to sell becomes the purchaser, the court will pre- sume that the transaction was injurious, and will not permit the agent to contradict the presumption. 2 The policy of this rule is obvious. The confidence reposed in the agent must not be abused. His position of trust must not be employed to his own advantage, or to the injury of his principal. In short, while in the employ- ment of his principal, his principal's interest must be his interest, and he may have no interest which, conflict- ing with those of his principal, can work injury to the latter." 3 § 246. Agent's Duty of Faithful Service. " It is the unquestionable duty of an agent to act in matters touching the agency with a sole regard to the interests of his principal. The agent in accepting the employment undertakes to manage the interests confided to him, and discharge the trust reposed in him to the 2 Citing Coles v. Thecothick, 9 Ves. 234. 247. 3 McDonald v. Lord, 26 How. Pr. 407 (N. Y. 1864); Clark & Skyles on Agency, §§ 404 et seq. See also §§ 59-71 supra. agent's relations to principal. 257 best of his ability for the benefit of his principal. The compensation to which he is entitled is the consideration for the engagement into which he enters. The reward is the inducement to the service, and faithful service is generally the condition upon which the reward becomes due. An agent for sale cannot sacrifice the property of the principal for the sake of his commissions, but the desire of earning them is generally a motive to diligence, ' and an incentive to exertion. \Vhen the duty and in- terest of the agent coincide, and he does the act which his duty prompts, but the impelling motive is the interest which he is to derive from it, and not the duty, the act must stand justified although the motive may be criti- cised. There is in the case supposed, no conflict between his duty and his interest. The act corresponds with the duty, but the motive which prompted it is a low and in- ferior one. This cannot, however, affect the validity of the act as between the principal and agent. ' ' 4 § 247. Agent Must Not Exceed Authority. "An agent must also obey instructions and observe the terms of the agency ; otherwise he does not perform, in the eye of the law, his full duty towards his principal and is not entitled to receive the compensation for his services promised to him in the contract of agency. ' ' 5 "A departure by an agent from his instructions does not ipso facto constitute fraud. It is competent evidence on the issue of fraud in an action by the principal against him, and, with other circumstances, may satisfactorily establish it. Agents frequently overstep the limits of their authority, and it is quite conceivable that it is often done in the supposed interest of their principal. In such cases they take the risk. Tf the principal ratifies * Price v. Keyes. 02 N. Y. 3S2. .isr?. ?,*4 (1*75). * Raleigh R. E. & Trust Co. v. Adams, 140 N. C. 105 (1907). 258 PRINCIPAL AND AGENT. the act, they stand justified. If he disaffirms it and suf- fers loss from it, the agent is responsible. But proof that an agent has transcended the limits of his authority, would not alone support an action by the principal for a fraudulent misuse of his power." 6 § 248. Agent Must Disclose Information. "An agent owes a duty to his principal to disclose to him any information which he may have which may be relevant to that agency. 7 The law conclusively pre- sumes that the agent makes such disclosure, unless the agent has some private purpose to accomplish, the ac- complishment of which would be imperiled thereby," 8 as where the broker is secretly interested in the deal or is engaged in furthering a scheme to defraud his prin- cipal. 9 " The concealment by an agent of facts which are material to his principal's interests, especially after in- quiry made, amounts in law to fraud." 10 And so, where in an exchange, one of the parties requests the broker to ascertain the actual rental of the property he is to take, and the broker procures an erroneous statement thereof, which the principal relies upon and contracts to ex- change, but rescinds after learning the facts, the bro- ker is not entitled to commissions. 11 § 249. Agent's Power to Make and Endorse Negotiable Paper. "It is not always necessary that explicit authority must be given an agent to justify his indorsement of a "Price v. Keyes, 62 N. T. 382, 3S3, 384 (1875). * See Raleigh R. E. & T. Co. v. Adams, 145 N. C. 165 (1907) ; Rodman v. Manning, 99 Pac. 657 (Ore. 1909). s Crooks v. People's Nat. Bank, 72 App. Div. 335 (N. Y. 1902) ; Clark & Skyles on Agent-v. § 416. See also §§ 264-266 infra. » See Henrv v. Allen, 151 N. Y. 1 (1896); Benedict v. Arnoux, 154 N. Y. 728 (1898); Constant v. Un. of Rochester, 111 N. Y. 611 (1888). i° Low v. Woodburv. 107 App. Div. 298 (N. Y. 1905). " Marcus v. Bloomingdale, 63 App. Div. 227 (N. Y. 1901). agent's relations to principal. 259 check or bill drawn to his principal's order. An agent who is employed to procure a note to be discounted may- indorse it in the name of his employer, or he may, un- less expressly restricted, indorse it in his own name and claim indemnity of his principal. 12 And the power to make and indorse negotiable instruments may be implied as a necessary incident of powers expressly conferred, as where an entire business or an entire transaction is intrusted to the agent and it becomes necessary to make or indorse negotiable paper in order to effectually carry out the agency." 13 § 250. Agent's Liability for Conversion of Money. The claim is often made, and in some jurisdictions sustained, that conversion will only lie for the conver- sion of certain specific personal property, to which cate- gory money does not belong, and that, therefore, an action for its conversion will not lie; and that the only remedy is an action on contract. In New York it is settled that an action in tort will lie to recover money received by an agent, broker or other person in a fiduciary capacity, which he refuses to deliver to his principal. 14 "Citing Nelson v. Hudson River R. R. Co.. 48 N. Y. 498. 13 p orK es v. U. S. Mortgage & Trust Co., 135 App. Div. 48T, 488 (N. Y. 1909), (citing Whitten v. Bank of Fincastle, 100 Va. 546; Gould v. Bowen, 20 Iowa 77; Gate City Building & Loan Assn. v. Nat. Bank of Commerce, 126 Mo. 82). "Jones v. Smith, 65 Misc. 528 (N. Y. 1910), (citing Britton v. Ferrin, 171 N. Y. 235; Jackson v. Moore, 94 App. Div. (N. Y.) 504, 508). CHAPTER XXVI. LIABILITY OF BROKER AND PRINCIPAL. § 251. General Statement. If a broker commits a fraud in the course of his em- ployment he is liable and so is his principal. (§§ 252- 255.) All persons who act for or in the name of the owner in bringing about the transaction must be deemed his agents where he accepts the fruits of their efforts, and the owner may not, even though innocent, receive the benefits and at the same time disclaim responsibility for the fraud by means of which they arose. (§§ 254-256.) § 252. Misrepresentations by Brokers and Agents. In case of fraud on the part of agent or principal, there is always more or less difficulty in procuring the proof necessary to establish the conditions, or in deter- mining from the facts presented whether or not fraud was practiced. These are, however, matters of evidence. What is, and what is not considered fraud in real estate transactions is discussed later. 1 Where the vendor himself makes representations and the elements of fraud are present, no serious difficulties present themselves with respect to the substantive law of fraud. Where, however, the misrepresentations are not made by the vendor himself, a question may arise. To what extent is he liable for fraud committed not by him- self personally but by others in some way connected with i See CUs. XXIX-XXXIII infra. 260 LIABILITY OF BROKER AND PRINCIPAL. 261 the transaction! Of course, to incur liability a defend- ant need not make false representations personally. If he authorized and caused them to be made it is enough. 2 ' ' If the agent commits a fraud in the course of his em- ployment, he is liable, and so is his principal. If he com- mits a fraud outside the scope of his authority, he would be liable but not his principal." 3 In Kipy v. Cronan, 115 S. W. 791 (Ky. 1909), it was said that in the absence of any confidential relation between the broker and intend- ing purchaser, or fraud to prevent inquiry or investiga- tion by such purchaser, a real estate broker cannot be held liable for representing to an intending purchaser that the owner would not accept less than the sum named by the broker for the premises, though the owner had in fact agreed with him to sell at a lower figure. § 253. When Vendor is Liable for Broker's Represen- tations. There are cases which hold that, ''As a general pro- position, a principal is not responsible for the deceit practiced by his agent, unless there is something in the nature of the engagement, the terms of the employment, or the powers conferred, broad enough to include a power on the part of the agent to deal with the property in such manner that the principal, in good morals and equity, ought to be bound by what the agent may have said. There are many cases which hold the principal respon- sible for the fraud and misrepresentation and acts of the agent when he accepts the fruits of the contract, and refuses to surrender. As the cases put it, he may not be permitted to reap the harvest and refuse to pay for the seed. When those decisions are examined, it will be SBracketl v. Griswold, 112 N. Y. 407 (1889). 8 Clark on Contracts, 745; Rboda v. Annls, 7." Mc. 17 (1883); Brauckmau v. Lelghton, 60 do. Apjh 11 (1894); Farris v. Uilder, 115 S. W. 015 (Tex. 1909). See ali^o Clis. XXVII, XXVIII infra. 262 PRINCIPAL AND AGENT. seen there was an attempt on the part of the vendee to rescind the sale, and, the vendor refusing, he was held liable for the representations. In all of them the respon- sibility of the principal is put upon this basis. Where, however, there is no attempt on the part of the vendee to rescind, but he affirms the sale, he can bring his action for deceit only against the agent who has been guilty of the misrepresentations, unless he is able to trace some connection between the principal and the agent, and thereby charge the former with responsibility for what the agent may have said or done. An innocent principal, who has simply authorized an agent to sell property, cannot be charged in an action of deceit for the agent's wrongs unless in some manner he be connected with them. This distinction is recognized, and the doctrine commends itself to our judgment." 4 The courts are not, however, unanimous in thus re- stricting the liability of the principal as will be seen by an examination of the succeeding sections. On the con- trary, it has been said that the current of authority ap- pears to be in favor of discarding all such distinctions and holding the principal liable at law and in equity alike for the frauds of his agent or servant in the course of employment, provided, of course, they were committed within the scope of authority of the agent and in the in- terest of the principal. 5 § 254. Vendor Liable if He Accepts Proceeds. "All persons who act for or in the name of the owner in bringing about the transaction must be deemed his agents where he accepts the fruits of their efforts, and all the methods employed by them are imputable to him; lie may not even, though innocent, receive and recover * Mayo v. Wahlgreen. 50 Pac. 43 (Colo. 1897), (citing Kennedy v. McKay, 43 N. J. L. 393; Decker v. Fredericks, 47 N. J. L. 409 ; 1 Atl. 470). 6 Alger v. Anderson. 78 Fed. Rep. 729 (1897). See also Clark & Skyles on Agency, pp. 1112-1113; 1 Am. & Eng. Ency. of Law (2nd Ed.), 1178-1179. LIABILITY OF BROKER AND PRINCIPAL. 263 upon a security given on the sale and at the same time disclaim responsibility for the fraud by means of which the purchaser was induced to deliver it. " c * ' It is an established principle of law that where a person acts for another who accepts the fruits of his efforts, the latter must be deemed to have adopted the methods employed, as he may not, even though innocent, receive the benefits and at the 'same time disclaim responsibility for the fraud by means of which they arose." 7 " Where a prin- cipal adopts and ratifies the acts of his agent by receiv- ing the fruits of it or otherwise, he assumes responsibil- ity for the instrumentalities which the agent has em- ployed in his behalf to effect the contract." 8 Even where the agent's false representations were never au- thorized or suspected by the principal, 9 a reception and retention of the proceeds may make the latter respon- sible for the fraud. 10 § 255. Principal Bound by Agent's Representations. In Mayer v. Dean, 115 N. Y. 560, 561 (1889), it is said : " There is no doubt of the general rule that to a certain extent a principal is bound by the representations of his agent made in effecting a sale of property. Such an agent must be presumed to possess authority to make such representations in regard to its quality and condi- tion as usually accompany such transactions, and his •Falrchild v. McMahon, 130 N. Y. 290 (1893): Gamer v. Manpim, 93 N. Y. 642 (1883); ItlKxla v. Annis, 75 Me. 24, 25 (1883); Forster v. Wilhiisen, 14 Misc. 520 (N. Y. 1S95). *Tavlor v. Commercial Bank, 174 N. Y. 188 (1903). To the same efTeet are Carr v. Nat. Hank & I-oan Co.. 43 App. Div. 10 (N. Y. 1899): Seeber v. People's Bldg., etc., Assn.. 36 App. Div. 316 (N. Y. 1899); People v. Campbell, 22 App. Div. 17o i N. Y. 1897); Reynolds v. Wilt.-. 13 S. 0. 16 (1879). See also Keitman v. Florillo, 72 Atl. 7) (N. .1. 1909), and - Colombia Law Review, 395. BRumsey v. BrlggB, 139 N. Y. :'.::i (1893); Lane v. Black. 21 \V. Va. 626 (1883). »Law v. Grant, 37 Wise. 557 (1875). i° Coykendall v. Constable, 99 N. Y. 314 (1885); Alger v. Anderson, ts Fed. 7.".5 (1897), (citing Franklin v. Ezeli, 1 Sneed 197; Barnard v. iron Co., 85 Tenn. 139; 2 s. \v. 21; Jewetl v. Carter, 132 Mass. 335; Cont. ins. Co. v. Ins. Co. of Penn., 2 r C. A 535; 51 I'd. 890; 2 Jag. Torts, 267, 271; Story on Agency, 5s 134, lr, 2: l Am. & Eng. Enc, of Law (2nd Ed.), lir.s. 1159; 1 Blgelow on Fraud, 225-228; 2 Kent Comm., marg. p. 621 and notes; Kennedy v. McKay. 43 N. J. L. 288 ; Mason v. Crosby, 16 Fed. Cas. 1010; Doggett v. Emerson, 7 Fed. Cas. 804). 1264 PRINCIPAL AND AGENT. principal cannot receive the fruits of a bargain without adopting the instrumentalities employed by his agent in bringing it to a consummation. 11 In an action between vendor and vendee, knowledge possessed by either the principal or the agent is, respectively, imputable to each other, and an agent, whose principal has knowledge of latent defects in property proposed to be sold, cannot honestly represent to its intending purchaser that it is free from such defects. It is well settled in this state that a principal cannot retain the benefits of a contract obtained through the misrepresentations of his agent, even though the principal was ignorant of the represen- tation and really intended no fraud. It was held in Ben- nett v. Judson, 21 N. Y. 238 (1860), that a vendor of land is responsible for material misrepresentations, in re- spect to its location and quality, made by his agent with- out express authority, and in the absence of any actual knowledge by either the agent or the principal, whether the representations were true or false. * * It is consonant with reason and justice that a principal should not be allowed to profit by the fraud of his agent ; and if he adopts the contract made in his behalf, although igno- rant of the fraud, he should be held liable to make com- pensation to the party injured by it." 12 § 256. Acceptance of Proceeds Test of Liability. In Krumm v. Beach, 96 N. Y. 398 (1884), the contract of sale was made by the agent in his own name, without the knowledge of the principal, and all the fraudulent representations came from the agent and were unknown to the principal until after the conveyance. Held, the receipt and retention by the principal of the fruits and product of a fraud involves a liability on account of it, ii Citing Bennett v. Judson, 21 N. Y. 238 (1800). i= Citing Sandford v. Handy, 23 Wend. 260 ; Griswold v. Haven, 25 N. Y. 595 ; Indianapolis, etc., R. R. Co. v. Tyne, 63 N. Y. 653. LIABILITY OF BROKER AND PRINCIPAL. 265 although the principal is innocent of personal participa- tion in the wrong. The defrauded vendee may rescind the contract and recover back his consideration after an offer to reconvey and a tender of what had been received, or he may stand upon the contract and require of the vendor its complete performance or such damages as would be the equivalent of that complete performance. 13 In another case where fraudulent representations by agents as to rents were relied upon as giving the vendee the right to rescind the contract, it was held that the vendor must in some way be connected with the fraud be- fore such relief would be given. 14 In this case the agents were not employed by the vendor and their statements as to rentals were not authorized by him nor known to him. § 257. Fraud of Agent. Pleading. Where the false representations are made through an agent and the principal is sued, it is unnecessary to allege any agency in the making of the representations. A simple allegation that they were made by the defend- ant is appropriate. 15 Although an act is done through an agent, it should be alleged as done by the principal, leaving the method of doing it to the proof. 16 is Krumm v. Beach. 96 N. Y. 398 (1884). " Rotbstein v. Isaac, 124 App. Div. 133 (N. Y. 1908). 1B Harlow v. Haines, 63 Misc. 98 (N. Y. 1909). And see 16 Ency. of PI. & Pr., 901-904. i« Moffett v. Jaffe, 132 App. Div. 7 (N. Y. 1909). CHAPTER XXVII. LIABILITY OF PRINCIPAL TO THIRD PARTIES. § 258. General Statement. The principal is liable generally to third parties for the torts of his agent in the course of his employment, but not for the willful trespass of his agent, committed without color of right or semblance of authority. (§§ 260-262.) The principal, whether known or unknown, may be held on a contract made with authority by an agent, though in the agent's name, unless exclusive credit is given to the agent. (§ 263.) Subject to certain limitations, notice to the agent is notice to the principal. (§§ 264-266.) There is a difference of opinion as to whether accept- ance of a bonus by the agent affects the principal's se- curity. (§ 267.) § 259. Scope of Chapter. In the present work devoted primarily to the law re- lating to real estate brokers, it is impossible to do more than present the most general principles bearing upon the liability of a principal to third parties for the acts of his agent. The law applicable to the relation of prin- cipal and agent generally, is of such magnitude that emi- nent writers have devoted entire volumes to it, and for any detailed investigation reference should be had to the works of these writers. 1 1 Story on Ag. ; Mechem on Ag. ; Clark & Skyles on Ag. ; Reinhard on Ag. ; Huff- cut on Ag. 266 LIABILITY OF PRINCIPAL TO THIRD PARTIES. 267 § 260. Liability of Principal for Agent's Wrongdoing. " The principal is liable in a civil suit to third per- sons for the frauds, deceits, concealments, misrepresen- tations, torts, negligences and other malfeasances and misfeasances of his agent in the course of his employ- ment, although the principal did not authorize, justify or participate in, or indeed know of such misconduct, or even if he forbade the acts, or disapproved of them. This rule of liability is not based upon any presumed authority in the agent to do the act, but upon the ground of public policy, and that it is more reasonable where one of two innocent persons must suffer from the wrong- ful act of a third person, that the principal who has placed the agent in the position of trust and confidence should suffer than a stranger. * * * All that is nec- essary to render the principal liable for the malfeasance or torts of the agent is that the tort must be committed in the course of the agency ; not that the agency author- ized it, or * * * that the employment afforded the means of committing the injury." 2 The principal is not, however, liable for the willful trespass of his agent, committed without color of right or semblance of author- ity. 3 § 261. Liability of Principal who Accepts Benefits of Agent's Acts. Acceptance by the principal of the fruits of the agent's efforts, though the principal be innocent, may place the principal in a position where he will be re- garded as having assumed responsibility for the instru- mentalities which the agent has employed to effect the transaction. 4 2 l.oo v. Village of Sandy mil, 40 N. Y. 448 (1868). Bui see § 271 Infra. • Lee v Village of sa„.iv Hill. 40 N. Y. us (1869); Erie City Iron Works v. Barber. 100 Pa. St. 138 (1884). See also Wheeler v. McGuire, 2 L. It. A. 810 (Aia. 1888). * See §§ 254-257 supra. 268 PRINCIPAL AND AGENT. § 262. Liability of Principal for Agent's Contracts. The liability of the principal on contracts made by an agent depends upon the authority of the agent. The authority may be real or only apparent; the agent may be a general agent or a special agent, and upon these conditions depend the determination of whether or not the agent exceeded his authority. 5 Where a broker contracts as agent for a principal who is named, the principal is liable to the party with whom the contract is made if the agent acted within the scope of his actual authority, or if the agent acted within an apparent authority, with which he was clothed by the principal, even though the act be contrary to private in- structions and limitations uot known to the other party. 6 " It is a general principle of law of agency that a principal is not bound by the acts of the agent not within the actual or apparent scope of the agency, simply be- cause the agent falsely asserts that they are within it." 7 " If the agency is special, and is known, it is the duty of the person dealing with the agent to inquire into the nature and extent of the authority conferred, and to deal with the agent accordingly. Where the special character of the agent is not known, and the principal has clothed the agent with apparent powers, strangers, in dealing with the agent, may assume that such apparent powers are possessed. The principal cannot, by private com- munications with his agent, limit the authority which he allows the agent to assume." 8 The question of the authority of a real estate broker to enter into a contract of sale has already been presented. 9 The authority of a general agent may be more or < i b See Wheeler v. McGuire, 2 L. R. A. SOS (Ala. 1S88). • Clark on Contracts, 731. See also Ch. IV supra as to broker's authority to sign contract. _ , „„„ i Benedict v. Pell, 70 App. Div. 45 (N. Y. 1902), (citing Edwards v. Dooley, 120 N. Y. 540 (1890) ). 8 Clark on Contracts, p. 734. 9 See Ch. IV supra as to broker's power to sign contract. LIABILITY OF PRINCIPAL TO THIRD PARTIES. 269 less extensive; and he may be more or less limited in his action within the scope of it. The limitation of his authority may be public or private. If it be public, those who deal with him must regard it, or the principal will not be bound. If it be private, the prin- cipal will be bound, when the agent is acting within the scope of his authority, although he should violate his secret instructions. A special agent is one employed for a particular purpose only. He also may have a general authority to accomplish that purpose, or be limited to do it in a particular manner. If the limitation respecting the manner of doing it be public or known to the person with whom he deals, the principal will not be bound if the instructions are exceeded or violated. If such limitation be private, the agent may accomplish the object in viola- tion of his instructions, and yet bind his principal by his acts." 10 § 263. Liability of Undisclosed Principal. When property is sold to a person whom the vendor believes to be a purchaser, and he afterwards discovers that the person credited bought as agent for another, the vendor has a cause of action against the principal for the purchase price. 11 Thus, where a person knows that the owner of a particular property will not sell to him, and therefore has another person act as agent and buy in the property in the agent's name, the agent's mind is the principal's mind in the transaction, and the principal may be held for the balance of the unpaid purchase price. 12 "As a general rule, where a written agreement not under seal is made on behalf of a principal not named, and the consideration has moved from him, it is compe- i° Brvant v. Moore, 20 Me. KG, ST (184G>. iiKayton v. Barnett, 110 N. Y. G25 (1889); Borcberling v. Kate, :!7 N. J. Eq. 153 (1883). 12 Kayton v. Barnett, supra. 270 PRINCIPAL AND AGENT. tent for the principal to bring an action in his own name on such agreement, thus made for his benefit; and, on the other hand, even when the agent may himself be liable upon a written contract, because he has failed fully to disclose that he has made it on behalf of another, the principal on whose behalf he has made it may also be liable." 13 11 If an agent possessing due authority makes a con- tract in his own name, his principal, whether known or unknown, may be sued thereon, unless from the attend- ant circumstances it is the clear intent of the parties that exclusive credit is given to the agent, and that no resort shall in any event be had against the principal." 14 Where credit is given to an agent without knowledge that there is any principal, the principal, when discovered, may, at the election of the other party, be held on the contract if the election is exercised within a reasonable time. 15 If the principal claims that the seller knew him to be such (principal) and gave credit exclusively to the agent, he assumes the burden of establishing this by clear proof, the assumption being that the credit is given to the prin- cipal. 16 There are exceptions to the rule that an undis- closed principal may both sue and be sued upon a con- tract made in his behalf. The exceptions, so far as they affect real estate brokers' contracts, have already been noted. 17 § 264. Notice to Agent as Notice to Principal. The principal is chargeable with all the knowledge the agent possesses in the transaction of the business he 13 Nat. Life Ins. Co. v. Allen, 116 Mass. 400 (1874), (citing Huntington v. Knox, 7 Cush. 371, 374; Exchange Bk. v. Rice, lt)7 Mass. 37, 43). "Davis v. Lynch, 31 Misc. 724 (N. Y. 1900). 15 City Trust. Safe Dep. & Surety Co. v. American Brewg. Co., 70 App. Div. 511 (N. Y. 1902) ; aff'd. 174 N. Y. 486 (1903) ; Mississippi Valley Const. Co. v. Abeles, 112 S. W. S94 (Ark. 1908). i« Wasserman v. Bacon, 80 App. Div. 505 (N. Y. 1903). 17 See § 46 supra. LIABILITY OF PRINCIPAL TO THIED PAETIES. 271 has in charge. 18 Or as another case puts it, a principal is chargeable with notice of all such facts as come to his agent's knowledge, whilst acting within the scope of his agency. 19 When the members of a partnership are appointed agents, they are joint agents. Notice to one of two or more joint agents is notice to all. 20 " In an action between vendor and vendee, knowledge possessed by either the principal or the agent is, respec- tively, imputable to each other." 21 The rule rests upon the duty of the agent to disclose to the principal all the material facts coming to his knowledge with reference to the subject of his agency and upon the presumption that he has discharged that duty. ' ' An agent owes a duty to his principal to disclose to him any information which he may have which may be relevant to that agency. The law conclusively presumes that the agent makes such dis- closure, unless the agent has some private purpose to accomplish, the accomplishment of which would be im- periled thereby. ' ' 22 § 265. When Notice to Agent is Not Notice to Principal. The presumption as to disclosure does not always arise, for there are several exceptions. 23 When the agent has no legal right to disclose a fact to his principal, or he is engaged in a scheme to defraud his principal, the presumption does not prevail/ 24 18 Adams v. Mills, 60 N. Y. 539 (1875). >• Kauffman v. Robey, 60 Tex. 310 (1883), (citing Jones v. Banford. 21 Iowa 217; Fulton Bk. v. Canal Co., 4 Paige 127; Swell's Evans on Agency, 164; Le Neve v. Le Neve, 2 Lead. Cases in Eq., pt. 1. 167. 168). 20 Whittenbrock v. Parker. 102 Cal. 100 (1894), (citing Wade Henry v. Allen, 151 N. Y. 1 (1896). 2 * Id. ; KaufTman v. Robev, 60 Tex. 311 (1883), (citing Winchester v. Susquehanna R. Co.. 4 Md. 231; La Farge Ins. Co. v. Bell, 22 Barb. (N. Y.) 51; McCormlck v. Wheeler. 36 111. 114). 272 PRINCIPAL AND AGENT. In Pine Mountain Iron Co. v. Bailey, 94 Fed. Rep. 258 (1899), the court said: " The rule that notice to the agent is notice to the principal has an exception as well established as the rule itself. It is that when the agent acts for himself, in his own interest, and adversely to his principal * neither notice to nor the knowledge of the agent can be lawfully imputed to the principal. 25 The reason of the general rule is that it is the duty of the agent to communicate to his principal the facts rela- tive to any transaction in which he acts on his behalf, and that the law presumes that he has discharged his duty. But when the nominal agent commences to act in his own interest, and adversely to his principal, the pre- sumption no longer obtains that he will communicate to him facts which might prevent the consummation of the negotiation which he is conducting on his own be- half, and the counter presumption that he will conceal them arises. As the reason for the rule no longer exists, the rule ceases to apply, and the exception prevails. ' ' In Benedict v. Arnoux, 154 N. Y. 728 (1897), it was claimed that the knowledge of the agent was imputable to the principal. The court said: " This is true to a limited extent ; so long as the agent acts within the scope of his employment in good faith, for the interest of his principal he is presumed to have disclosed to his prin- cipal all the facts that come to his knowledge as agent; but just as soon as the agent forms the purpose of deal- ing with his principal's property for his own benefit and advantage, or for the benefit and advantage of other persons who are opposed in interest, he ceases, in fact, to be an agent acting in good faith for the interest of his 2B Citing American Surety Co. v. Pauly. 170 U. S. 133, 156; 18 Sup. Ct. 552; Frenkel v. Hudson. 82 Ala. 158; 2 So. 758; Waite v. City of Santa Cruz, S9 Fed. 019, 630; Barnes v. Gas Light Co.. 27 N. J. Eq. 33. 37: Winchester v. R. R. Co.. 4 Md. 231, 241 ; Davis Improved Wrought Iron Wagon Wheel Co. v. Davis Wrought Iron Wagon Co., 20 Fed. 009, 702; Thomson-Houston Electric Co. v. Capital Elec. Co., 50 Fed. 849, 853; Commercial Rank v. Cunningham, 24 Pick. 270, 270 ; Mechem on Agency, § 723. LIABILITY OF PRINCIPAL TO THIRD PARTIES. 273 principal and his action thereafter based upon such pur- pose is deemed to be in fraud of the rights of his prin- cipal, and the presumption that he has disclosed all the facts that have come to his knowledge no longer pre- vails." The court then quotes from Henry v. Allen, 151 N. Y. 1 (1896). But " a principal who knows that his agent is also acting as agent for the party adversely in- terested in a transaction with him, and yet consents that he may act as his agent, is estopped from denying the notice and knowledge which the agent has during the negotiation." 26 § 266. Agent's Knowledge Obtained in Other Trans- actions. As to how far a principal is held chargeable with knowledge of facts communicated to his agent, where the notice was not received or the knowledge obtained in the very transaction in question, there is conflict. 27 It has been held that " notice to and the knowledge of the agent or attorney acquired in prior transactions, and present in his mind while he is exercising the powers and discharging the duties of his agency, are notice to and the knowledge of his principal." 28 On the other hand, it is said " that he (the principal) is not charge- able with notice of such facts if they come to the knowl- edge of his agent whilst engaged in a transaction with which the principal has no concern, is equally well settled " as that the principal is chargeable with notice of all such facts as come to his agent's knowledge while acting within the scope of his agency. 20 "" Pine Mountain Co. v. Bailey. 04 Fed. 200 (1R09). CcItJntr Astor v. Wells. 4 Wheat. 466; FltZBimmona v. Express Co., 40 Oa. 330, 330; Alexander v. University. 57 In. I. 466, 470; Leeklns v. Nordyke, 00 Iowa 471. 475; 24 N. W. 1 ; Adams Mining <'<>. v. Sonter, 20 Mich. 73. 77). 27 £,.<■ r.mstant v. University of Rochester. Ill N. Y. Oil (1RSR) : KaufTman v. Bobev. 00 Tex. 311 (1SS3); Wlttenbecb v. Parker, 102 Cal. 100-103 (1894). M Pine Mountain Co. v. Bailey, 04 Fed. 200 (1899). 29 KaufTman v. Bobey, supra. 271 PRINCIPAL AND AGENT. § 267. Usury of Agent. While the rule prevails in some states that a loan is not rendered usurious by the fact that the lender's agent, without his authority, knowledge or participation, ex- torted money from the borrower upon the false pretense that part of it was a bonus for his principal, 30 the con- trary or a modified view is taken in others. 31 s° Estevez v. Purdv. G6 N. Y. 446 (1876). See also Bell v. Day, 32 N. Y. 168 (1865); Algur v. Gardner, 54 N. Y. 360 (1873); Condit v. Baldwin, 21 N. Y. 219 (1860). 31 See Clark & Skyles on Agency, p. 1126. The following cases bear on the subject: Sherwood v. Roundtree. 32 Fed. Rep. 113; Boreherling v. Terfz. 40 N. J. Eq. 502; White v. Dwyer, 31 N. J. Eq. 40 ; Coudert v. Flagg, 31 N. J. Eq. 394 ; Phillips v. Roberts, 90 111. 492; Pavne v. Neweomb, 100 111. 611; Meers v. Stevens. 106 111. 549; Cox v. Life Ins. Co., 113 III. 3S2; Boylston v. Bain. 90 III. 283; Wyllis v. Ault, 46 Iowa 46; New England Co. v. Hendrickson, 13 Nebr. 574 ; Cheney v. White, 5 Nebr. 261. CHAPTER XXVIII. LIABILITY OF BROKER TO THIRD PARTIES. § 268. General Statement. An agent is not liable to third parties for moneys properly received by him in the name and in the business of the principal. (§ 270.) For misfeasance the agent is generally liable to third parties suffering thereby. (§ 271.) If the agent act without authority, or beyond it, he becomes personally liable. (§§ 272-276.) Where an agent makes a contract he impliedly agrees that he is authorized to make it. (§§ 272-275, 277.) An agent in order to release himself from liability, should disclose his principal. (§ 277.) In New York an unlawful intrusion on real property is a misdemeanor, and it is also a criminal offense for one to affix an advertisement to real property without the owner's consent. (§ 278.) § 269. Scope of Chapter. In regard to the liability of agents to third parties, it may be said that the general subject is of too great mag- nitude to be more than touched upon here. For a full consideration of the subject, the special works on agency should be consulted. 1 § 270. Liability of Agent for Moneys Received. "An agent to whom money has been paid with a di- rection to hand it over to a third person, is accountable I See f 259 supra. 275 276 PRINCIPAL AND AGENT. only to his principal, and not to such third person, unless he has entered into a binding engagement with such third person which lias given the latter a right of action against him." 2 In Fisher v. Meeker, 118 App. Div. 452, 454 (N. Y. 1907), it was held that an agent acting within the scope of his authority cannot be held liable by per- sons other than his principal for moneys properly re- ceived by him in the name and in the business of the principal. Thus, where the plaintiff purchased goods of the defendant as agent to whom he paid the purchase price without any express promise by the agent to pay the sum to the principal and thereafter on demand by the principal again paid a portion of the purchase money, he cannot recover the overpayment from the agent. This, because payment to an agent who has authority to col- lect, is payment to the principal and an absolute dis- charge of the debt, and it is of no consequence to the debtor that the agent fails to account to the principal. In the case cited, 3 the court said: "The case of Smith v. President, etc., of Essex County Bank, 22 Barb. (N.Y.) 627, is a distinct authority against the right to sustain such an action. It was there held that a payment to an agent who has authority to collect is a payment to the principal and an absolute discharge of the debt, and that it is a matter of no sort of consequence, so far as the debtor is concerned, whether the agent accounts for it or misapplies it. In the case of Hall v. Lauderdale, 46 N. Y. 70, it was held that an action cannot be maintained against an agent, although, having money of his prin- cipal in his hands applicable to the payment of the debt of his principal, he refuses to pay it. The court, through Judge Andrews said: 'The defendant was responsible to the principal, and to the principal alone, for any omis- sion or neglect of duty in the matter of his agency.' The * Note in Wells v. Collins, 5 L. R. A. 531 (Wis. 1899). •Fisher v. Meeker, 118 App. Div. 452, 454 (N. Y. 1907). LIABILITY OF BROKER TO THIRD PARTIES. 277 case of Colvin v. Holbrook, 2 N. Y. 126, 4 recognizes this same principle. The court there said: 'The rule, it is be- lieved, is universal, that a known agent is not responsible to third persons for acts done by him in pursuance of an authority rightfully conferred upon him. The very no- tion of an agency proceeds upon the supposition that what a man may lawfully do by a substitute, when per- formed, is done by himself, and the individuality of the agent so far is merged in that of the principal. It is also settled, if anything can be established by authority, that an agent is not liable to third persons for an omission or neglect of duty in the matter of his agency, but that the principal is alone responsible.' 5 There is a class of cases * * * in which the responsibility of agents and servants has been upheld. They are cases where the principal had no right to receive the money, and, of course, could confer none upon the agent, or where it was paid by mistake, or where the agent exceeded his au- thority, or was guilty of misfeasance, not as an agent or servant but as a wrong doer, or where payment was in- duced by a wrongful act of the agent or there was an explicit agreement to return it." § 271. Liability of Agent for Misfeasance and Non- feasance. "In Van Antwerp v. Linton, 89 Hun (N. Y.) 417, 419, the court, per Parker J., say: 'as between himself and his master he is bound to serve him with fidelity, and for a breach of his duty he becomes liable to the master, who in turn may be charged in damages for injuries to third persons occasioned by the nonfeasance of the servant. For misfeasance the agent is generally liable to third par- ties suffering thereby. The distinction between non- feasance and misfeasance has been expressed by the * Criticised in note in 28 L. R. A. 433. * Citing Cooper v. Tim, 10 Misc. (N. Y.) 372. 278 PRINCIPAL AND AGENT. courts of this State (New York) as follows: "If the duty omitted by the agent or servant devolved upon him purely from his agency or employment, his omission is only of a duty he owes his principal or master, and the master alone is liable. While if the duty rests upon him in his individual character and was one that the law im- posed upon him independently of his agency or employ- ment, then he is liable." Burns v. Pathcal, 75 Hun (N. Y.) 433.' The judgment was affirmed on the opinion be- low (157 N. Y. 716)." 6 Agents for renting property and collecting rents are not liable for injuries to third persons sustained on the property, unless such agents are themselves guilty of misfeasance. 7 In an Illinois case, 8 the agents were subjected to lia- bility under the following circumstances: certain real estate brokers were agents for renting certain premises and had complete control thereof, repairing same in their discretion. They rented the property and by the lease the tenants covenanted to keep the premises in repair. At the time of renting, however, the premises, and es- pecially a door thereon, were in need of repair, and the agents agreed to repair it. This was not done, and an expressman delivering goods on the premises was so in- jured by the falling of this door that he died. The court in holding the agents responsible said: "An agent is lia- ble to his principal only for mere breach of his contract with his principal, but he must have due regard to the rights and safety of third persons. He cannot in all cases find shelter behind his principal. * * * It was not his contract with the principal which exposes him to or 6 Dunham v. City Trust Co., 115 App. Div. 588 (N. Y. 1906). See also Hagerty v. Montana ore Pureh. Co., 98 Pac. 643 (Mont. 1908), (referring to Ellis v. MeNaughton, 70 Mich. 237; 42 N. W. 1113; 15 Am. St. Rep. 308; Baird v. Shipman, 132 III. 16; 23 N. K. 384; 7 L. R. A. 128; 22 Am. St. Rep. 504; Mayer v. Thompson-IIutchinson Bldg. Co., 104 Ala. 611; 10 So. 620; 28 L. R. A. 433; 53 Am. St. Rep. 88). See critical note in Mayer v. Thompson Co., 28 L. R. A. 433 (1894), and see also Hodgson v St. Paul PlOW Co., 50 L. R. A. 644. 7 Minnis v. Younker, 118 N. W. 532 (Iowa 1908). 8 Baird v. Shipman, 132 HI. 16 ; 7 L. R. A. 128 (1890). LIABILITY OF BROKER TO THIRD PARTIES. 279 protects him from liability to third persons, but his com- mon-law obligation to so use that which he controls as not to injure another. That obligation is neither in- creased nor diminished by his entrance upon the duties of agency, nor can its breach be excused by the plea that his principal is chargeable. If the agent once actually undertakes and enters upon the execution of a particular work, it is his duty to use reasonable care in the manage- ment of executing it, so as not to cause any injury to third persons which may be the natural consequence of his acts; and he cannot escape this duty by abandoning its execution midway and leaving things in a dangerous con- dition by reason of his having so left them without proper safeguards. ' ' 9 The court then quotes from Mechem on Agency, § 572, to the effect that while an agent may not be liable to third persons for not doing that which is imposed upon him by virtue of his relation, he is so responsible for that which is imposed upon him by law, i. e., the same "not doing" which constitutes ac- tionable negligence in any relation. 10 The court also refers to Campbell v. Portland Sugar Co., 62 Me. 552, as a parallel. The agents' liability in the case of Baird v. Shipman is put upon the ground that when they rented the prem- ises to the tenant in a dangerous condition, they volun- tarily set in motion an agency which, in the ordinary and natural course of events would expose to injury persons entering the barn where the accident occurred. If the insecure condition had arisen after the letting to the ten- ant, the court said a different question would be pre- sented, "but as it existed before and at the time of the letting, the owner or persons in control are chargeable with the consequences." 11 ■Citing Osborne v. Morgan, 130 Mass. 102. W Citing I. oilman v. Barnett. 02 Mo. 159; Martin v. Benolst, 20 Mo. App. 203; Harrlman v. Stowe, ">7 Mo. !»:: : Bell v. Josselyn, 3 <;ray 308. " Citing Uridley v. Bloomlngton, 08 111. 47; Tonile v. Hampton, 21 N. E. (111.) 800. 2S0 PRINCIPAL AND AGENT. § 272. Agent Liable for Improper Contract. "It is the general rule that an agent, to avoid per- sonal liability, must contract in such a form as to give a remedy against his principal, and if in making a contract in the name of his principal, he acts without authority, or beyond it, he becomes personally liable." 12 " When an agent assumes to act for an owner, he must see to it that his principal is legally bound by his act, and if he does not give a right of action against his principal, the law holds him personally responsible." 13 An agent must so execute his authority as to bring about a con- tract mutually binding on the principal and the party with whom he contracts. 14 Furthermore, the courts have held that where an in- strument is executed on behalf of a body which has no existence, the party executing the instrument becomes liable, as where a lease was made on behalf of "the trus- tees of the German American Institute" as lessees and signed and sealed, " for the Board of Trustees by S. Kauffmann, treasurer," there being no trustees in fact, and only a mere voluntary association. 15 § 273. Liability of the Agent on Unauthorized Contract. It is conceded that the agent is liable in some form for entering into an unauthorized contract. All that it is necessary for the agent to know, therefore, is that he is liable, and it will afford him little consolation to know that he is not liable in a certain form of action, but is un- der another. The practitioner, however, is interested in the form of the action he is expected to bring under such 12 Hall v. Lauderdale, 40 N. Y. 70 (1871). is Harrell v. Veith, 13 N. Y. St. Rep. 738, 740 (1S8S). " Slmmonda v. Moses, 100 N. Y. 140 (1885). is Bartholomae v. Kauffmann, 15 Jones & Spencer (47 N. Y. Super. Ct.) 552; affM, 91 N. Y. 654 (1883), no opinion. Similar instances of liability are Fredenhall v. Taylor, 23 Wis. 538 (1868), where a "committee" of an incorporated association acted; Blakely v. Bennecke, 59 Mo. 193 (1875), where signature was " Louis Bennecke, Capt. 49th Regt. Mo. Vols., Conidg. Post." LIABILITY OF BROKER TO THIRD PARTIES. 281 circumstances. As allowable limits of space will not per- mit of a prolonged presentation, we quote the concise but comprehensive statement contained in a popular text- book. "An important exception to the rule" that an agent who contracts, as agent, for a named principal, cannot be sued on the contract " is where an agent contracts without authority, or for a non-existent or incapable principal. It is well settled that if a person contracts as agent on behalf of a principal who does not exist, or who cannot contract, or if he enters into a con- tract in excess of his authority, he is personally liable in some form to the other party. Whether he is liable ex contractu, or whether he is only liable in tort, is an un- settled question, and there is a conflict of opinion. In England and in some of our states, he is liable in contract if he acted in good faith and in tort if he acted in bad faith. If he believed that he had an authority which he did not in fact possess, he may be sued upon an implied warranty of authority. This is an implied or feigned promise to the other party that, in consideration of his making the contract, the professed agent undertakes that he has authority to bind his principal. 'The un- reality of this warranty of authority makes it open to criticism, since the promise therein involved was prob- ably never present to the minds of either of the parties affected by it. ' Some of our courts have taken this view of the question, and have held that an agent acting with- out authority cannot be held liable in contract. 'If one falsely represents that he has an authority by which an- other, relying on the representation, is misled, he is lia- ble; and by acting as agent for another when he is not, though he thinks he is, he tacitly and impliedly repre- sents himself authorized, without knowing the fact to be true, it is in the nature of a false warranty, and he is lia- ble. But in both cases his liability is founded on the 282 PRINCIPAL AND AGENT. ground of deceit and the remedy is by action of tort.' If the professed agent knew that he had not the authority which he assumed to possess, he may certainly be sued by the injured party in an action for deceit. As we have just seen, some courts hold that this is the injured party's only remedy, even where the professed agent acted in good faith. ' ' 1<5 In New York it is held that the liability rests on the ground that the agent warrants his authority. The pre- tended agent may be held liable in an action for deceit or in an action for breach of warranty as to his authority. A person acting as agent incurs liability as follows: (1) in a case of fraudulent misrepresentation that he has authority; (2) where the agent has no authority, although he intends no fraud; and (3) where a party un- dertakes to act as an agent bona fide, believing that he has authority, but in point of fact has no authority and therefore acts under an innocent mistake. 17 § 274. Ground of Agent's Liability for Unauthorized Acts. In a case already cited, 18 it was said: " 'Wherever a party undertakes to do any act as the agent of another, if he does not possess any authority from the principal therefor * * * he will be personally responsible there- for to the person with whom he is dealing for or on account of his principal. There can be no doubt that this is and ought to be the rule of law in the case of a fraudulent representation made by the agent, that he has due authority to act for the principal ; for it is an intentional deceit. The same rule may justly apply where the agent has no such authority, and he knows it, 18 Clark on Contracts, pp. 738, 739. See also LeRoy v. Jaeobosky, 136 N. C. 443; C7 L It. A. 077 (1904), where many authorities are cited. "Campbell v. Muller, 19 Misc. 189; 43 N. Y. Suppl. 233 (1897). See also White v. Madison, 20 N. Y. 117 (1862); Simmonds v. Moses, 100 N. Y. 140 (1885). " Campbell v. Muller, supra. LIABILITY OF BROKER TO THIRD PARTIES. 283 and lie, nevertheless, undertakes to act for the principal, although he intends no fraud. But another case may be put, which may seem to admit of more doubt; and that is where the party undertakes to act, as an agent, for the principal, bona fide, believing that he has due authority ; but, in point of fact, he has no authority, and therefore he acts under an innocent mistake. In this last case, however, the agent is held by law to be equally as respon- sible as he is in the two former cases, although he is guilty of no intentional fraud or moral turpitude. This whole doctrine proceeds upon a plain principle of justice, for every person so acting for another, by a natural, if not by a necessary, implication, holds himself out as having competent authority to do the act ; and he there- by draws the other party into a reciprocal engage- ment.' 19 The reason why the agent is liable in such case to the person with whom he contracts is that the party dealing with him is deprived of any remedy against the principal. The contract, though apparently with the principal, is not his in fact; and it is but just that the loss should be borne by the agent who contracted without authority. 20 The liability of the agent rests on the ground that he warrants his authority, not that the con- tract is to be deemed his own; and on the question of damages the agent's liability is not necessarily measured by the contract, but embraces all injury resulting from his want of power, which was held to include the costs of an unsuccessful action against the alleged principal.- 1 * * * The g roim( i a nd form of the agent's liability have been the subject of much discussion, and there are conflicting decisions on the point. In Pennsylvania and certain other jurisdictions it has been held that when the "Citing Story on Ag., § 2'14 ; and referring to Ewell. Evan on Ag., 403; Dusenbury v. Ellis, 3 Johns. Cas. (N. Y. i 70; White v. Madison, 20 N. Y. 124; Lord v. Van Gtelder. 16 Misc. Rep. 22: 37 N. Y. Snpp. 668; Farmers Co-op. Trn-t Co. v I loyd. 4. Ohio St. 525; 26 N. E. 110; Baltzen v. Nlcolay, 53 N. Y. 407; Slmmonds v. Moses, 100 N. Y. 140; 2 N. E. 040; Taylor v. Nostrand. 134 N. Y. 108; 31 N. E. -40. 20 Citing Raltzen v. Nlcolay, supra. 21 Citing Taylor v. Nostrand, supra. I'M PRINCIPAL AND AGENT. agent makes a false representation of his authority, with intent to deceive, or where, with knowledge of his want of authority but without intending any fraud, he as- sumes to act as though he were fully authorized, he is personally liable to the other contracting party for the injury sustained, and such liability may be enforced either by action on the case for deceit, or by electing to treat him as a principal. 22 The Court of Appeals of this state (New York) has held that ' the later and better considered opinion seems to be that his liability when the contract is made in the name of the principal, rests upon an implied warranty of his authority to make it, and the remedy is by an action for its breach.' 23 " In Noe v. Gregory, 7 Daly (N. Y.) 285, Judge Van Hoesen, delivering the opinion of the court, said: ' I think the law of New York now is that the pretended agent is only liable to an action of deceit, or to an action for breach of warranty as to his authority. Either form of action will apprise him that the question to be liti- gated is his authority to act for the person whom he represented to be his principal, and he may come pre- pared to try that issue.' " § 275. Warranty of Authority to Make Contract. The principle is applicable to frequent situations. A few illustrative cases will suffice to show its application. In Rowland v. Hall, 121 App. Div. 459 (N. Y. 1907), the agent signed a contract of sale, supposing that an "es- tate " owned the property, for he had dealt with the supposed " executor " of the estate and collected the rents and managed the property for him for years. Meanwhile, the " executor," who had " power of attor- ney " from the owners, conveyed the property to a third 22 Citing Kroeger v. Pitcairn, 101 Pa. St. 311; 8 Wait, Act. and Def., 62. 23 Citing Baltzen v. Nicolay, 53 N. T. 467. LIABILITY OF BROKER TO THIRD PARTIES. 285 party and the third party refused to recognize the con- tract. It was held that the agent was liable for the pay- ment made to him by the purchaser on account of the purchase price. In Elliott v. Asiel, 120 App. Div. 829 (N. Y. 1907), the defendant entered into an agreement to sell real es- tate and designated the vendor as " Estate of Hannah Asiel," and signed the contract " Jacob Asiel, adminis- trator of the Estate of Hannah Asiel." As ordinarily an administrator has nothing to do with the real estate of the deceased, 24 and in this case the heirs refused to recognize the contract, a dismissal of the purchaser's complaint was reversed, the court saying that the con- tract was a personal contract of Jacob Asiel; that as administrator, without special leave of the surrogate, he had nothing to do with the real estate and had no power to make the contract. " It purported to be a contract of the estate, and the administrator by making it implied that he as administrator was authorized to make such a contract and was responsible to the defendant (sic) for any damages sustained in consequence of a breach of that implied agreement. ' ' 25 § 276. Reason of Liability of Agent for Unauthorized Acts. " The rule, that the agent is liable when he acts with- out authority, is founded upon the supposition that there has been some wrong or omission on his part, either in misrepresenting, or in affirming, or in concealing the authority under which he assumes to act." 20 If the agent acts within his instructions, and in good faith, es- pecially when the facts are equally known to both parties, 21 Sep § 207 supra. -■' s.'c ii-i to broker's authority to sIct contract, Cb. IV supra. -° ¥l.-i 1 1 v. Lauderdale, 46 N. Y. 70 <1S71). 28G PRINCIPAL AND AGENT. lie is not personally responsible although it may happen that the authority itself is void. 27 In Baltzen v. Nicolay, 53 N. Y. 467 (1873), where the agent set up the statute of frauds, no written con- tract having been made, the court, after citing White v. Madison, 26 N. Y. 117 (1862), 28 says: " The reason why the agent is liable in damages to the person with whom he contracts, when he exceeds his authority, is that the party dealing with him is deprived of any remedy upon the contract against the principal. The contract, though in form the contract of the principal, is not his in fact, and it is but just that the loss occasioned by there being no valid contract with him should be borne by the agent who contracted for him without authority. In order to make the agent liable in such a case, however, the unau- thorized contract must be one which the law would en- force against the principal if it had been authorized by him. 29 Otherwise the anomaly would exist of giving a right of action against the assumed agent for an unau- thorized representation of his power to make a contract, when the breach of the contract itself, if he had been authorized to make it, would have furnished no ground of action. That the agent who makes a contract for an undisclosed principal is personally bound by it, although the party dealing with him may know the general fact that he is acting as agent, is well settled; nor does the fact that the agent is an auctioneer, and that the contract arises upon a sale by him as such, withdraw it from the operation of the rule." Where an agent signs a contract of sale which the owner repudiates, it does not deprive the agent of com- pensation for services if he produced a purchaser ready, willing and able. 30 27 Hall v. Lauderdale, 4G N. T. 70 (1871). 28 See §§ 273, 274 supra. 29 CitinK Dunfr v. Parker, 52 N. Y. 404. ao Monroe v. Snow. 131 111. 135 (1891). And see §§ 117-119 supra. LIABILITY OF BROKER TO THIRD PARTIES. 287 § 277. Liability of Agent Acting for Undisclosed Prin- cipal. " The general rule is that one who acts as agent for another, in order to release himself from liability, should disclose his principal, because otherwise it would be pre- sumed that he intended to bind himself personally. In other words, it is not the duty of one dealing with an agent to find out whether he is acting in the transaction in that capacity, or as principal ; 31 but it is the duty of the agent, if he desires to relieve himself from personal liability, to disclose the name of his principal in the trans- action." 32 " One who contracts as principal cannot es- cape liability, certainly not after a suit is brought, by proving that he was acting as an agent. ' ' 33 11 It is a well recognized rule of law that where an agent conceals the fact of his agency and enters into a contract in his own name, he may be treated as the prin- cipal by the party with whom he deals, and may be held liable on the contract to the same extent as if he were in fact the principal in interest." 34 " It is well settled that when the agency is disclosed, and the contract relates to the matter of the agency, and is within the authority conferred, the agent will not be personally bound, un- less, upon clear and explicit evidence of an intention to substitute or to superadd his personal liability for or to that of the principal. ' ' 35 ' ' In case of written agreements executed by an agent, the agent is, in general, personally bound, if the instru- ment can have no legal operation against the principal. But in construing oral agreements made by an agent, M TliN statement should not be confused with the principle that one who deals with an agent, knowing him to be such, is ijound to know the limitations placed upon his authority. See § 28 supra. Crosetl v. Carleton, 4S n\ y. Snppl. 309 (ISO"). See also § 263 supra. MMcGovern v. Bennett, 146 Mich. 562 (1906), (citing White v. Boyce, L'l Fed. 22S : McKnown v. Gettys, 25 Kv. Law Rep. 2070). »* Whitney v. Woodmansee, 15 Idaho 739 (1909), (eitlnc 2 Clark & Skyles on Ag., § 568; st.,ry on Ag., §§ 200. 207: Murphy v. Helmrich, 66 Cal. CO; 4 Pac. 958; Ye Seng Co. v. Oorbltt, 9 Fed. 423 ; 7 Saw. 308). "WhltiiiK v. Saunders, 2:; Misc. 332 (N. Y. 1898), (citing Ilall v. Lauderdale, 40 N. Y. 74). 288 PRINCIPAL AND AGENT. courts give effect to the real intention of the parties, un- embarrassed by technical rules of construction; and when the act is within the authority, the presumption is that the agent intends to hind the principal and not him- self." 36 In the editorial note in Wheeler v. McGuire, 2 L. R. A. 811 (Ala. 1888), it is said: "An agent may become liable on contracts made by him in that capacity: first, where the principal is not known; secondly, where there is no responsible principal (except in the case of public agents) ; thirdly, where he becomes liable by an under- taking of his own." This note also sets forth the follow- ing propositions, citing authorities therefor: "Where an agent in his dealings with third parties does not disclose his principal he will be personally liable on the contract. "The agent will be liable on a contract entered into for an undisclosed principal, even if it is well known to the third party that he acts only as an agent. "When a party deals with the agent, without any dis- closure of his agency, he may elect to treat the after dis- covered principal as the person with whom he contracted. "He has a right, within a reasonable time, to elect to proceed against the principal, unless in the meantime, with full knowledge as to who was the principal, and with the power of choosing between him and the agent, he had elected to treat the agent alone as his debtor. "After a third party has elected whom to sue, and has sued either the agent or the principal to judgment, he cannot after that sue the other, whether the suit has been successful or not. "If, at the time of the sale, the seller knows, not only that the person who is nominally dealing with him is not principal, but agent, and also knows who the principal really is, and notwithstanding all that knowledge, chooses to make the agent his debtor, dealing with him "Hall v. Lauderdale, 4C N. Y. 70 (1871). LIABILITY OF BROKER TO THIRD PARTIES. 289 alone, the seller cannot charge the principal, having once elected to sue the agent. ' ' Mr. Clark lays down these propositions: "Where an agent contracts as agent for a principal who is named, the agent cannot sue in his own name on the contract, except where he is the real principal, though named as agent, or where he has a special interest in the subject matter of the contract. The agent cannot be sued on the contract, except where the contract is under seal, and he has made himself a party to it, or, in some jurisdictions, where he contracted for a foreign principal, or where he has exceeded his authority or has contracted without au- thority, or where the contract was really made with him personally, though he is described as agent. 37 § 278. Unlawful Intrusion on Real Property. No attempt is made in the present volume to present the criminal statutes of the several states relating to of- fenses against real property. A provision of the New York statutes follows, in order to illustrate how the crimi- nal laws prohibiting trepass might possibly affect the broker. As will be noted, going upon property of an- other and affixing thereon "to let" or "for sale" signs without being authorized may subject a real estate agent to criminal liability. Since we are not aware of any re- ported opinion judicially declaring that the acts above mentioned are within the provisions given, we merely quote the provisions without comment. "A person, who intrudes upon any lot or piece of land within the bounds of a city or village, without authority from the owner thereof * * * is guilty of a misde- meanor." 38 "A person who places upon or affixes to, or causes or « 7 Clark on Contracts, pp. 731, 732. M N. Y. Tenal Law, § 2036. 290 PRINCIPAL AND AGENT. procures to be placed upon or affixed to, real property not his own, or a rock, tree, wall, fence, or other structure thereupon, without the consent of the owner, any words, characters or device, as a notice of, or reference to, any article, business, exhibition, profession, matter or event, is punishable by imprisonment for not more than six months, or by a fine of not more than two hundred and fifty dollars, or by both. The placing or affixing of any words, characters, device or notice, of any article, busi- ness or other thing, to or upon any property or place specified in this section, is presumptive evidence that the proprietor, vendor or exhibitor thereof caused or pro- cured the same to be so placed or affixed." 39 s» N. Y. Penal Law, § 121. PART IV.— FRAUD. CHAPTER XXIX. WHAT CONSTITUTES FRAUD. ACTS NOT USU- ALLY CONSIDERED FRAUDULENT. § 279. General Statement. Fraud is a false representation or non-disclosure of a material fact, made with intent to deceive and operat- ing to deceive another party to his injury. Fraud may be committed not only by word of mouth, but by means of writings, pictures, maps, and the like. (§§ 280, 281.) Generally, mere silence is not fraud; neither can fraud be based upon mere expressions of hope, expectation and the like, nor upon promises solely, nor as a general rule upon naked assertions of value. (§§ 282-291.) § 280. What is Fraud? Fraud has been aptly defined to be "a false represen- tation of a material fact, or non-disclosure of a material fact under such circumstances that it amounts to a false representation made with knowledge of its falsity, or in reckless disregard of whether it is true or false, or as of personal knowledge, with the intention that it shall be acted upon by the other party, and which is acted upon by him to his injury." * Picture cards, maps, signs and photographs may be the instruments of fraudulent mis- i Clark on Contracts, 324; Maupin on Marketable Titles (2d Ed.), Co. XI. 291 292 FKAUD. representations. As for instance, where they tend to mislead and produce a false impression as to the con- tinuity of the property to other highly developed and im- proved property. 2 Fraud, to vitiate a contract, must be material and must relate distinctly and directly to the contract, and must affect its very essence and substance. 3 Misrepre- sentation with intent to deceive is the legal equivalent of actual fraud. 4 "Where a party to a contract in mak- ing a false representation is honestly mistaken, there is no ingredient of fraud in the case. This rule, however, does not permit him to make false statements recklessly or without some foundation for belief in them. Before one positively affirms the existence of a fact, he must pro- ceed upon reasonable inquiry, and have some apparently good ground for his affirmation." 5 A mistake or inno- cent misrepresentation is enough for rescission of the contract. 6 § 281. Broker's Frauds. To attempt to enter in detail into the forms which fraud and misrepresentation may take with respect to real estate transactions, would be an impossible task. It would require an exceedingly lively imagination to speculate as to the various methods by which fraud might be perpetrated. Yet it may be suggested that there are certain formulae in vogue in real estate trans- actions which are not infrequently resorted to and which are or may be fraudulent. 2 Scarsdale Pub. Co. v. Carter. 63 Misc. 277 (N. Y. 1909). a Smith v. Countryman. 30 N. Y. 070 (1864); Press v. Hair, 133 111. App. 534 (1907) ; Meeks v. Garner, 11 L. R. A. 190 (Ala. 1890) ; Dawe v. Morris, 4 L. R. A. 158 (Mass. 1889). * Forster v. Wilhusen, 14 Misc. 520 (N. Y. 1895), (citing Kiev v. Healy, 127 N. Y. 555, 561 (1891). 6 Hammond v. Pennock. 61 N. Y. ir>0, 1">1 (1S74) ; Erie City Iron Works v. Barber, 100 Pa. St. 138 (1884) ; Cabot v. Christie, 42 Vt. 121 (1869). a Forster v. Wilhusen, 14 Misc. 520 (N. Y. 1895), (citing Kountze v. Kennedy, 147 N. Y. 124 (1895) ; Crowe v. Lewin, 95 N. Y. 423 (1884) ). And see Maupin on Market- able Titles (2d Ed.), § 105. ACTS NOT USUALLY CONSIDERED FRAUDULENT. 293 Those experienced in real estate matters, and very many with but a single experience, will find no difficulty in subscribing to the general statement that the methods sometimes invoked to bring about a sale, are not all that might be desired. Many vendors— not to mention real estate brokers— insist that the truth should always be told, but it must be admitted that all the truth is not al- ways told. §282. Silence and "Concealment." The general rule is that mere silence is no fraud, ex- cept where the silence amounts to an affirmation that a state of things exists which does not. 7 That which is ethical is not always the law, nor does the law always cor- respond with the ethical. If a man is about to sell his property, what information ought he to give the proposed buyer, and what information may he properly withhold? This presents a question of ethics on the one hand and a question of law on the other. It is not a novel question. Even Cicero, who practised law 1900 years ago, seems to have had occasion to go into the question, and we may assume from what he says that even in those days some of the real estate agents ' ' knew the business. ' ' He says in the third book of the De Officiis: "A good man sells a house on account of some de- fects, of which he himself is aware and others ignorant. Perhaps it is unhealthy, and is supposed to be healthy- it is not generally known that snakes make their appear- ance in all the bedrooms,— it is built of bad materials, and is in a ruinous condition; but nobody knows this ex- cept the owner. I ask, if the seller should have failed to tell these things to the buyer, and should thus liave sold his house for a higher price than he could reasonably have expected, whether he would have acted unjustly or *Cooley on Torts (2d Ed.), pp. 557-005. 294 FRAUD. unfairly? 'Yes, he would/ says Antipater; 'for what is meant by not putting into the right way one who has lost his way (which at Athens exposed a man to public exe- cration), if it does not include a case in which a buyer is permitted to rush blindly on and through his mistake to fall into a heavy loss by fraudulent means'? It is even worse than not showing the right way; it is knowingly leading another into the wrong way.' Diogenes, on the other hand says : ' Did he who did not even advise you to buy, force you to buy? He advertised for sale what he did not like; you bought what you did like. Certainly, if those who advertise a good and well-built house are not regarded as swindlers, even though it is neither good nor properly built, much less should those be so regarded who have said nothing in praise of their house. For in a case in which the buyer can exercise his own judgment, what fraud can there be on the part of the seller? And if all that is said is not to be guaranteed, do you think that what is not said ought to be guaranteed? What could be more foolish than for the seller to tell the defects of the articles that he is selling? Nay, what so absurd as for an auctioneer, by the owner's direction, to pro- claim, ' ' I am selling an unhealthf ul house ? " ' Thus, then, in certain doubtful cases the right is defended on the one side; on the other, expediency is urged on the ground that it is not only right to do what seems expedient, but even wrong not to do it. This is the discrepancy which seems often to exist between the expedient and the right. But I must state my decision in these cases; for I intro- duced them, not to raise the inquiry concerning them, but to give their solution. It seems to me, then, that neither that Ehodian corn-merchant nor this seller of the house ought to have practiced concealment with the buy- ers. In truth, reticence with regard to any matter what- ever does not constitute concealment; but concealment consists in willingly hiding from others for your own ad- ACTS NOT USUALLY CONSIDERED FRAUDULENT. 295 vantage something that you know. Who does not see what sort of an act such concealment is, and what sort of a man he must be who practices it ? Certainly this is not the conduct of an open, frank, honest, good man, but rather of a wily, dark, crafty, deceitful, ill-meaning, cun- ning man, an old rogue, a swindler. Is it not inexpedient to become liable to these so numerous and to many more bad names ? " 8 If the fear of having the names in Cicero's category applied to them, deterred many of the Eomans from the conduct discussed, how different they must have been from some of the brokers we meet in our day ! Cicero, though he handles the subject so pleasantly, does not after all give a decided opinion, for does he not in effect argue that concealment is wrong? But what concealment is, he leaves for others to determine. The cases in our own courts are, as a whole, hardly more ex- plicit. In People's Bank v. Bogart, 81 N. Y. 107 (1880), it is said that ''the law requires disclosure to be made only ivhen there is a duty to make it, and this duty is not raised by the mere circumstance that the undis- closed fact is material, and is known to the one party and not to the other, or by the additional circumstance that the party to whom it is known, knows that the other party is acting in ignorance of it." The court quotes Story on Contracts to the effect that ''the general rule both of law and equity, in respect to concealments, is that mere silence with regard to a material fact which there is no legal obligation to divulge will not avoid a contract, although it operates to the injury of the party from whom it is concealed." § 283. Requirements as to Disclosure. "The rule is well established that where persons are » Wilkinson's Latin Classics. Vol. 2. pp. 202, 203. 296 FRAUD. dealing with each other upon equal terms, and no confi- dential relation exists between them, neither is bound to disclose superior information he may have respecting the transaction, and, in the absence of fraud or deception to induce the contract, the court can afford no relief. ' ' ,J "The following propositions may be stated as em- bodying the principal features of the decisions as to what acts or conduct of the vendor amount to fraud in respect to the title which he undertakes to convey: (1) The ven- dor is guilty of fraud if he conceals a fact material to the validity of the title, lying peculiarly within his own knowledge, and which it is his duty to disclose. It is as much a fraud to suppress the truth as it is to utter a falsehood. The question, what facts the seller must dis- close, is capable of much refinement. Obviously it can- not be determined by any precise rule. In every case that arises the question is one of fact to be solved by all the circumstances which surround the transaction, among which, perhaps, the most important are the rela- tions of trust and confidence which the parties bear to each other, and the inequalities in their respective busi- ness capacities, or opportunities for information respect- ing the title." 10 § 284. Fraudulent Concealment by the Purchaser. Cases involving concealment on the part of the pur- chaser, though less frequently before the courts than those in which the vendor's concealment is complained of, present interesting and sometimes difficult questions. "It has long been settled in common law jurisdictions that, in general, the mere failure of a buyer to disclose something extrinsic or intrinsic to the thing bought, known to him and not known to the seller, is not in legal ".Tones v. Stewart, 87 N. W. 13 (1901). 10 Maupin on Marketable Titles (2d Ed.), pp. 238-240. ACTS NOT USUALLY CONSIDERED FRAUDULENT. 297 sense fraud." u But while mere reticence on the part of the purchaser does not amount to a fraud, very little is sufficient to defeat the application of that principle. A single word which tends to mislead the vendor, or even a nod, or a wink, or a shake of the head, or a smile from the purchaser, may be enough. 12 In Crompton v. Beedle, 75 Atl. 333 (Vt. 1910), the owner of land lived some distance therefrom. The de- fendant, being aware of a valuable but undeveloped quarry on the land, the existence of which the owner was ignorant of, obtained an option to purchase, and subse- quently a deed of the land, upon the representation that it was of little value and that the only reason he desired the land was because it adjoined some land belonging to him, and that the only way of access thereto was over his land, and that the passing to and fro for such access an- noyed him and his family. It was held that the vendor, living at a distance, being thrown off her guard by reli- ance on the representations and therefore not inquiring as to the real value of the land, might rescind on discov- ering the real situation. 13 " An action will lie for fraudu- lent representations made by the prospective purchaser of land as to its value and condition; the land being at a distance from the place of purchase, and the vendor be- ing ignorant as to its condition and value, and relying upon the truthfulness of such representations." 14 It seems that this question would not be affected by the fact that no confidential relations existed between the parties. 15 "Unfairness and fraud may be collected from ii Crompton v. Beedle. 75 Atl. 333 (Vt. 1010). (citing Fox v. Mackreth. 2 Bro. C C 420; Harris v. Tyson, 24 Pa. 347; 04 Am. Dec. 001; Smith v. Beatty, 37 N. C. 450; 40 Am. Dec. 43S; Laidlaw v. Organ, 2 Wheat. 17* ; 4 I.. I'M. 214). ■ - crompton v. Beedle, supra. "This case nN<> refers to tin- following authorities: Paddock v. Btrobridge, -i» \t- 470- Maynard v. Maynard, v.t vt. 297; Ettlng v. Bk. of r. s.. n \v it. 59; 8 L. Ed. 410- Turner v. Harvey, Jacob 169, 17* (Eng.) ; Walters v. Morgan, 8 !><• <: V. « J. 718- Livingston v. Peru Iron Co., 2 Paige (N. V. t 390; llaygiirth v. Wearing. L. B. 12 Eq. 320; Mountain v. Day. !H Minn. 249; 97 N. W. 883, "Syllabus bv the court in Mountain v. Day, 91 Minn. 240; 97 N. W. 883, quoted In Crompton v. Beedle, 75 Atl. 384 (Vt. 1910). " Crompton v. Beedle, eupro. 298 FRAUD. a variety of circumstances, and it is ordinarily enough to establish fraud that a vendee has actively attempted to ensnare, and has in fact ensnared, the vendor into the making of an unconscionable contract. Where conceal- ment of an essential thing is effected by an industrious course of misleading and deceptive talk or conduct, there is fraud against which equity will relieve. The law dis- tinguishes between passive concealment and active con- cealment. Where one has full information, and repre- sents that he has, if he discloses a part of his information only, and by words or conduct leads the one with whom he contracts to believe that he has made a full disclosure, and does this with intent to deceive and overreach and to prevent investigation, he is guilty of fraud against which equity will relieve, if his words and conduct in consequence of reliance upon them bring about the result which he desires." 16 § 285. Promises, Hopes, etc. "It is a familiar rule, where representations consist in mere expressions of hope, expectations and the like, that the party to whom they are made is not legally jus- tified in relying upon them and assuming them to be true. The representation of what one expects, or hopes, as about to take place, in order to induce action on the part of the person to whom made, may be honest, or may be fraudulent. If the former, then no action will lie upon the ground of fraud, if the expectation is not realized. If the representation is made fraudulently and with the intention to deceive, then the evidence must exhibit it in that character. For the presumption will be, in the ab- sence of such evidence, that the person making the repre- sentation did so honestly, however extravagant in his hopes." 17 "Crompton v. Beedle, 75 Atl. 334, 335 (Vt. 1910). " Kley v. Healy, 149 N. Y. 351, 352 (1891); Chambers v. Mitchell, 123 111. App. 597, 598 (1905). ACTS NOT USUALLY CONSIDERED FRAUDULENT. 299 A representation that certain title companies would lend a certain amount on mortgage upon the property is jjromissory in its nature. A person has no right to rely thereon. So it is held in Kreshover v. Berger, 62 Misc. 613 (N. Y. 1909). But in the same case, on appeal, 18 it was held that a statement that a title insurance company had accepted a certain loan on the premises, when in fact it had declined "to pass" a loan by reason of defects in the construction of a wall, is a material misrepresenta- tion. Where the representations were that the enter- prise in which the plaintiff was invited to put his capital "would yield large profits" or that "it was a good pay- ing business," they were held promissory and matter of opinion, having respect to the development of the future. 19 § 286. Promises and False Representations. But even if reliance is placed upon the mere promises of the vendor as well as upon his false representations, still a cause of action for fraud may be maintained pro- vided the representations have a material effect in accom- plishing the deception. It is not necessary that they should be the sole inducing cause. 20 And while fraud cannot be founded solely upon a promise not performed, even if the promisor never in- tended to fulfill the same, yet a statement of a present existing intent may be made the basis of fraud. Thus in Adams v. Gillig, 131 A])]). Div. 494 (N. Y. 1909). a grantee of land situated in the residential part of a city, while negotiating the contract of sale, and having a present and existing intention to erect an automobile garage, specifically represented to the grantor thai he intended to use the property for dwelling houses and for U Kreshover v. Boreer. nr, App. DIt. 27 (N. Y. 1909). "•Spnrman v. Kelm. 83 N. Y. 245 (1880). -" Kley v. Healy. 127 N. Y. 561 (1891). 300 FRAUD. no other purpose. Held there was a fraudulent misrep- resentation as to an existing fact. 21 § 287. Opinions; Expressions of Value. We have seen that generally there can be no fraud predicated upon expressions of hope, or expectation, and so there can generally be no fraud based upon expres- sions of value, for an expression of value is nothing more than an opinion. 22 In one man's opinion the value of a piece of land may be far different than in another's. § 288. Assertion of Value, Though False, Not Ordi- narily Fraudulent. ''Assertions must be considered," says the court in Conlan v. Roemer, 52 N. J. L. 55 (1889), " in the light of the subject-matter in respect to which they are made. The general doctrine is that a misrepresentation uncon- nected with any misrepresentation of kind, quality or quantity, by the vendor, though false, affords no cause of action. Every person reposes at his peril in the opinion of others when he has equal opportunity to form his own judgment. Mere expressions of matters of opinion, how- ever strongly or positively made, though they are false, do not constitute actionable fraud. Statements of mere matters of opinion or judgment, although known to be false, do not constitute a fraud in the absence of relations of trust and confidence. 23 It is not fraud to aver strongly that the purchaser will make a good and profitable pur- chase by accepting the vendor's offer. It may be other- wise if in connection with the expression of opinion there »Cf. Brown v. Honiss, 74 N. J. L. 50S (1900). 22 Page v. Parker, 43 N. n. 3C,S (1801); Hetland v. Bilstart, 118 N. W. 423 (Iowa 1908) ; State Bank v. Brown. 119 N. W. S3 (Iowa 1909) ; Bosley v. Monahan, 112 N. W. 1102 (Iowa 1907); Mayo v. Wahlgreen, 50 Pac. 43 (Colo. 1897); Hecht v. Metzler, 48 Pac. 40 (Utah 1K97) ; note in Denning v. Darling, 2 L. R. A. 743 (Mass. 1889). 23 Citing Wise v. Fuller, 2 Stew. Eq. 257. ACTS NOT USUALLY CONSIDERED FRAUDULENT. 301 were false assertions of fact calculated, if true, to give a basis for the opinion." 24 11 The rule is well settled that a naked assertion by a vendor of the value of property offered for sale, even although untrue of itself, and known to be such by him, unless there is a want of knowledge by the vendee, and the sale is made in entire reliance upon the representa- tions made, or unless some artifice is employed to pre- vent inquiry or the obtaining of knowledge by the vendee, will not render the vendor responsible to the vendee for damages sustained by him. ' ' 25 § 289. Opinions Amounting to Affirmations of Fact. But opinions may sometimes amount to representa- tions of fact. In People v. Peckens, 153 N. Y. 591 (1897), it was said: "As a general rule, the mere expression of an opinion, which is understood to be only an opinion, does not render a person expressing it liable for fraud." 26 " But," continues the court, " where the statements are as to value or quality, and are made by a person knowing them to be untrue, with an intent to de- ceive and mislead the one to whom they are made, and he is thus induced to forbear making inquiries which he otherwise would, they may amount to an affirmation of fact rendering him liable therefor. In such a case, whether a representation is an expression of opinion or an affirmation of a fact is a question for the jury. The rule that no one is liable for an expression of an opinion is applicable only when the opinion stands by itself as a distinct thing. If it is given in bad faith, with knowl- edge of its untruthfulness to defraud others, the person making it is liable, especially when it is as to a fact affect- 2* Citing McAleer v. Horsey, 35 Md. 430. » Chrysler v. Canaday, 90 N. Y. 279 (1882); Sels v. Plalsantln, 52 App. DIv. 200 (N. Y. 1900). „ „ _„ 2« See also Press v. ITnlr, 133 111. App. 534 (1907), (cltlnc Bnschman v. Oodd, 52 Md. 202; Robertson v. Parka, 76 Bid. 118; Wade v. RinRO, 122 Mo. 322). Bee also note to Denning v. Darling, 2 L. R. A. 743 (Mass. 1889). 302 FRAUD. ing quality or value and is peculiarly within the knowl- edge of the person making it. ' ' 27 § 290. Assertions and Opinions Fraudulent in Intent. In Hetland v. Bilstad, 118 N. W. 423, 424 (Iowa 1908), it was said: " Parties in negotiating deals have the right to exalt the value or quality of their own prop- erty to the highest point credulity will bear, provided their efforts in this line go no further than puffing or praise which the vendor may properly indulge in; but statements of value or quality may be made with the purpose of having them accepted as of fact, and, if this is done, and so relied on, they are to be treated as the parties designed they should be, namely, representa- tions of fact. 28 In that case the court said : ' The evidence in behalf of plaintiff clearly indicated the intention of Walsh that his assertion of the value of the land should be acted upon as true, and not merely as his estimate, and, if so, and it was knowingly false and induced an exchange by plaintiff to her damage, it was actionable.' This is fully sustained by the authorities. 29 The rule is forcibly stated in Murray v. Tolman (162 111. 417; 41 N. E. 748) : ' Where the vendee is wholly ignorant of the value of the property, and the vendor knows this, and also knows that the vendee is relying on his (vend- or's) representations as to the value, and such repre- sentation is not a mere expression of opinion, but is made as a statement of fact, which statement the vendor knows to be untrue, such a statement is a representa- tion by which the vendor is bound.' " 27 Citing Watson v. People. 87 N. Y. 561; Simar v. Canaday, 53 N. Y. 298; Hlckev v. Morrell, 102 N. Y. 454. 463; Schumacher v. Mather, 133 N. Y. 590, 595. See also Maupin on Marketable Titles (2nd Ed.), § 106. 28 Citing Mattauch v. Walsh. 136 Iowa 225; 113 N. W. 81S. 2» Citing Hlckev v. Morrell, 102 N. Y. 403 ; 7 N. E. 325 ; 55 Am. Rep. 824 ; Culley v. Jones, 164 Ind. 168; 73 N. E. 94; Murray v. Tolman, 162 111. 417; 41 N. E. 748; McKnight v. Thompson, 39 Neb. 752 ; 58 N. W. 453 ; People v. Peckens. 153 N. Y. 576 ; 47 N. E. 883; Horton v. Lee. 106 Wis. 439; 82 N. W. 360; McDonald v. Smith, 139 Mich. 211; 102 N. W. 669; Stack v. Nolte, 29 Wash. 188; 69 Pac. 753; Mountain v. Day, 91 Minn. 249; 97 N. W. 883; Morgan v. Dinges, 23 Neb. 271; 36 N. W. 544; 8 Am. St. Rep. 121. See also Crompton v. Beedle, 75 Atl. 335 (Vt. 1910). ACTS NOT USUALLY CONSIDERED FRAUDULENT. 303 The law on this subject is, however, not free from conflict, and some of the authorities do not regard an ex- pression of value as a basis for fraud unless the prop- erty is at a distance and the vendor prevents the vendee from seeking information. 30 § 291. When Expression of Opinion is Fraudulent. All that can be said, therefore, when referring to the subject in a general way, is that an expression of opinion or of value may sometimes constitute fraud. 31 " There is no certain rule by the application of which it can be determined when false representations constitute mat- ters of opinion or matters of fact. Each case in a large measure must be judged upon its own circumstances." 32 But " the opinion of an expert is such a fact which he cannot knowingly misstate without incurring legal liabil- ity." 33 A broker was held liable for misrepresenting the value of land and thus inducing a person to loan money thereon on mortgage, to the loss of the lender. 34 Dolan v. Cummings, 116 App. Div. 787 (N. Y. 1907), presents a case showing a still different phase, where it may be said that there was fraud with respect to the value of property. The headnote, which tersely gives the law of the case, states: "A relation of confidence and trust exists between brothers and sisters who are ten- ants in common of lands, and if one tenant conceals the fact that he has had a specific offer for the real estate and induces his co-tenants to sell their interest to him at a much lower value, thev are entitled to rescind the sale on discovering the offer. Under such circumstances it so Hetland v. Bllstad, 118 N. W. 424 (Iowa 1908). « See also Snively v. Meixwll, 97 111. App. 370-373 (1901), where many authorities are cited. » 2 Reeves v. Cornlnpr. 51 Fed. Rep. 774. quoted In Snively v. Melxsell, supra. ™ Conlan v. Roemer, 52 N. J. L. 58 (1889). (citing PIcard v. McOormlck, 11 Mich. 68; Kost v. Bender. 25 Mich. 515; Stewart v. Steam, 63 N. H. 99; Wise v. Fuller, 2 Stew. Kq. 257). s* Rubeus v. Mead, 53 Pac. Rep. 432 (Cal. 1898). 304 FRAUD, is incumbent upon the purchaser to show affirmatively that no deception was practiced; and when it appears that lie not only concealed the offer he had received, but advised his vendee not to see the other owners and repre- sented to them that he took great risks in buying the property, he is guilty of false representation, and the sale should be rescinded." CHAPTER XXX. WHAT CONSTITUTES FRAUD. ACTS USUALLY CONSIDERED FRAUDULENT. § 292. General Statement. Fraud may be based on representations that others have offered a certain price for the property, or that a certain price was paid for the property, 1 or that the prop- erty brings a certain rental, or as to improvements on the property, or as to its situation, or with respect to the maturity of the mortgages thereon, or even with respect to the vendor's title. (§§293-300.) § 293. Representation That Certain Price Had Been Offered. " A false representation that a person had offered to purchase the property from the owner for a fixed price, when in fact the only offer made was an offer for a very much smaller price, is actionable if a person thereby is induced to buy the property, anticipating that he may sell to the person who made the first offer, and supposing the amount stated to have been true. Such a statement is not one as to the value of property, but is the state- ment of a fact, namely, the offer made by the first per- son, which is peculiarly within the owner's knowl- edge." ~ 1 As to this the authorities .ire conflicting. 2 Isman v. Loring, 130 Api>. Div. 849 (N. Y. 1909); 20 Cyc. 59. 305 306 FKAUD. § 294. Representation as to Value and Price Paid for Property. It has been held that a false statement by a vendor to a vendee concerning the value " of property about to be sold, will not sustain an action for fraud, but the vendee in such cases must rely on his own judgment. It may be that the rule in such cases would be different if the purchaser was prevented by any act or artifice of the seller from exercising his judgment in ascertaining the value. ' ' 3 Where the question was not one arising out of a rep- resentation as to value but was with respect to a fact which might, in the ordinary course of business, influ- ence the action and control the judgment of the pur- chaser, namely, the price paid for the property by the vendor within less than a month prior to the sale, it was held " that a false statement with respect to the price paid under such circumstances, which is intended to in- fluence the purchaser, and does influence him, constitutes a sufficient basis for a finding of fraud. ' ' 4 While the vendor may not be bound to speak on the subject, if he does, he should speak the truth. 5 But the authorities on this subject are in conflict. 6 Thus in Bosley v. Monahan, 112 N. W. 1102 (Iowa 1907) it was said: " There seems to be a difference of opinion * * * among the courts, as to whether a statement as to the price paid by the seller or the price which has been offered to the seller is a material statement of fact on which the buyer may rely, or, like a general statement of value, to be treated only as trade talk. This court has taken the view that such statements may be relied on as material representations of fact." 7 s Ellis v. Andrews, 56 N. Y. 83 (1874). ♦ Palrchild v. MeMahon, 139 N. Y. 290, 293, 294 (1893). 6 Id. « 20 Cvc. 54. 'Citing Teachout v. Van Hoesen, 70 Iowa 113; 40 N. W. 96; 1 L. R. A. 664; 14 Am St. Rep. 206; Dorr v. Cory, 108 Iowa 725; 78 N. W. 682; Scott v. Burnight, 131 Iowa 507; 107 N. W. 422. ACTS USUALLY CONSIDERED FRAUDULENT. 307 § 295. Representations as to Rentals. Fraud may be based on false statements of rental. 8 Misrepresentations as to rental of the property made by the broker is a sufficient basis for rescission of the con- tract. 9 " The statement by a vendor that the income from a property is greater than it in fact is, is a fraud for which an action will lie." 10 The purchaser need make no effort to ascertain from the tenants the actual rent, where the vendor diverts him from inquiry, as the vendee has a right to rely upon the mere statement of the vendor or his broker. Want of diligence in discover- ing the fraud is not sufficient to deprive a party of his right to rescind a fraudulent contract. 11 But statements made by brokers not employed by the vendor, will not support a rescission, as where the brokers really repre- sent the purchaser but the seller voluntarily pays the commission. 12 In Goodman v. Hess, 56 Misc. 482 (N. Y. 1907), a dis- crepancy of $264 in the statement of the annual rentals was held material, the vendor having stated them to be $5,325 per annum. This was a case in which the pro- posed purchaser refused to enter into a contract on ac- count of such misrepresentation and the broker was held entitled to commissions. Where a purchaser is induced to take title by a false representation as to the rents, " the measure of damages is the difference between the market value of the premises if they had been as repre- sented and their actual market value." 13 8 Kreshover v. Bercer. 135 App. Div. 27 (N. Y. 1009); Remmers v. BerbllnK. 66 Misc. 291 (N. Y. 1910) ; Heeht v. Metzler, 48 Pac. 40 (Utah 1897), (citlnp DeFrees v. Uarr, 8 Utah 488; .'53 Par. 217; Orlfflns v. Dlller, 21 N. Y. Supp. 407; Wise v. Fuller, 29 N. J. Kq. 2, r i7 ; Speed v. HolllngB worth, 38 Pac. (Kans.) 497). •Forster v. Wilhusen. 14 Misc. 520 (N. Y. 1895). UConlan v. Roomer. 52 N. J. L. 50 ( 1 889 1 , (cltlnK Wise v. Fuller, 2 Stew. Kq. 257; Dimmork v. Hallett. L. R. 2 Ch. App. 21>. "Forster v. Wlllmsen. 14 Misc. 520 (N. Y. 1895). See also Prince v. Jacobs, 80 App. Div. 24.°. (N T . Y. 1903). 12 Rothstein v. Isaac, 124 App. Div. 133 (N. Y. 1908). 'a Kttllnfcer v. Well. 184 N. Y. 182 (1900); further appeal, 131 App. Div. 784 (N. Y. 1909). 308 PKAUD. § 296. Representations as to Improvements. Where it was claimed that the vendor represented that the property had gas and water, and the party charged with making the representations claimed that he only made a qualified representation, " that Babylon had water, gas and all facilities and that this property was within Babylon," it was held that the representation, while literally it might be true, was, as it carried with it a suggestion of falsehood when taken in connection with other facts, made to convey a fraudulent purpose. 14 § 297. Representations as to Situation of Property. A representation that lots are situated five to ten minutes' walk from railroad station, when in fact they are a mile and a half or two miles therefrom, is a false representation. 15 Where wrong land is pointed out, re- covery may be had; 16 and also where the boundaries are misrepresented. 17 § 298. Representations as to Mortgages on Property. A representation by the vendor that a mortgage on the property could remain as long as interest was paid, was held sufficient to avoid a contract where the mort- gagee had made no such arrangement. 18 In this case 19 the authorities were reviewed as to the right of a vendee to recover a deposit made on an oral contract for the sale of property, entered into on a representation that a mortgage then on the property could remain as long as interest was paid. The mortgagee had in fact made no such arrangement, and it was held that the vendee could rescind and recover his deposit on account of the fraud. 14 Scarstlnle Pub. Co. v. Carter, 63 Misc. 27G (N. Y. 1909). See also Hansen v. Kline. 113 N. W. 504 (Iowa 1907). IB id. i« SteltinR v. P.ank of Sparta, 130 Wise. 309 (1908). "Davis v. Nuzum. 1 L. R. A. 774 (Wise. 1888). "Hellman v. Strauss, 2 Hilt. 9 (N. Y. 1858). ™ Id. ACTS USUALLY CONSIDERED FRAUDULENT. 309 § 299. Representation that Others Want the Property. In Hammond v. Pennock, 61 N. Y. 145, 151 (1874), one of the features of the fraud was the overworked as- sertion that somebody else wanted the property and if the buyer intended to buy he had better make up his mind at once. There were, however, other material mis- representations. § 300. Representations as to Title of Vendor,, There may be fraud, too, in respect to the title of the vendor, 20 as for instance where the vendor induced the purchaser to take a deed on the representation that he owned the property and had a good title, when in fact he had but tax sale certificates. 21 " Proof of mere mis- representation as to ownership may demand rescission of a contract, but will not sustain an action for deceit, in the absence of allegation, sufficient evidence and finding of intent to deceive. ' ' 22 20 Kerwin v. Friedman, 127 Mo. App. 522 (1907); Meeks v. Garner, 11 L. R. A. 196 (Ala. 1890). 21 Grosjean v. Galloway, G4 App. Div. 547 (N. Y. 1901); and see Manpln on Mar- ketable Titles (2nd Ed.), pp. 236 et seq. -- Zagarino v. Kurzrok, 135 App. Div. 764 (N. Y. 1909), (citing Wakeman v. Dalley, 51 N. Y. 27; Mclntyre v. Buell, 132 N. Y. 192). CHAPTER XXXI. NEGLIGENCE ON PART OF VENDEE. § 301. General Statement. The authorities are not entirely harmonious as to how far a vendee may rely upon the representations of the vendor. In some jurisdictions it is held that represen- tations to be relied upon must be such as an ordinarily prudent man would rely upon. In other words, the ven- dee must exercise ordinary care. In other jurisdictions it is held that negligence on the part of the vendee is no bar to relief in case of fraud. Most authorities are in accord that the exercise of prudence and caution is ex- cused (1) where confidential relations exist between the parties, and (2) where fraud or artifice is used to divert or prevent inquiry or investigation, or to mislead. (§§ 302-307.) § 302. May Vendee Rely Upon Statement of Vendor? As to whether a person may rely absolutely upon rep- resentations made, or is bound to make independent in- vestigation, the authorities are not altogether clear and harmonious. In Mead v. Bunn, 32 N. Y. 279 (1865), it is said that it is a mistake to assume ' ' that a false repre- sentation by one of the parties to a contract puts the other on inquiry as to its truth. Every contracting party has an absolute right to rely on the express statement of an existing fact, the truth of which is known to the oppo- site party and unknown to him, as the basis of a mutual engagement ; and he is under no obligation to investigate 310 NEGLIGENCE ON PART OF VENDEE. 311 and verify statements, to the truth of which the other party to the contract, with full means of knowledge, has deliberately pledged his faith." 1 In Forster v. Wil- husen, 14 Misc. 520 (N. Y. 1895), it was held that where by his agent an owner, with intent to deceive the pur- chaser, made representations as to the rentals of the prop- erty, and those representations were untrue and material in inducing the purchaser to purchase, and where with due diligence, after discovery of the fraud, the purchaser demanded a rescission of the contract and the return of the money paid upon it, the facts sufficed to support an action. It is no answer that the purchaser made no effort to ascertain from tenants the actual rent, where the owner diverted the purchaser from such inquiry. In fact, the purchaser has a right to rely on the mere state- ment of the broker, and want of diligence in discovering the fraud is not sufficient to deprive a party of his right to rescind a fraudulent contract. Moreover, a mistake or innocent misrepresentation, if material, is enough for rescission of the contract. In an action brought to recover damages for false representations alleged to have been made in respect to liens and encumbrances upon the property sold, the court said that the fact that the plaintiff could have informed himself as to encumbrances by an examination of the pub- lic records does not preclude him from maintaining his action. " Negligence is no defense to fraud. That the victim was an easy mark has not yet been heard to jus- tify garroting. ' ' 2 § 303. Vendor Not Ordinarily Required to Volunteer Information. On the other hand it is said that " the general rule is, that a party engaged in a business transaction with an- i Ami Townsend v. Peltl son. 156 N. Y. 624, 626 (1808). ZBlumenfeld v. Stlne, 42 Misc. 413 (N. Y. 1004). 3 1 2 FKAUD. other can commit a legal fraud only by fraudulent mis- representations of facts, or by such conduct or such arti- fice for a fraudulent purpose as will mislead the other party or throw him off from his guard, and thus cause him to omit inquiry or examination which he would otherwise make. A party buying or selling property, or executing instruments, must by inquiry or examination gain all the knowledge he desires. He cannot proceed blindly, omitting all inquiry and examination, and then complain that the other party did not volunteer all the information he had. Such is the general rule. But there are exceptions to this rule. Where there is such a rela- tion of trust and confidence between the parties, that the one is under some legal or equitable obligation to give full information to the other party — information which the other party has a right, not merely in foro conscien- tioe, but juris et de jure, to have, then the withholding of such information purposely may be a fraud. 3 It is not always easy to define when this relation of trust and confidence exists ; and no general rule can be formulated by which its existence can be known. ' ' 4 § 304. Vendee Required to Exercise Caution. Again, it is said, " Prudence and caution must be ex- ercised. The representations must be such that an ordi- narily prudent man would rely on as true, to justify a person in relying upon them. " 5 In the same case, it was said: ''An instruction which told the jury that if, by an ordinary degree of precaution, the plaintiff could have ascertained the falsity of the representations complained of, then the plaintiff was not entitled to recover, was 3 Citing Story's Eq. Jur., §§ 207 et seq. ; Hadlev v. Clinton County Importing Co., 13 Ohio St. R. 502; Bench v. Sheldon. 14 Barb. 66; Paul v. Hadley, 23 Barb. 521. * Dumbmann v. Schulting. 75 N. Y. 61, 62 (1878). See also Denning v. Darling, 2 L. R. A. 743 (Mass. 1889). and note. s Press v. Hair, 133 111. Ann. 534 (1907), (citing Grier v. Puterhaugh, 108 111. 602; Hutchinson v. Lyford, 123 111. 300; Eames v. Morgan, 37 III. 200; Dickinson v. Atkins, 100 111. App. 401). NEGLIGENCE ON PAKT OF VENDEE. 313 held a correct statement of the law in Eames v. Morgan, 37 111. 260." In another case, 6 it was said: " The gen- eral rule is that a purchaser must exercise common pru- dence, and if he fails to avail himself of the ordinary means of information the law gives him no redress. 7 But defendants cannot invoke this rule, because of their ac- tive efforts to conceal the condition of the mine, to thwart investigation and inquiry, and in misrepresenting the significance of conditions that were apparent. Such con- duct brings the case within the salutary exception designed to avoid encouragement to fraudulent and de- ceitful practices." 8 In Ripy v. Cronan, 115 S. W. 794 (Ky. 1909), the court, after quoting from 20 Cyc. 49, that the rule of caveat emptor applies, states that the excep- tions to the rule of caveat emptor are: " First, where confidential relations exist between the two ; and, second, where fraud or artifice is used to prevent inquiry or in- vestigation." § 305. Degree of Caution Required of Vendee. In Long v. Warren, 68 N. Y. 426 (1876), the represen- tations alleged to be false were as to the non-existence on the farm of a noxious weed known as quack grass, which rendered the farm less valuable. The defendant used no artifice either of word or act to dissuade or turn away or hinder the plaintiff from making inspection of the farm for himself. The plaintiff had passed over the farm, and had he taken ordinary pains to look out for this grass, he would have perceived it. "Where the matter is not peculiarly within the knowledge of the defendant," says the court, "and the plaintiff has •Tooker v. Alston, 150 Fed. 003 (1907). »Citlni? Andrus v. St. Louis Smelting Co., 130 U. S. 043; 9 Sup. Ct. 645; 32 I.. K.I. 1054. BCitinK Strand v. Griffith. 38 C. O. A. Ml; 97 Fed. K." I ; Henderson v. Henslinll, 4 C. C. A. 3.".7 ; 54 Fed. 320. See also Stewart v. Wyoming Hunch Co., 128 II. S. 388; 'J Sup. Ct. 101 ; 32 L. Kd. 439. 314 FKAUD. the moans of obtaining correct information, apart from the statement made to him, he may not recover upon the false declaration/' To the same effect is Starr v. Bennett, 5 Hill, 303. The representations must be such that the vendee has no means of discovering their falsity. If he does not avail himself of the means of knowledge within his reach, he will not be entitled to the aid of a court of equity. 10 It is stated in Smith v. Countryman, 30 N. Y. 681, though obiter perhaps, that statements as to value of property, and the freedom of it from defects which are known, to the one making them, to exist, but which might by the exercise of reasonable diligence be discov- ered, do not, if false, vitiate the contract. In Vernon v. Keyes, 12 East, 632, affirmed 4 Taunton, 488, it is held that a seller is unquestionably liable to an action of de- ceit, if he fraudulently misrepresent the quality of the thing sold, to be other than it is, in some particulars, which the buyer has not equal means with himself of knowing. 11 At nisi prius, a limitation to the rule was announced as follows: Means unused, of detecting the falsity of representations, are not a bar to an action, but matter for the jury, and if the jury find for the plaintiff, will not be ground for a reversal. 12 But we are not now reviewing the verdict of a jury for the plaintiff, but are dealing with the facts as a general proposition as if we sat in the place of a jury, and are not called upon to sanc- tion or disapprove that holding at nisi prius. It is also said in one case, that the very fact of a warranty having been given, would tend to throw the warrantee off his guard, and prevent him from making a close examina- tion. 13 But that is where he has taken a covenant, and may rely upon it." * Citing Ba.vley v. Merrel, Cro. Jac. 386. i° Citing Tallman v. Green, 3 Sandf. 437. 11 Referring to 1 Kent, 484, 485 ; Sherwood v. Salmon, 5 Day 439, 449. 12 Citing Bowing v. Stevens, 2 Carr & P. :v.',~. 13 Citing Holyday v. Morgan, 28 Law J. Q. B. 9. NEGLIGENCE ON PAET OF VENDEE. 315 § 306. Vendee Must Exercise Ordinary Caution. " In the kindred cases of false pretences, the criminal law holds to the rule we have above given, and it has been resolved, that where an exercise of common pru- dence and caution on the part of the prosecutor, would have enabled him to avoid being imposed upon by the pretence alleged, there can be no conviction. 14 The rule is summed up in Addison on Torts : When the real quality of the thing spoken of is an object obvious to or- dinary intelligence, and the parties making and receiving the representations have equal knowledge, or equal means of acquiring information, and the truth or falsity of them may be ascertained by the party interested in knowing, by the exercise of ordinary inquiry and dili- gence, and they are not made for the purpose of throwing him off his guard, and directing him from making the inquiry and examination, which every prudent person ought to make, there is no warranty of the truth of the representations, or that they are as they are stated to be, and there are no false and fraudulent warranties, within the legal definition of that phrase, upon which an action can be maintained. The rule is comprehensively stated as follows, by the United States Supreme Court in Slaughter's Administrators v. Gerson, 13 Wall. 383: 1 They must be representations relating to a matter as to which the complaining party did not have at hand the means of knowledge. Where means of knowledge are at hand and equally available to both parties, and the sub- ject of the purchase is equally open to their inspection, if the purchaser does not avail himself of those means and opportunities, he will not be heard to say in impeach- ment of the contract of sale that he was drawn into it by the vendor's misrepresentations.' (See also Davis v. Sims, Lalor's Hill and Denio, 234; S. In. Co. v. Adam, " Citing People v. Williams, 4 Hill 0. 316 FRAUD. 23 Pick, 256; Mooney v. Miller, 102 Mass. 220.) Some of the cases cited were of sales of land." 15 § 307. Negligence No Bar to Relief in Cases of Wilful Fraud. " The principles laid down in Long v. Warren, and the cases upon which it rests, have never been applied in this state (New York) to a case where it is simply sought to make an instrument, which by mistake or fraud fails to express the prior agreement between the parties, conform to such agreement. The authority of that case should not be extended to cases not clearly within the prin- ciples there laid down. It is certainly not just that one who has perpetrated a fraud should be permitted to say to the party defrauded when he demands relief that he ought not to have believed or trusted him. Where one sues another for negligence his own negligence contrib- uting to the injury will constitute a defense to the action ; but where one sues another for a positive, wilful wrong or fraud, negligence by which the party injured exposed himself to the wrong or fraud will not bar relief. If the rule were otherwise, the unwary and confiding, who need the protection of the law the most, would be left a prey to the fraudulent and artful practices of evil-doers." 16 Where there is no fraud or circumvention, some au- thorities hold that it is not for the courts to relieve a party from the mere results of his own carelessness, neg- ligence or laches, not induced by the conduct of the other party. " But if a party is led to forbear inquiry by false representations as to matters material and not collateral, intentionally made with knowledge of their falsity for the purpose of inducing such forbearance, or by fraudu- 10 Long v. Warren, 68 N. Y. 420 (1870). See also Brauckman v. Leigh ton, 60 Mo. App. 43 (1894). 16 Albany City Savings Inst. v. Bunliek, 87 N. Y. 49 (1882); Jiuld v. Walker, 114 S. W. 979 (Mo. 1908) ; Banking Co. v. Cunningham, 103 Me. 466 (1908), (citing Liv- ingston v. Strong, 107 111. 295) ; U. S. Gypsum Co. v. Shields, 106 S. W. 724 (Tex. 1908) ; Och v. M. K. & T. Ry. Co., 130 Mo. 71, 72 (1895). NEGLIGENCE ON PART OF VENDEE. 317 lent artifice or deceitful maneuvers resorted to with the like knowledge and purpose, upon which he in fact relies, the question of whether a careful and prudent man would have been misled in like circumstances is immaterial." 17 The rule that negligence of the party defrauded in failing to read a paper which he signed precludes him from attacking its validity, does not prevail" in this state (New York) though, as was said in Wilcox v. American Tel. Co., 176 N. Y. 117 (1903), there may be dicta in the text books and decisions in other jurisdictions to that ef- fect. 18 It was expressly repudiated by the New York Court of Appeals in Albany City Savings Institution v. Burdick, 87 N. Y. 40. 19 The duty of self-protection is also dis- cussed in Smith v. Countryman, 30 N. Y. 655 (1864). "Crompton v. Beedle, 75 Atl. 336 (Vt. 1910). "And see Rollins v. Quimby, 200 Mass. 162 (1908). 19 See also Welles v. Yates, 44 N. Y. 525 (1871): Smith v. Smith, 134 N. Y. 62 (1892). CHAPTER XXXII. WAIVER. RESCISSION. REMEDIES. § 308. General Statement. The right of rescission on account of frand may be waived by recognizing the contract as binding, after knowledge of the fraud. (§§ 309-312.) A person who has been induced by fraudulent repre- sentations to buy property has three remedies to elect from: (1) He may rescind the contract absolutely, re- store or offer to restore the property, and sue at law to recover the consideration parted with; (2) he may bring suit to rescind; and (3) he may retain what he has re- ceived, and sue at law for damages. (§§ 313-320.) Rescission, if resorted to, must be prompt. (§§ 310, 316.) § 309. Waiver of the Fraud. The right to rescind a contract secured by fraud may be waived, if a party with knowledge that a fraud has been perpetrated upon him, confirms the transaction by making new agreements or engagements respecting it, or retains and uses the subject of it after knowledge, or otherwise recognizes it as binding. 1 The court in Pryor v. Foster, 130 N. Y. 175, 176 (1892) quotes from Bigelow on Fraud, 184, as follows: " If a party with knowledge that a fraud has been perpetrated upon him in a parti- i Prvor v. Foster. 130 N. Y. 175. 176 (1892) ; Sehiffer v. Dietz. 83 N. Y. 307, 308 (1880) : Remmers v. Berbling, 06 Misc. 291 (N. Y. 1910) ; State Bank v. Brown. 119 N. W. 81 (Iowa 1909) : Schmidt v. Mesneer, 48 Pac. 54 (Cal. 1897). (citing Doherty v. Bell. 55 Ind. 205 ; St. John v. Henilrickson, 81 Ind. 350 ; Negley v. Lindsay, 67 Penn. St. 217; Nouinan v. Land Co., 81 Cal. 1). 318 WAIVER. RESCISSION. REMEDIES. 319 cular transaction, confirmed the transaction by making new agreements or engagements respecting it, or by retaining and using the subject of it after knowledge, or otherwise recognize it as binding, he thereby waives the right to treat it as invalid and abandons his right to rescind if it be a case of contract, or to redress if it be a tort not attended with a contract with the wrongdoer. If, however, the fraud result in a contract, performance of the same after discovering that it was fraudulently obtained by the opposite party does not preclude a per- son from suing for damages on account of the fraud. The injured party may retain the benefits of the contract, confirm its validity, and still recover damages for the fraud by which he was induced to make it; or he may recoujD any damages which he has sustained if the oppo- site party sue him for money due on the contract or other failure to perform it. " 2 § 310. What Constitutes Waiver of Fraud. Where any benefit is received under the contract, after knowledge of the fraud, it is a ratification and affirmance of the contract. 3 The right to rescind a con- tract for fraud must be exercised immediately 4 upon its discovery, and any delay in doing so, or the continued employment, use and occupation of the property received under the contract, will be deemed an election to affirm it. 5 Continuance in possession after discovery of the fraud is evidence of an intent to abide by the contract. But the mere bringing of an action on a contract, un- less brought with knowledge of the fraud which induced the contract, is not a binding election to ratify the con- tract nor a waiver of the right to rescind the contract sMorllln v. Railroad. 145 N. C. 223 (1007). *Cobb v. Hatfield. 40 N. Y. 536 (1871). * See § 316 infra. »8trong v. Strong. 102 N. Y. 73 (18S6). Sw also Pryor v. Foster, 130 N. Y. 175 (1892). • Schlffer v. Dietz, 83 N. Y. 308 (1880). 320 FRAUD. for the fraud. 7 But by suing on the contract after knowl- edge of the fraud, the right to disaffirm on account of the fraud is waived. 8 The fact that a deed of the premises was executed and delivered subsequent to the fraud, is no defense unless the deed was received and accepted with notice of the fraud. § 311. Full Knowledge of Fraud Not Necessary to Waiver. It is not necessary, in order to make the election con- clusive, that the party electing shall be acquainted with all the evidence which may tend to prove the fraud. It is sufficient if he has knowledge of all the material facts showing the actual perpetration of fraud upon him. 10 And it has been said that the question of waiver is largely one of intent. 11 But the doctrine that any act in affirmance of a contract after discovery of fraud, defeats the right of rescission, is not necessarily applicable to an action for damages founded in fraud. 12 § 312. Recitals in Contract Do Not Operate as Waiver of Fraud. A purchaser is not estopped from rescinding a con- tract of sale for fraud, by a recital therein that no repre- sentations have been made for the purpose of inducing the sale. 13 A clause which provides that " no verbal agreements affecting the validity of this contract will be recognized," does not obviate the results of fraud, for t Equitable Co-operative Foundry Co. v. Hersee, 103 N. Y. 25 (1886). sConrow v. Little, 115 N. Y. 387 (1889); Robb v. Vos, 155 U. S. 16 (1894); Crook v. First Nat. Bk., 83 Wise. 31 (1892). And see Johnson Co. v. Mo. Pac. Ry. Co., 126 Mo. 344. • Blumenfeld v. Stine. 42 Misc. 413 (N. Y. 1904). i° Bach v. Tuch, 126 N. Y. 53 (1891) ; E. Bement & Sons v. La Dow, 66 Fed. Rep. 195 (1895). « Pryor v. Foster, 130 N. Y. 177 (1892). i 2 N. Y. Land Imp. v. Chapman, 118 N. Y. 295 (1889) ; Pryor v. Foster, 130 N. Y. 171 (1892). "Bridger v. Goldsmith, 143 N. Y. 424 (1894). WAIVER. RESCISSION. REMEDIES. 321 fraud is not an agreement. It is an imposture practiced by one upon another. It may be used as an inducement to enter into an agreement. 14 Where a tenant sues for damages sustained by reason of the false representations of the landlord, an agreement that the landlord should not be liable for any damages caused by or arising from any source whatsoever in or about the premises, is not a waiver of damages caused to the tenant by the fraud of the landlord. 15 § 313. Remedies for Fraud. Measure of Damage. " It is elementary that a person who has been induced by fraudulent representations to become the purchaser of property has, upon the discovery of the fraud, three remedies open to him, either of which he may elect: First, he may rescind the contract absolutely, and sue to recover the consideration, in which case he must first re- store or offer to restore the property; second, he may bring action to rescind; third, he may retain what he has received, and bring an action at law to recover the dam- ages sustained, 16 in which case the measure of his recov- ery is the difference between the value of the article sold and what it should be according to the representations. 17 In Krumm v. Beach, 96 N. Y. 398 (1884), it was held that where a party seeks the third remedy, whether the rep- resentations relate to the title or to matters collateral to the land, the measure of the damages is full indemnity to the injured party, — the entire amount of his loss occa- sioned bv the fraud." 18 I'Senrsdale Pub. Co. v. Carter. 03 Misc. 275 (N. Y. 1909); V. S. Gypsum Co. v. Shield 106 S. W. 724 (Tex. 1908). w Blnmenfeld v. Wagner, 63 Misc. 69 (N. Y. 1909). •'■.In. 1. 1 v Walker 111 S. W. 979 (Mo. 1908); Modlln v. Railroad, 1 » ~> N. 0. -2.t (1907); Mlnazek v. Libera, *:: Minn. 288 (1901); st. John v. Hendrlckson, 81 Ind. 350 (1SSLM. "Citing Vail v. Reynolds, 11* N. Y. 297 H^m. m j "Grosjean v. Galloway, 64 App. DIv. 547 (N. Y. 1901). As to proof of fraud at law and in equity, see § 320 Infra. ,Y2'2 FKAUD. § 314. Remedies for Fraud. Action to Rescind. "A person who has been induced by fraudulent rep- resentations to become the purchaser of property has upon discovery of the fraud three remedies open to him, either of which he may elect. He may rescind the contract absolutely and sue in an action at law to recover the con- sideration parted with upon the fraudulent contract. * * * He may bring an action in equity to rescind the contract and in that action have full relief. 19 Such an action is not founded upon a rescission, but is maintained for a, rescission, 20 and it is sufficient, therefore, for the plain- tiff to offer in his complaint to return what he has re- ceived and make a tender of it on the trial. Lastlv, he may retain what he has received and bring an action at law to recover the damages sustained." 21 It may be observed that in the case just quoted from, 22 the court said that ' ' no question was raised by answer or during the trial as to the jurisdiction of the court and neither party demanded a trial by jury. Both parties tried the case on the theory that if the facts alleged in the complaint were established the plaintiff would be en- titled to equitable relief of some kind," but we fail to see how any objection as to the jurisdiction of a court of equity could prevail where the action is brought for the relief secondly above mentioned. § 315. Liability on Contract in Case of Fraud. ' ' Whatever facts would enable a party to avoid a con- tract, are equally available to enable him to defeat one sought to be enforced against him. " 23 * ' If a vendee of land who was induced to purchase by means of false rep- 19 Citing Allerton v. Allerton, 50 N. Y. C70. -" See § 316 infra. -i Davis v. Rosenzweig Realty Co., 11)2 N. Y. 128 (1908), quoting from Vail v. Rey- nolds, 118 N. Y. 297. See also Prince v. Jacobs, 80 App. Div. 243 (N. Y. 1903). 22 Davis v. Rosenzweig Realty Co., 192 N. Y. 132 (1908). 23 Smith v. Countrvman, 30 N. Y. 670 (1861); Pryor v. Foster, 130 N. Y. 176 (1892) ; Johnson v. Sheridan Lumber Co., 93 Pac. 473 (Ore. 1908). WAIVER. RESCISSION. REMEDIES. 323 reservations, does not rescind, and offer to reconvey, be may only sue for damages for the fraud, or plead a coun- terclaim for such damages in an action against him for the purchase juice. He cannot exonerate himself from liability for the purchase price, except by rescinding and offering to reconvey on discovering the fraud. Krumm v. Beach, 96 N. Y. 398 (1884)." 24 § 316. Rescission. A party who would rescind a contract upon the ground of fraud, must act promptly, 25 and restore or offer to re- store to the other party what he received under it. 26 But delay in rescinding may be explained, and ordinarily a person cannot be charged with delay in rescinding until after he has discovered the fraud. The vendee's rescis- sion of the contract for the fraud of the vendor, dissolves it ab initio. 27 " The election to rescind a contract for fraud evidenced by the bringing of an action based there- on is irrevocable and prevents the bringing of an action on the contract itself, and vice versa, when the plaintiff has knowledge of the fraud." 28 " Rescission has to be made in advance of an action to recover back money paid on a fraudulent contract of purchase, but not to bring a suit for a rescission. Such a suit is not based on a previous rescission; it is for a re- scission, and it suffices that the complaint itself is a rescis- sion by necessary offers to tender, to restore, etc. 29 The distinction between an action based on a rescission and one for a rescission seems to be obscured or lost sight of by the language of some opinions." 30 2* Soper v. St. Regis Taper Co.. 38 Misc. 294 (N. T. 1902) ; aff'd, 70 App. Dlv. 409 (N. Y. 1902). * Meatier v. Jeffries, 145 Mich. 603 (1900). See also § 310 supra. -« iImi.ii.hi.icI v. Pennock, 61 N. Y. 152. 153 (1S74). « Whaien v. Stuart, 194 X. Y. 503 (1000). 2* Realty Transfer Co. v. Colin Co.. 132 App. Dlv. 286 (N. Y. 1909). » Citing Vail v. Reynolds, 118 N. Y. 207; Berry v. A. C. ins. Co., 132 N. T. 40. s° McGowun v. Blake, 134 App. Dlv. 105, 166 (N. Y. 1909). 324 FRAUD. § 317. Offer to Restore. While generally the defrauded party must, before he can maintain an action, either return or offer to return what he has received under a contract before he may rescind it for fraud,"' 1 there is an exception to this rule where the defrauded party is entitled, in any event, to all that he has received. In such a case a return or offer to return is not a condition precedent to the bringing of an action. It is sufficient if the sum retained is taken into account and allowed in the judgment. 32 " In an action in equity, brought for the rescission of a contract, it is suffi- cient if the plaintiff offer in his complaint to return what he has received, and make a tender of it on the trial. ' ' 33 § 318. Pleading Fraud. " The burden of charging as well as proving fraud is on the party alleging it, and facts constituting the alleged fraud must set forth in order to entitle a party to introduce evidence of it. Mere conclusions of law are not enough. " 34 * ' To sustain a cause of action to recover damages for fraud, the plaintiff must allege the fraud and resulting damage, but when fraud and damage are both alleged there is a cause of action." 35 " Fraud gives a cause of action for the damages which necessarily re- sult from the wrong, and these may be recovered without an averment of special damage. Such damages, however, as are the material but not the necessary result of the injury, are special and must be alleged. ' ' 36 § 319. Pleading Fraud Committed by More than One. The principles which govern an action for fraud and si Noves v. Patrick, 58 N. H. CIS (1879). 32 Douglass v. Scott, 130 App. Div. 322 (N. Y. 1909) ; Bebout v. Bodle, 38 Ohio St. 500 (1882). 33 Cox v. Stillman. 132 App. Div. 437 (N. Y. 1909). As to the various remedies at law and in equity, see §§ 313-316 supra. Si Eppley v. Kennedy, 131 App. Div. 4 (N. Y. 1909). as Isman v. Loring, 130 App. Div. 847 (N. Y. 1909). so Id., 848. WAJVEK. RESCISSION. REMEDIES. 325 deceit are the same whether the fraud is alleged to have originated in a conspiracy, or to have been solely com- mitted by a defendant without aid or cooperation. Whenever it becomes necessary to prove a conspiracy in order to connect the defendant with the fraud, no aver- ment of the conspiracy need be made in the pleadings to entitle it to be proved. 37 An allegation of conspiracy need not be proved but may be wholly disregarded if plaintiff can show otherwise the guilty participation of any de- fendant. 38 Where a conspiracy is established, the acts, admis- sions and declarations of any one of the conspirators, done and made during the criminal enterprise, in pursu- ance and furtherance thereof and in reference thereto may be proved. 39 "Such evidence is received on the theory that the conspirators have jointly assumed to themselves as a body, the attributes of individuality, so far as regards the common design, thus rendering what- ever is done or said by any one in furtherance of that design, a part of the res gestce, and therefore the act of all." 40 § 320. Proof of Fraud at Law and in Equity. The question may arise as to whether the fraud requi- site as a basis for rescinding a contract in equity is of the same nature as that demanded in a court of law in an action for damages for deceit. " In equity, the right to relief is derived from the suppression or misrepresenta- tion of a material fact, though there be no intent to de- fraud. This view has been applied to innocent misrepre- sentations in a prospectus, providing that they were of the "Butler v. Duke, 39 Misc. 243 (N. Y. I!in2>. MBracketl v. Grlswold, 112 N. Y. 166, 467 (1889); and sec Hansen v. Kline, 113 N. w. 508 (Iowa 1907). „. ., „ .. ,,„„. •■"'(Mi the u<'ii«-r:il subject <«f cnnspiraev. mm- I'laoe v. Minsler. 60 N. Y. !>., (INi.il. «o n. y. Guar, fi in. I Co. v. Gleason. 78 N. Y. 508 (1878) J Page v. Parker. 43 N. II. 363 (1801); Wiggins v. Leonard, 9 Iowa 197 (1859). 326 FRAUD. essence of the contract. This doctrine is, substantially, grounded in fraud, since the misrepresentation operates as a surprise and imposition upon the opposite party to the contract. It is inequitable and unconscientious for a party to insist on holding the benefit of a contract which he has obtained through misrepresentations, however in- nocently made." 41 In Jackson v. King, 4 Cow. 220 (N. Y. 1825), it was suggested that courts of law have not, in all cases of fraud, concurrent jurisdiction with equity, and that the distinction between legal and equitable jurisdiction upon fraud is that at law it must be proved, not presumed as it may be in equity from the nature of the transaction and the situation of the parties. 42 « Hammond v. Pennock, 61 N. Y. 152 (1874). 42 See also Squiers v. Thompson, 7.3 App. Div. 552 (N. Y. 1902) ; Lyon v. James, 97 App. Div. 385 (N. Y. 1904); Bell v. James. 128 App. Div. 241 (N. Y. 1908); Johnson v. Sheridan Lumber Co., 93 Pac. 473 (Ore. 1908). CHAPTER XXXIII. CRIMINAL FRAUD. § 321. General Statement. In New York, it is criminal to obtain a signature by- false pretense or to conspire to cheat and defraud an- other out of property. (§§ 322-324.) Also to corrupt or to enter into unlawful agreements with agents. (§ 325.) The New York statute is referred to in this chapter as indicative of what may be found in some other states. § 322. Obtaining Property by False Pretenses. Under the New York statute, "A person who, with in- tent to cheat or defraud another, designedly, by color or aid of a false token or writing, or other false pretense, obtains the signature of any person to a written instru- ment, is punishable by imprisonment in a state prison for not more than three years, or in a county jail for not more than one year, or by a fine of not more than three times the value of the money or property affected or obtained thereby, or by both such fine and imprisonment." 1 " Where an intent to defraud constitutes a part of a crime, it is not necessary to aver or prove an intent to de- fraud any particular person." 2 § 323. Compelling Execution of Instrument. The New York statute also provides that "The com- pelling or inducing of another, by such force or threat, to make, subscribe, seal, execute, alter or destroy any valu- i N. Y. Penal Law, § 932. 2 N. Y. Peual Law, § 3, subd. 5. 327 328 PKAUD. able security, or instrument or writing affecting or intend- ing to affect any cause of action or defense or any prop- erty is an extortion of property within the last two sec- tions." 3 "§ 850. Extortion Defined. Extortion is the obtain- ing of property from another, with his consent, induced by a wrongful use of force or fear, or under color of offi- cial right. " § 851. What Threats May Constitute Extortion. Fear, such as will constitute extortion, may be induced by a threat : 1. To do an unlawful injury to the person or property of the individual threatened, or to any relative of his or to any member of his family; or 2. To accuse him, or any relative of his or any member of his family, of any crime ; or, 3. To expose, or impute to him, or any of them, any deformity or disgrace ; or, 4. To expose any secret affecting him or any of them. " § 852. Punishment of Extortion. A person who extorts any money or other property from another, under circumstances not amounting to robbery, by means of force or a threat mentioned in the last two sections, is punishable by imprisonment not exceeding fifteen years." i § 324. Definition and Punishment of Conspiracy. A further provision of the New York statute is that " if two or more persons conspire to cheat and de- fraud another out of property, by any means which are in themselves criminal, or which, if executed, would amount to a cheat, or to obtain money or any other property by false pretenses, * * * each of them is guilty of a mis- demeanor. " 5 "No agreement except to commit a felony » N. Y. Penal Law. 5 853. * N. Y. Penal Law, §§ 850-852. 6 N. Y. Penal Law, § 580. CRIMINAL FRAUD. 329 upon the person of another, or to commit arson or bur- glary, amounts to a conspiracy, unless some act beside such agreement be done to effect the object thereof, by one or more of the parties to such agreement." 6 § 325. Corrupt Influencing of Agents. Unlawful Agreements of Agents. In New York the statute also provides that " Who- ever gives, offers or promises to an agent, employee or servant, any gift or gratuity whatever, without the knowl- edge and consent of the principal, employer or master of such agent, employee or servant, with intent to influence his action in relation to his principal's, employer's or master 's business ; or an agent, employee or servant, who without the knowledge and consent of his principal, em- ployer or master, requests or accepts a gift or gratuity or a promise to make a gift or to do an act beneficial to him- self, under an agreement or with an understanding that he shall act in any particular manner to his principal 's, employer's or master's business; or an agent, employee or servant who, being authorized to procure materials, supplies or other articles either by purchase or contract for his principal, employer or master, or to employ ser- vice or labor for his principal, employer or master, re- ceives directly or indirectly, for himself or for another, a commission, discount or bonus from the person who makes such sale or contract, or furnishes such materials, supplies or other articles, or from a person who renders such service or labor ; and any person who gives or offers to such an agent, employee or servant such commission, discount or bonus shall be guilty of a misdemeanor and shall be punished by a fine of not less than ten dollars, nor more than five hundred dollars, or by such fine and by im- prisonment for not more than one year. ' ' 7 « N. Y. Penal Law, § 588. i N. Y. Penal Law, § 439. PART V.— PROCEDURE. CHAPTER XXXIV. PLEADING. § 326. General Statement. In suing for broker's commissions, the broker has the option either to state the facts constituting the cause of action or, if he has performed his part, according to their legal effect. (§ 329.) If he pleads the facts constituting his cause of action, it is essential to set forth every material fact which forms a part of the cause of action. (§§ 329-333.) If the broker alleges performance, evidence excusing performance is held by some authorities not admissible. (§334.) Where the payment of commission is dependent on some special agreement, the happening of the condition precedent should be alleged. (§ 335.) Abandonment by the broker, termination of his em- ployment, and bad faith on the part of the broker may all be considered matters of defense. (§ 336.) Although an act is done through an agent, it should be alleged as done by the principal, leaving the method of doing it to the proof. (§ 337.) § 327. Scope of Chapter. The time and space necessarily required for a satisfac- tory treatment of the subject of pleading is so great that 330 PLEADING. 331 the present chapter can but give a general idea of plead- ing in brokers' cases. The discussion of the subject is, as a whole, based on the so-called ''reformed procedure," though here and there an authority has been drawn from a state where the common law form of pleading still exists. The essentials of pleading are the same under most of the codes of the various states in which code pleading is the practice— with the possible exception of Louisiana. Reference will therefore be made to but a single code, and as New York was the first state to adopt the reformed procedure, 1 and its decisions have been cited so freely in other states, the law of that state has been chosen, and the citations, as a rule, are of New York decisions. § 328. Complaint for Broker's Commissions. ' ' There is only one form of civil action. The distinc- tion between actions at law and suits in equity, and the forms of those actions and suits, have been abolished." 2 The New York Court of Appeals in Sadler v. City of New York, 185 N. Y. 414 (1906), said: "All that a plaintiff has to do in any case is to set forth in his complaint a clear, concise, and unequivocal statement of the facts consti- tuting his cause of action, and a demand for the judgment to which he supposes himself entitled." But let not this statement disarm the practitioner. It has the air of converting the art of pleading into a de- lightful pastime. Yet pleading is a technical and difficult art. The various codes were intended to simplify plead- ing, but, notwithstanding this, we must frequently look into the law as it existed long before the time of these enactments in order to ascertain the meaning of the codes. Often the impression is produced on the practitioner's i N. Y. Const, of 1S46. a N. Y. Code Civ. Pro.. § 3339. 332 PROCEDURE. mind that the codes have not made things so simple after all. § 329. Methods of Pleading. In most cases when drawing a complaint for the re- covery of a broker's commissions, either of two methods may be adopted,— the party may, at his option, state the facts constituting the cause of action as they actually existed or according to their legal effect. 3 Thus a complaint 4 alleged that the defendant was in- debted to the plaintiff in the sum of $591.18— a balance due from the defendant for work, labor and services in advertising done for and at the special instance and re- quest of the defendant. The proof showed an agreement between the parties that plaintiff should do certain ad- vertising for the defendant and be paid in tickets of the defendant; that plaintiff performed the work and re- ceived a certain quantity of the tickets, but not all that he should have received, the amount stated in the com- plaint being still due. Plaintiff demanded the balance of the tickets from the defendant but was refused. Com- plaint sustained. Where there is a special agreement, and the plaintiff has performed his part, the law raises a duty on the part of the defendant to pay the price agreed upon, and the plaintiff may rely either on this implied assumpsit or on the express agreement. 5 § 330. Pleading Legal Effect. From what has been said in the preceding section, it seems that the broker, having performed his part, may a N. Y. News Pub. Co. v. Natl. Steamship Co., 148 N. Y. 39 (1895), (citing Bennett v. .Inilson, 21 N. Y. 238 (18G0); Farron v. Sherwood, 17 N. Y. 227 (1858); Barney v. Worthington, 37 N. Y. 11G (1807) ). See also Ilosle.v v. Black, 28 N. Y. 438 (1803). * N. Y. News Pub. Co. v. Natl. Steamship Co., supra. s Farron v. Sherwood, 17 N. Y. 227 (1S58). PLEADING. 333 allege that the defendant is indebted to him in a stated sum for work, labor and services performed at the special instance and request of such defendant (i and, in New York State, at least, this regardless of whether the orig- inal agreement was for payment in money or in prop- erty of another kind. " The rule in this state seems to be that where a party agrees to pay a specific sum, * * * or the value of the services in some specific articles of property, and upon demand refuses or fails to deliver the property, his obligation is thereby converted into one for the payment of money. ' ' 7 When the contract of employment is fully performed and nothing remains but to pay, the compensation may be recovered on the common counts. 8 Thus a real estate broker's commission that has been fully earned under an express contract may be recovered under the common counts. 9 In Leimbach v. Eegner, 70 N. J. L. 608 (1904), non- suit was entered on a claim for commission, the contract of employment not being in writing as required by the New Jersey statute and the broker having sought to re- cover on a quantum meruit. 10 § 331. Pleading the Facts Constituting the Cause of Action. If the broker prefers to plead the facts as they ex- isted, 11 he may do so but must observe the formalities. " Under our Code of Civil Procedure a complaint must contain a plain and concise statement of the facts consti- tuting each cause of action, without unnecessary repeti- tion. § 481, subd. 2. * * * This is nothing more than a 8 See eases cited under preceding section; and Bee Form )7 Infra, Ch xm ID v. News Pub. Co. v. Natl. Steamship Co., lis n. y. 89 (1895), (citing 1 Sedg. on Damages (8th Ed.), g 280; Gleason v. Plnney, 5 Cow. (N. Y. » 152; Smith v Smith - Johns, (N. Y.i 235; Brooks v. Hubbard, 3 conn. 58 b Menifee v. Biggins, - r ,7 111. 50 (1870). » Rlsley v. Beaumont, 71 N. J. L. 372 (1904) io Sec § 333 infra as to necessity of pleading that broker's authority to sell was In writing where statute requires writing. ii See § 320 supra. 334 PROCEDURE. restatement of the rule as it existed prior to the adoption of the present Code. While it is no longer necessary, as it was under the old system, to plead the conclusions of law which followed the facts previously stated, it is es- sential to set forth every material fact which forms a part of the cause of action or defense." 12 ; 332. Action Based Upon a Contract. 8 " Where an action or defense is based upon a con- tract, the pleading in which it is set forth should allege all the material facts." 13 A consideration is essential to all contracts not under seal, except so-called " contracts of record." 14 The employment of a broker creates a contract of brokerage and a consideration is essential to the validity thereof. The employer gives his promise of payment, either express or implied, upon the perform- ance of the broker's part of the brokerage contract. 15 In other words, it is a promise for an act, which is recog- nized as a consideration. 16 " Consideration is a material and indispensable ele- ment of every contract. ' In declaring upon a contract not under seal, it is in all cases necessary to state that it was a contract that imports and implies consideration, as- a bill of exchange or promissory note, or expressly to state the particular consideration upon which it is founded.' " 17 " * Where a consideration is not implied, or a request is essential to the defendant's liability, it is of the gist of the action, and must be specially averred.' " 18 12 National Citizens' Bk. v. Toplitz, 178 N. Y. 467, 468 (1904). ™ Id. " Clark on Contracts, 153. 15 See § 139 supra. i" Clark on Contracts, 165. M National Citizens' Bk. v. Toplitz, 178 N. Y. 467 (1904), (citing 1 Chitty on Pleadings (13th Am. Ed.). 292 and cases cited; Moak's Van Samvoord's Pleading. 164; Bliss on Code Pleading (2nd Ed.), § 268; Beach on Modern Law of Contracts, Vol. 2, § 1691; Bailey v. Freeman, 4 Johns. (N. Y.) 280; Dolcher v. Fry, 37 Barb. (N. Y.) 152). 18 National Citizens' Bk. v. Toplitz, supra, (citing Spear v. Downing, 34 Barb. (N. Y. ) T)22 ; Gould on Pleadings, 176). As to promise to pay commissions which are PLEADING. 335 § 333. Facts to be Stated. Where the broker, therefore, attempts to set forth his cause of action by alleging the facts as they existed, he must state all the essential facts, which are at least these, —that the broker performed the services at the defend- ant's request, express or implied, or was employed by the principal, 19 or where original employment is wanting, that his acts were ratified by the principal ; 20 that he was the procuring cause of the sale, i. e., under the prevailing- rule, 21 procured a buyer, ready, willing and able 22 to pur- chase on the employer's terms, 23 or procured an enforce- able contract of sale; 24 and the agreed or customary amount of the commissions, 25 or the reasonable value of the services, 26 and non-payment thereof. While it is customary to allege demand and non-pay- ment, it is not essential to allege a demand, and, were it necessary, the bringing of the action is a sufficient de- mand 27 and the failure to make a previous demand would affect only the question of interest and probably costs. 28 held to bo without consideration and unenforceable, see §§ 121, 205. And see §§ 208-210. The consideration must lie legal. Therefore, a promise to pay commission if the broker will commit a fraud upon his employer in bringing about a deal is unenforceable. See §§ 140-145, 209 supra : also Clark on Contracts, pp. 441, 442. i» See Chs. IX. X, supra; 8 Ency. of PI. & Pr. 833; 19 Cyc. 274. An allegation of employment should be incorporated In the complaint, followed by sufficient aver uta of a compliance with the contract of employment. Yoder v. Randol, 83 Pac. -">:;7 (Okla. 1905); 3 L. R. A. (N. S. ) 576. Under an allegation that the broker was employed bj a person who "was the owner of and bad charge and control" 'it' the land, the broker need not prove that such person owned the record title. Cook v. Piatt, 104 S. W. 1133 ; 126 Mo. App. 553 (1907). -" See §§ 109-112 supra. ■^ See §§ 117-119 supra. -■* Where the purchaser is accepted by the principal, the purchaser's financial ability Is no part of the broker's affirmative case. Six- §§ 1. '3-155 Supra. 23 The complaint should allege that the broker sold the property or that be pro- cured a purchaser who was ready, able and willing to I summate the sale upon the specified terms. 8 Ency. of PI. & Pr., 832. 2 * In some jurisdictions, it is held that the broker's obligation is performed \\})<'U he produces a purchaser ready, willing and able to purchase on the principal's terms, while In other jurisdictions the broker is required to bring about an enforceable con- tract of sale. The conflicting views have been referred to in several preceding chapters, and principally in §§ 117-1 lit supra. ^ See §§ 211-226 supra. That the defendant bad knowledge of a custom need not !»• pleaded. Whltehouse v. Moon'. 13 Abb. Pr. 142 (N. Y. 1801). See § 2°:. supra as to pleading rules of a board of brokers. * See § 226 supra. -~ Maguire v. Durant. 1 Misc. 50!) (X. Y. 1892). 2» De Carrlcartl v. Blanco, 121 N. Y. !_>::<• (1890); Sweeny v. City of New York. 173 N. Y. 414 (1903). And see as to necessity of demand When plaintiff pi. 'ads the legal effect, § 330 supra. 336 PROCEDURE. As to alleging non-payment, it may be said that what- ever may be the law, it is better practice to allege non- payment as it is a simple matter to prove prima facie in a broker's case. There are occasions, however, where the question may become of importance, as for instance, in an action to recover broker's commissions where one of the parties has died and the survivor is disqualified from testifying. The law is in some confusion on the general proposi- tion of alleging and proving payment. In an action upon contract for the payment of money only, the allegation and proof of the promise and of the fact that it has ma- tured, creates the presumption of non-payment and throws the burden of proving payment upon the one who asserts it. 29 Where the statute requires the broker's authority to be in writing, some cases hold that the complaint must allege written authority. 30 In New Jersey, where the statute declares that no broker or real estate agent selling or exchanging land shall be entitled to com- mission unless his authority is in writing signed by the owner or his agent, and the rate of commission is stated, 31 it has been held that the broker is not obliged to set out in his pleading that his authority was in writing, and that, so far as the declaration is concerned, since the right to bring an action for ser- vices in negotiating the sale of property was not created by this statute, but existed at common law, and since the statute only requires that evidence of the request and authorization must be in writing and the rate 28 Conkling v. Weatherwax, 181 N. Y. 258 (1905), in which note the views of the Judges of the N. Y. Court of Appeals expressed in separate opinions and memoranda ; see also the eases there cited. Other cases bearing on the point are: Lent v. N. Y. etc. R R Co., 1.30 N. Y. 504 (1892); Crawford v. Tyng. 10 Misc. 143 (N. Y. 1894); Cochran v.' Reich, 91 Hnn 440 (N. Y. 1895) ; Gruenstein v. Jablowsky, 1 App. Div. 580 (N Y 1890) ; Drv Dock R. R. Co. v. N. & E. R. R.. .3 Misc. 61 (N. Y. 189.3) ; Hauxhurst v. Ritch, 119 N. Y. 621 (1890); Rdson v. Dillage, 8 How. Pr. 273 (N. Y. 1853) ; Fitzmahonv v. Caulfleld, 25 App. Div. 119 (N. Y. 1898). »> Covey v. Henry, 71 Neb. 118 (1904). See also Leimbach v. Regner, 70 N. J. L. 608 (1904). « See § 16 supra. PLEADING. 337 of compensation be fixed by the writing, the law would presume that the contract declared on, if required to be in writing by the statute, was in writing. In other words, that the statute introduces a new rule of evidence, and does not alter or affect the rule of pleading. 32 § 334. Full Performance and Excuse for Performance. Under a complaint setting out a contract and aver- ring its performance by the plaintiff, evidence in excuse for non-performance has been held not admissible. 33 But in Hosley v. Black, 28 N. Y. 443 (1863), it is said, " this rule is of very little consequence; for the plaintiff may amend his complaint and then give the evidence." In a case 3i where the defendant made no objection to the proof, the court said that as the plaintiff did not move to amend it was in the discretion of the court, even after the close of plaintiff's case, to entertain the motion to dis- miss because performance was alleged and excuse for performance was attempted to be proved. If a waiver of performance is relied upon, it must be pleaded. A plaintiff cannot allege performance and when the same is denied change front on the trial, and establish facts excusing performance. 35 " Where a com- plaint by a broker, employed to find a purchaser or a lender, does not allege that the transaction was consum- mated, it must allege that plaintiff notified defendant that a customer was found." 36 A mere allegation that " because of the default of the defendant " the contract was not carried out, is insufficient. Facts should be stated. 37 as Adams v. Grady, 72 Atl. 55 (N. J. 1909), (citing 1 Chltty on Pleading, marc p. 222 and New Jersey eases). See also § 330 supra. ■■■■:< Hosley v. Black. 28 N. Y. 443 (1863); Stone v. Goodsteln, 49 Misc. 482 (N. Y. 190G). And see § 194 nupra. "Weeks v. O'Brien, 141 N. Y. 204 (1894). 35 Williams v. Fire Assn. of Pa., 119 App. Dlv. 573 (N. Y. 1907). *» 19 Cyc. 275. 87 Davis v. Silverman, 98 App. Dlv. 305 (N. Y. 1904). 338 PROCEDURE. But it has been held that where the principal is un- able or refuses to make the trade, the broker may sue for commission?* And where the cause of action was for procuring- a sale, and the sale was prevented by the ven- dor, it has been held that the broker could recover as for a complete sale. 39 Where the owner induces the real purchaser to take title in the name of another person in order to keep the broker in ignorance of the fact that the sale had been made to the purchaser presented by the broker, the bro- ker's complaint should not be dismissed on the ground that the evidence established a cause of action for fraud. Under such circumstances the broker may recover on an allegation of performance. 40 § 335. Pleading Special Agreements. Where the commission is to be paid out of the final payment received by the vendor, the broker must allege as a condition precedent that the vendor received the final payment. An allegation that the sum " became due " on a given date is not equivalent to an allegation of the happening of the condition precedent. 41 Where it was agreed that the broker should have commissions if he furnished a purchaser at a fixed price, he is not entitled to compensation under the agreement for furnishing a purchaser at a less price. In such a case, the broker cannot recover proportionate commis- sions on the lesser sum, or what his services were reason- ably worth, when he did not declare on a quantum meruit.*- In Morton v. Petit, 133 App. Div. 377 (N. Y. 1909), the 38 Cadigan v. Crabtree. 170 Mass. 4S1 (1901). 3» Rice-Dwver K. E. Co. v. Rulilnian. 68 Mo. App. 500 (1S0C). *° Martin v. Fegan. 95 App. Div. 154 (N. Y. 1004). « Nekarda v. Presberger, 123 App. Div. 418 (N. Y. 1908). And see §§ 228 et seq., 230-234 supra. 42 Steinfeld v. Storm, 31 Misc. 167 (N. Y. 1900). PLEADING. 339 complaint alleged that the broker was employed " to pro- cure * * * an acceptance of a certain application made by defendant for a loan," and that the broker " procured one * * * to accept said application." The complaint was demurred to upon the ground that there was no alle- gation that the broker ever communicated to or notified the defendant that he had procured a person ready, able and willing to consummate the loan, but the complaint was, nevertheless, held sufficient. In McLaughlin v. Whiton,37 Misc. 838 (N.Y. 1902), it was held that an alle- gation that the broker was to procure a loan is not estab- lished by proving that he produced a person ready, pre- pared and willing to make the loan. Where the contract is to procure a loan, it should appear that it was actually secured; the right of action depending upon a condition precedent, performance should be averred. 43 § 336. Matters of Defense. Under a general denial a defendant may offer evidence to show that the contract actually made was another than that pleaded in the complaint. Thus, where the com- plaint alleges that the broker brought about an absolute sale, the principal may, under a general denial, show that the broker secured a person who took an option only. 1 ' Evidence of gross misconduct, fraud or negligence on the part of the broker has been held admissible where only the general issue was pleaded. 45 On the other hand, an abandonment of the employment by the broker as well as an express termination of the employment, have been held to be matters of defense and do not have to be nega- tived by the plaintiff in the course of his proof to support a cause of action for commission. 46 And that the broker "McLanKhlln v. Whlton. 87 Mlso. MS (N. Y. 1902). "Brown v. Wiener, 51 Wash. 509; 99 Pac. f»8l (1009). «« Kncy- of PI. & >T • 886. *° Moore v. Boehm, 45 Misc. C22 (N. Y. 1904). 340 PROCEDURE. did not act in good faith lias also been held to be matter of defense. 47 An agent cannot be interested in the profit of a sale to his principal, and even though a person is not a party to an agreement to share the profit, he becomes liable to account under an allegation that he received and kept a share of the profit. 48 § 337. Pleading Acts Done by Agent. Although an act is done through an agent, it should be alleged as done by the principal, leaving the method of doing it to the proof. 49 Where false representations are made through an agent and the principal is sued, it is unnecessary to allege any agency in the making of the representations. A simple allegation that they were made by the defendant is appropriate. 50 47 See § 141 supra. 48 Colonizers Realty Co. v. Shatzkin. 129 App. Div. 609 (N. Y. 1909). See also §S 142-145. 252-257 supra. As to whether the defendant may show, under a general denial, that the hroker had agreed for commissions from iwtu sides without the knowl- edge of the defendant, or whether it must lie alleged as a defense, see § 58 supra. 4 » Moffett v. Jaffe, 132 App. Div. 7 (N. Y. 1909). 60 Harlow v. Haines, 63 Misc. 98 (N. Y. 1909). CHAPTER XXXV. INTERPLEADER. § 338. General Statement. When two or more brokers are employed on the same property, the circumstances may be such that both bro- kers claim the commission and the owner be unable to determine which of the two was the procuring cause of the sale. (§339.) A bill of strict interpleader is one in which the com- plainant asserts his possession of something in which he claims no personal interest, but in which other persons whom he makes defendants set up conflicting claims and the complainant cannot safely determine to which he shall yield. (§ 340.) Interpleader has been held proper where two brokers claim commission on the same sale (§ 341) but even in such circumstances the right to interplead is not univer- sally recognized. (§ 342.) The procedure with respect to interpleader is in most places regulated by statute. (§ 343.) When two brokers claim the same commission and one sues in a court without jurisdiction to accord the right of interpleader, the vendor may bring an action of inter- pleader in another court having jurisdiction. (§ 344.) Sufficient grounds for interpleader must be shown. (§ 345.) Interpleader makes actions at law equity suits. (§346.) § 339. Double Claims for Commission. That the principal may employ as many different bro- 341 342 PEOCEDUEE. kers as lie pleases to sell Iris property, and is liable for commissions only to that broker who is the procuring cause of the sale, has already been discussed. 1 Under such circumstances it not infrequently occurs that two different brokers claim to have been the inducing cause in the same sale and each claims the commission. The existence of such complications is mainly due to the purchaser's efforts to secure the property on the best possible terms. A prospective purchaser may be shown the property by a broker and learn from him the terms of sale. The broker may or may not report the pending ne- gotiations to his principal. Even if he informs the prin- cipal of the negotiations, he rarely, at this stage, discloses who the proposed purchaser is, for fear the principal may be tempted to deal direct. Meanwhile the proposed purchaser, looking for other property, comes into contact with other brokers in the same vicinity, and is perhaps shown the same property which the first broker has already shown him. In many cases the prospective purchaser does not disclose to this second broker the fact that another broker has already shown him the property, but gets the best terms he can from the second broker, who, in his turn, fails to dis- close the name of the prospective purchaser to the principal. Sometimes the purchaser deals at once with the second broker if this latter holds out any hope of obtaining the property on more favorable terms. Sometimes, however, the purchaser returns to the first broker, either because the first broker held out better hopes or because the pur- chaser desires to inform this first broker that he, the pur- chaser, has been offered the property under more favor- able terms. He does this expecting the first broker to do even better for him. The contest is then on. The principal is besieged by J See §§ 97, 08, 237 supra. INTERPLEADER. 343 both brokers, and, not knowing that both have the same buyer, imagines that two prospective purchasers are all at once very anxious for his property. This sometimes makes him quite independent. When a sale is finally brought about, the principal finds that he has on his hands a difficult proposition. He does not want to pay two commissions for the one sale. If, however, he undertakes to determine the question and pays the commission to the broker whom he decides to have been the procuring cause of the sale, a court or a jury may subsequently, on the suit of the other broker, decide that his decision was in error, and then the prin- cipal, though wholly innocent of any wrong, is obliged to pay the judgment obtained by the second broker or take an expensive appeal. Even if he takes the second course he would un- doubtedly be informed by the appellate tribunal that while it deplores a situation which subjects the principal to double payment, yet the whole matter was a question of fact, and as there was evidence upon which the jury could have reached the verdict it rendered, the appellate court did not feel inclined to disturb the verdict. The principal may go still further and ask the first broker to whom he voluntarily paid the commission, to return it. The first broker replies that he feels that he earned the commission, and adds that as he was not a party to the litigation already had, he was not given an opportunity to show in court that he had earned the com mission. The principal may now sue the first broker. The result is not always certain. The first broker may even be successful in establishing before another court or jury that he is the party who is actually entitled to retain the money. When the principal has thus dragged himself through the court proceedings, he finds that it lias cost him two commissions, and in addition, several times the amount of 344 PROCEDURE. an ordinary commission in the cost of the litigation, and that he is worse off than if he had voluntarily paid both commissions in the beginning. In such circumstances, may the principal avoid all this expense and trouble by resorting to the remedy known as interpleader? § 340. Nature of Interpleader. "A bill of strict interpleader is one in which the com- plainant asserts his possession of some fund or something in which he claims no personal interest, but in which other persons whom he makes defendants set up conflict- ing claims, and the complainant cannot safely determine to which claim he should yield. ' ' 2 No attempt will be made to enter into details concerning the derivation and particular nature of interpleader, nor whether inter- pleader exists in common law actions only by virtue of statute or not, as our object is to confine ourselves as closely as may be to the subject of interpleader in rela- tion to double claims for the same commission. The question may arise in three ways: (1) where both brokers bring separate actions for the same commission, and the principal asks that the actions be joined, as it were, into one, and that he may drop out of both upon paying the commission into court, and leave the bro- kers to fight it out between them, or that he, the principal, may be compelled to contest but one suit; (2) where one of the brokers brings suit and the principal asks that the other broker, who also makes claim, be joined with or substituted for the principal in the suit; (3) where neither broker brings suit, but both make claim, and the princi- pal takes the initiative and brings suit against both bro- kers to determine the conflict. 2 Metropolitan Life Ins. Co. v. Hamilton, 70 Atl. 677 (N. J. 1908) INTEBPLEADER. 345 § 341. Interpleader Permissible in Broker's Commis- sion Cases in Some States. In New York there have been cases which held that the right to interplead in brokers' commission suits did not exist, 3 but the right to interplead adverse claimants to a brokerage commission on the sale of realty is now recognized there. 4 Where there is no pretense or sugges- tion that the owner has rendered himself liable to double commissions, and he concedes his liability to one or the other of the claimants, but is unable to determine between them and is unwilling to do so at his own risk, the owner may pay the money into court and interplead the rival claimants. 5 And in Rogers v. Picken Eealty Co., 55 Misc. 199 (N. Y. 1907), where two brokers claimed commission on the same sale, interpleader was held proper, the court distin- guishing other cases in which each claim was based on a separate contract. Here it was held that where there is in the hands of a defendant money which belongs to the plaintiff or a third person, and is claimed by both of them, and the holder of the fund has no interest in the subject matter, and the question to be determined is the title to the particular fund in respect to which the claims are made, an order substituting the second claimant in place of the original defendant may be made. And in Pennsyl- vania interpleader has been granted to determine conflict- ing claims to the same brokerage commission. 6 § 342. Interpleader Not a Universally Recognized Right. The subject of interpleader is not, however, free from doubt. A typical and at the same time a recent case which » Cohen v. Cohen, 35 Misc. 200 (N. Y. 1901); Olsen v. Moran, 50 Misc. C55 (N. Y. 1906). « Danlonville v. Smith, 133 App. Dlv. 234 (N. Y. 1900). • Trembley v. Marshall, 118 App. Dlv. 839 ( N. Y. 1907). "Brooke v. Smith, 13 I'a. Co. Ct. 557 (1893K 346 PROCEDURE. presents the question as it very frequently arises is that of Maxwell v. Frazier, 96 Pac. 548 (Ore. 1908). Maxwell engaged Frazier, a real estate broker, to sell his property for him at a fixed price and for a commission of $50. At the same time Maxwell, as he had a right to do, 7 engaged Hurst also to sell the property. Hurst claimed that his commission was not fixed in advance, but that he was to receive the reasonable value of his services. Presently Maxwell sold the property to one Corby, and being unable to determine whether Frazier or Hurst was the procuring cause of the sale, came into Court, ad- mitting that he owed $50 commission either to Frazier or to Hurst for procuring the purchaser, but alleging that they both claimed it and were threatening to bring action against him therefor and that he was unable to decide, without hazard to himself, to which it belonged. Maxwell brought this interpleader suit without collu- sion with either Frazier or Hurst, and tendered the sum of $50 into court for the benefit of the successful claimant. One of the brokers contended that the case was not a proper one for interpleader. The court in upholding this contention said: " ' It is essential to the right to file the bill that there be two or more claimants to the fund in dispute, capable of interpleading and settling the matter between themselves.' 8 The issues must be between the defendants as to their right to the same specific thing or fund, and not an issue with the plaintiff as to separate claims against him. Mr. Justice Wolverton in North Pac. Lbr. Co. v. Lang, 28 Or. 246, 258; 42 Pac. 799, 803; 52 Am. St. Rep. 780, in discussing this remedy and when it may be invoked, says: ' One of the essential requisites to equitable relief by bill of interpleader is that all the ad- verse titles of the respective claimants must be connected or dependent or one derived from the other or from a 1 See §§ 97, 98, 237 supra. 8 Citing 23 Cyc. 5. INTERPLEADER. 347 common source. There must be privity of some sort be- tween all the parties, such as privity of estate, title or contract, and the claims should be of the same nature and character. In cases of adverse independent titles or de- mands, actions to determine the rights of litigants must be directed against the party holding the property, and he must defend as best he can at law. * * * Thus, where the only relation which the plaintiff sustains to the de- fendants is that he is the debtor of one of them, he cannot invoke the aid of an interpleader. ' To the same effect is 23 Cyc. 3-8. In the case before us, each of the defendants relies upon a separate contract with the plaintiff. There is no privity between them, but they are claiming on in- dependent demands. Neither defendant is claiming the commission through any privity with the other. The plaintiff is not a stakeholder, but his liability to each of the defendants, if liable at all, is upon a personal contract, and the bill will not be entertained to try out a mere legal liability of the plaintiff to a defendant. Such is not the province of a bill of interpleader. The creditor is entitled to his remedy at law. A parallel case to the one at bar is Sachsel v. Farrar, 35 111. App. 277. The vendor of real estate filed a bill requiring two real estate agents to in- terplead as to which was entitled to commissions for the sale, and it is held that as their claims were upon inde- pendent contracts with the vendor, and not by title derived by one from the other, the vendor must make the best defense he can at law, and interpleader will not lie. In (First Natl.) Bank v. Bininger, 26 N. J. Eq. 345, it was held that the true doctrine is that in cases of adverse independent titles, the party holding the property must defend himself at law as best he can. Hoyt v. Gouge, 1 25 Iowa 603; 101 N. W. 464, which is also a suit to require real estate brokers to interplead,is to the same effect. A Iso see (Third Natl.) Bank v. Skillings Lbr. Co., 132 Mass. 410. Therefore the case was not a proper one for interpleader. 348 PROCEDURE. Where a bill of interpleader is filed, the practice is first to determine whether such a bill will lie. If it will not, it is useless to go further. If it will, then, upon bringing the property in dispute into court, the complainant is dis- charged from further liability with his costs to be paid out of the deposit, and issues cannot be made against him except as to whether the case is a proper one for inter- pleader. But the court will require the defendants to in- terplead and litigate their respective rights to the fund in dispute. ' ' 9 § 343. Method of Procedure. The procedure with respect to interpleader is, in many states, regulated by statute. Among the states which regulate the matter by statutory provision are New York, 10 Massachusetts, 11 Ohio, 12 California, 13 Delaware, 14 Connecticut, 15 Oregon, 16 and Georgia. 17 New York has very explicit statutory provisions, which are presented here for illustrative purposes. Section 820 of the New York Code of Civil Procedure, providing for interpleader in a contract action which is pending, is as follows: "A defendant against whom an action to recover upon a contract or an action of eject- ment, or an action to recover a chattel is pending, may, at any time before answer, upon proof by affidavit, that a person, not a party to the action, makes a demand against him for the same debt or property, without collusion with him, apply to the court, upon notice to that person and the adverse party, for an order to substitute that person » Citing 23 Cyc. 31 ; North Pac. Lbr. Co. v. Lang, 28 Ore. 246 ; 42 Pac. 799 ; 52 Am. St. Rep. 780; Newhall v. Kastens, 70 111. 156; Duke L. & Co. v. Duke, etc., 93 Mo. App. 244. i" N. Y. Code of Civ. Pro.. §§ 820. 820a; Mun. Ct. Act, § 187. » Rev. Laws of Mass. (1902), Ch. 173, § 37. 12 Bates Ann. Ohio Stats., § 5016. 13 Cal. Code of Civ. Pro.. § 386. 11 Del. R.">! CONTRACTS FOR SALE OF REAL ESTATE. consequence. Indeed, very anciently the transfer of title to real estate was itself quite informal. An oral declara- tion of transfer made upon the land, or the symbolic de- livery of the property by the delivery of a twig of a tree growing on the land, and the like, were among the early methods of transferring title. However satisfactory these methods may have been in primitive days, they would be utterly insufficient now. If employed, they would lead to endless confusion and litigation and to a deplorable lack of certainty in the se- curity of one's title to land. To avoid all this, the law makers long ago required such agreements to be in writ- ing. The subject is almost universally regulated by stat- ute, known in nearly all jurisdictions as " The Statute of Frauds." 1 § 349. Usual Methods of Concluding a Sale. Ordinarily a sale of real estate is brought about by real estate agents, or less frequently by the parties them- selves. The services of a lawyer are scarcely ever sought until the negotiations are well under way and frequently not until all the details have been practically agreed upon and a deposit paid on account. The wisdom of this is doubtful, but the conditions are sometimes such as to ren- der it unavoidable. When the seller of real estate has been offered terms with which he is satisfied, he is anxious to ' ' strike while the iron is hot." And the purchaser, offered the prop- erty at a price satisfactory to him, is more than willing to have the transaction " clinched " at once by a written contract. Also, the broker when he has performed his part in the sale of real estate by bringing about a meet- ing of the minds of the parties, is naturally anxious to see that understanding perfected by a written contract. 1 See § 350 infra. AGREEMENTS RELATING TO SALE OF REAL ESTATE. 355 In some states he must secure an enforceable contract before he is entitled to his commissions. 2 Under such circumstances no deliberation is indulged in and the contract is usually drawn on the spot or at the nearest convenient place, with such knowledge, or lack of knowledge of the requirements and effect of an agree- ment of sale of real property as the parties may them- selves possess. And yet, as we shall see later, the con- tents of the written contract are of the utmost importance. A contract for the sale of real estate should be drawn with the greatest care, and, whenever circumstances per- mit, before signing it the vendor should produce his title deeds, abstracts, or title insurance policies and be ready to furnish accurate information concerning the property and his title thereto. The reason for submitting the title deeds, abstracts, or title insurance policies for examination is found in the fact that from such documents it will usually appear what encumbrances and defects the vendor's title is burdened with, and provision may be made in the contract accord- ingly. Usually the purchaser makes up his mind to buy after a physical inspection of the property, and it is quite immaterial to him whether there are party walls, restric- tions, street railroads, etc. In fact, all these may only serve to make the property more desirable to him, and if discussed at the time of making the contract, little diffi- culty will usually be found in arriving at an agreement properly providing for or against such matters. But after a contract is once signed, if nothing is said therein about these matters, " experienced purchasers " —or perhaps their attorneys— scent all manner of future difficulty on account of these very things, and, as the es istence of some of them may sometimes afford sufficient ground to justify the purchaser in refusing to carry out the contract, the vendor has the alternative of making an a See §§ 117-119 supra. 356 CONTRACTS FOR SALE OF REAL ESTATE. " allowance " on the price, or of involving himself in liti- gation which may tie up the property for many months. § 350. Oral Agreements and Informal Written Agree- ments. As already stated, the parties to an agreed sale of real estate sometimes find it inexpedient to delay long enough to adjourn to some convenient place to draw a formal contract. In such case a money " deposit " is usually paid by the purchaser " to bind the bargain " and a " receipt " for the money is given. Sometimes these ' ' receipts ' ' contain the elements of a contract and serve the purposes of a more formal instrument and are enforceable as contracts by the purchaser. We shall refer to the essentials of a contract pres- ently, but here we shall only discuss the legal status of the parties where a " deposit " is paid and no writing is entered into, or where the writing entered into does not measure up to the dignity of a contract. If the vendor of real property has accepted a deposit and has not signed such a " receipt " as might be con- strued to be a valid contract in writing, he may, when called upon to transfer the property, refuse to do so, provided he returns the deposit. He cannot, however, refuse to transfer the property and still keep the deposit. On the other hand, if the purchaser when called upon to complete the transaction, does not then wish to pur- chase the real estate, he may refuse if he will but he can- not recover his deposit. He cannot be forced to complete his undertaking, but he forfeits the money he has already paid. The reason for this advantage which the seller has over the buyer, springs out of the Statute of Frauds be- fore referred to. 3 This statute usually provides that every agreement for the sale of real estate must be in 3 § 348 eupra; see also §§ 31-37 supra. AGREEMENTS RELATING TO SALE OF REAL ESTATE. 357 writing, signed by the vendor or his agent. This being true, the vendor is never bound by an unwritten agree- ment to sell, except in the rare cases where he permits the buyer to enter into possession of the property, which is usually referred to as part performance and takes the transaction beyond the point where it is affected by the Statute of Frauds. The subject of part performance is too intricate for discussion here. It is sufficient to say, however, that the authorities are in practical unanimity that " part payment " of the purchase price is not part performance, and does not of itself bind the vendor. The general proposition may be restated briefly thus: Where a deposit has been made to bind an oral agree- ment for the sale of real property and the receipt does not amount to a valid contract, the purchaser, if he re- fuses to complete the agreement— the vendor being able and willing,— cannot recover his deposit. On the other hand, if the seller is not willing to carry out the agree- ment or is unable to do so, the purchaser cannot enforce specific performance but may recover his deposit. If the seller tenders performance, the purchaser can- not raise the question of no written contract. He must either perform his part of the agreement or lose his de- posit. The seller may, however, raise that question and decline to proceed with the agreement if he so desires, merely returning the purchaser's deposit. This is so because the Statute of Frauds almost everywhere pro- vides that the contract must be signed by the vendor or his authorized agent, but no requirement is made as to the purchaser's signature. § 351. Options on Real Estate. We have already discussed the broker's status when he procures an option.' A genera] idea of the nature oi « This discussion occurs iu §§ 149, 103 supra. 35S CONTRACTS FOR SALE OF REAL ESTATE. an option is, however, not without value. An option on real estate is an exclusive privilege to buy such real estate, and a contract for an option, or option contract, is the agreement by which the privilege is created. It neither transfers nor agrees to transfer title to the prop- erty, but confers upon its holder the right, within the time limited by the option, to buy the property upon the terms provided. The option is a one-sided agreement, not binding on the holder until accepted by him, but the moment the holder or the proposed purchaser accepts the option, both parties are bound— the owner to sell, and the pur- chaser to buy. The acceptance of the option may be in writing, or by mere assent, or by tender of the price. The term " acceptance " as used in connection with an option must be understood. The mere physical " re- ceiving " of the written offer which constitutes the op- tion is not an " acceptance." An assent to the offer contained in the option is necessary to constitute an acceptance. An option, unless founded upon a consideration, may be revoked or withdrawn at any time before acceptance, and it has been held that a sale of the property to an- other party amounts to a withdrawal. It is essential, too, that the option shall be in writing and be signed by the vendor. § 352. Essential Features of a Contract for Sale of Real Property. The essentials of a valid contract for the sale or ex- change of real property are the same as for any other contract, with the added requirement that it must be in writing and be signed by the vendor. No particular words are necessary. A contract is sufficient if it gives the names of the seller and the buyer, and expresses the AGREEMENTS RELATING TO SALE OF REAL ESTATE. 359 consideration and describes the land to be conveyed. The agreement must be mutual— binding upon both par- ties. In most states no seal is required. The books abound with cases in which the courts have passed on various writings and have either sus- tained or rejected them as contracts. Some authorities say that the contract may be made up of several writ- ings, even if some of the writings are addressed to a third party, that it need be signed only by the seller and that the land may even be identified orally. Others say that the paper should state the whole contract with rea- sonable certainty so that the substance of it may be made to appear from the record itself without resort to any oral evidence. But all this uncertainty arises usually by reason of the parties trusting to informal writings or mere " receipts " and would not arise if formal agree- ments, blanks for which are almost everywhere obtain- able, were entered into. § 353. Parties to the Contract. In contracts relating to the sale of real estate, as in any other contracts, there must always be two parties. The parties must be capable of contracting. Usually infants or persons of unsound mind cannot contract. Application to the courts is necessary in such cases and also in the case of certain corporations whose objects are religious, charitable and the like. The l.iw in some states imposes on married women limitations in respect to their right to make contracts. The owner of the property may make the contract in his own name as vendor, but in all cases it is advisable if he is married, to have his wife join in the contract ns this often avoids troublesome complications Inter. In some states the husband must join in a contract made by the wife for the sale of her real property. 360 CONTRACTS FOE SALE OF REAL ESTATE. The right of an alien to make a contract for the sale of real property is another of those questions concerning which much may be said. It is a matter of local regula- tion, but in modern times the rights of aliens with respect to real estate have been so much enlarged that they may contract practically without limitation. A person may make a contract to sell property even though he does not own it, but if he fails thereafter to acquire the title or to procure a conveyance in accord- ance with his contract, he subjects himself to damages. Business corporations are competent to make con- tracts for the sale of realty. The rights of executors, trustees, administrators and guardians to make such con- tracts present further questions. An executor or trustee who is given power of sale under a will, may usually sell without application to the court. And so may an " ad- ministrator with the will annexed," who succeeds to the executor's power of sale. Otherwise application to the court is necessary and reasons for sale must usually be shown. Where there is any doubt as to whether applica- tion to the court is necessary, it is always advisable to insert in the contract that the sale is " subject to the approval of the court," and this affords at least some protection in some cases. § 354. Execution of Contract of Sale. The parties to a contract for sale of real estate may sign it in person, or it may be signed for either party by the agent of that party. The broker's right to contract has already been discussed fully. 5 If the contract is made by a person acting in a representative capacity, such as an executor for instance, he may sign the con- tract with his own name without adding his official title at the end of the signature, provided he is described in 6 See Ch. IV supra. AGREEMENTS RELATING TO SALE OF REAL ESTATE. 361 the contract in his representative capacity. If he is not so described, but still signs without proper addition of the official title to his signature, he becomes individually liable. It is also said, and in some states declared by statute, that an instrument executed by the grantee of a power, as for instance an executor or trustee with power of sale, conveying an estate or creating a charge which he would have no right to convey or create except by virtue of the power, shall be deemed a valid execution of the power, although the power be not recited or referred to therein. For example, if A is by deed or will given power to sell real property, and he has no beneficial interest in the property itself or in the proceeds of a sale thereof, a deed naming A merely as an individual, and signed by him as an individual, would in such case be held a con- veyance by virtue of the power. On the other hand, if A is given such power to sell and is beneficially interested in the property or in the proceeds of sale, a deed by him as an individual would convey only his individual interest, and in order to con- vey the entire property by virtue of his power of sale, it would be necessary either to describe him in the deed as trustee, executor, or whatever his official title may be, or that the deed contain a recital that it is made under the power of sale, or, at the very least, that A sign the deed with the words " as trustee, etc.," " as executor, etc.," as the case may be, added to his name. Failure to observe this distinction in the signing of such instru- ments sometimes leads to considerable difficulty. No particular form of signature is necessary to bind a corporation. And it has been held that the agent who affixes the signature of the corporation need not add his own name after that of the corporation. It is always better, however, to have the full corporate signature affixed to the contract by some authorized officer and to 362 CONTRACTS FOR SALE OF REAL ESTATE. have the corporate seal attached. Otherwise it may be difficult, when necessary, to prove the authority of the person who signed for the corporation. In any such case the name of the corporation is affixed, followed by the official signature of the affixing officer. 6 It is always advisable to have a contract for sale of real estate acknowledged by the parties, as in some states a contract duly acknowledged is admissible in evidence without further proof, which is not the case when the acknowledgment is omitted. « See §§ 44, 46 swpra. CHAPTER XXXVII. SUBJECT MATTER OF CONTRACTS FOR SALE OF REAL ESTATE. § 355. Drafting Contract for Sale of Real Estate. Regular forms of contract are easily obtainable at any law stationer's. 1 Hence, the elemental essentials of such contracts need not be discussed. Having this form, the question arises, How shall its blanks be filled! First of all, it is absolutely imperative that all the oral understandings of the parties be reduced to writing and put into the contract. If the vendor orally agrees that he will " throw in " with the sale the carpets, chan- deliers or other personal property on the premises, see that it is so stated in the contract. If he resorts to the old-fashioned— and we may say somewhat conceited- language that " his word is as good as his bond," and that if he says he will allow the personal effects men- tioned to pass with the property or makes any other oral agreement, he means all he says, the statement is in no- wise binding and should be declared unsatisfactory. If the vendor means to keep his promise, he should have no objection to putting it in writing. It is not wise to rest anything on a mere " under- standing " between the parties. When once a written agreement is made, the law holds thai all the under- standings and arrangements of the parties are included in this written agreement, and oral evidence is not ad- missible to contradict or vary its terms. There are ex » See the forms used In various states, given In Part VII— Forma 17-31. Ch. XXXIX infra. 363 364 CONTRACTS FOR SALE OF REAL ESTATE. ceptions to this rule of law but we shall not state them here. Compliance with the rule is always safe and is much more satisfactory than to attempt to determine when exceptions may safely be made. 356. Description of Property in Contracts of Sale. Failure to properly describe property in the contract for its sale has given rise to much litigation. Often the contract is entered into so hastily that it is impracti- cable to obtain any accurate description for inclusion in the contract. The courts say that the contract must specifically or with sufficient certainty describe and identify the land proposed to be conveyed. There are various ways of identification— a declaration as to its present ownership; reference to an earlier deed; by the enumeration of the particular grants of which a tract is composed; by a street number, etc. All these methods are, however, unsatisfactory. There should be a detailed description of the property itself. The state and county in which the land lies should be given, and in states where land is so subdivided, the range, township, section and quarter section of which it forms a part should be set forth. From the viewpoint of the buyer, the frequent prac- tice of describing city property by street number alone is most unsatisfactory as well as dangerous. When prop- erty is thus referred to by street number alone, the pur- chaser must accept a deed of the property bearing the street number, regardless of its actual dimensions. He may have understood the property to have a frontage of 100 feet, but if the property bearing that street num- ber has a frontage of but 75 feet, he is bound to accept its transfer in satisfaction of his contract, unless he has been misled by misrepresentations. If the property is SUBJECT MATTER OF CONTRACTS. 365 described by street number and also by dimensions, the purchaser is entitled to the frontage given by the dimen- sions in the absence of any other modifying circum- stances. The best method is to describe the property by metes and bounds. By this is meant that the actual distance in feet and inches from the starting point be stated, that the courses be stated, together with the specific distance of each course, and also whether the courses run parallel to side streets or at right angles to the main street, and if the courses run through party walls, that fact should be distinctly stated. A party wall may be defined as a wall which serves for two buildings. This perhaps is not a technical defini- tion but is at least one which may be easily understood. The courts have held that under certain conditions a party wall may be an encumbrance upon land. In other words, situations frequently arise where the existence of a party wall between two buildings may give to either owner legal rights, known as " easements," in the prop- erty of the other. In such case the party wall is an en- cumbrance, and while this is not ordinarily of such a nature as to be seriously detrimental to the property, it may under certain conditions be sufficient and good ground to refuse to take title to the property, and the possibility of complication should be avoided by stating the facts. Generally the existence of an encumbrance on real property not mentioned in the contract for the sale of this property, gives the purchaser the right to reject the title and sue for damages. The damages are usually made up of the amount paid on the contract, the expenses of examining the title and of surveying the property, and (though not in all cases) the difference between what the property is actually worth (its market value) and the price stated in the contract. 3G6 CONTRACTS FOR SALE OP REAL ESTATE. The parties to a contract for the sale of real estate may, of course, modify or wholly annul the rights and liabilities which the law imposes on each. For instance, they may agree that if the purchaser fails to perform, the seller may retain the deposit as liquidated damages and that the contract be then deemed null and void. Or they may agree that if the seller is unable to make good title he shall return the deposit, or the deposit in addi- tion to certain expenses, and that the contract then be- come inoperative. Or they may agree that the failing party shall be liable to the other in a fixed amount as liquidated damages. Or they may agree upon the situa- tion of each in case the title is unmarketable. Indeed, the variations which may be engrafted upon the legal status of the parties are numerous. 2 § 357. Statement as to Ownership in Adjacent Streets or Highways. Another question which frequently arises and con- cerning which a clear statement should be made in the agreement of sale, is whether the seller intends to trans- fer with the land his ownership in the street or highway adjacent to the land. The courts say it is a matter of intention, but at the same time in a contract of sale this intention is usually sought to be found in the language used in describing the property. The rule frequently announced is that the bounding of a lot by the exterior line of an abutting street, i. e., the line separating the property from the street, as con- tradistinguished from bounding it by the street, ex- cludes from the conveyance any part of the abutting street, unless there be circumstances indicating a differ- ent intention. Thus, where the description commences upon the side of a street, as for instance " beginning at a a See Forms 17-31, Ch. XXXIX infra. SUBJECT MATTER OP CONTRACTS. 3G7 point on the northerly side of East Fourteenth Street," and thence along that side to a point specified, the gen- eral construction is that no ownership in the street is thus conveyed. But where the property is bounded by or is described as on or along a highway or street, or running along a highway or street, without restricting or controlling words, as for instance " and thence along East Four- teenth Street " as distinguished from " thence along the northerly side of East Fourteenth Street," the gen- eral rule is that the grantor's title in the land to the center of the street or highway is included in the grant. Where the contract binds the purchaser to pay a specific sum per acre and bounds the property " by " certain roads, it is held that the purchaser is not re- quired to pay for any acreage included in the highway itself. And where lots are described by lot numbers with reference to a map on which the lots appear as bounded by a street, the conveyance will be assumed to include the abutting streets to the centre whether or not at the the time of the conveyance the streets have been actually opened. This presumption will not, however, hold if suc- ceeding words in the conveyance limit the effect of the reference to the map, as where the reference to lot num- bers is followed by a specific description which limits the lots to the side of the street, or where the description contains appropriate words to indicate an intention to exclude part of the abutting streets. If the purchaser desires to assure himself that his title extends to the center of the street or highway, he may well require a specific statement to that effect, which usually takes the form of a clause at the end of the description, somewhat as follows: " Together with all the right, title and interest of the party of the first pari (or grantor) of, in and to the streets and avenues in 368 CONTRACTS FOR SALE OF REAL ESTATE. front of and adjacent to said premises to the center lines thereof respectively." This usually settles all doubt. § 358. Statement of Gross or Acreage Price. Another question sometimes arising is whether the parties intended to sell and buy for a gross sum though the acreage is mentioned, or according to a certain price per acre though the acreage is not mentioned. If proper words are chosen to express the intention of the parties, there can be no difficulty. While we cannot dwell on the different phases of the question, we may state that the safer method is this:— If it is intended to sell a plot of unknown acreage at a fixed price per acre, it should be distinctly stated that the acreage is then unknown or un- certain, that the price is so much per acre, and that the exact acreage is to be determined by subsequent survey or agreement of the parties. If the sale is intended to be for a gross sum for the entire land irrespective of the number of acres, then, although the approximate acreage may be stated if insisted upon, it should be made to appear specifically that the price was fixed irrespective of the number of acres within the plot. § 359. Statement of Easements, Negative Easements, Encroachments, Etc. Closely involved in the description of the property and therefore discussed under that head, are certain rights or encumbrances known as easements, negative easements, and the like. To one of these we have already referred when the matter of party walls was spoken of. Another is a matter of restrictions. If the property is restricted and this is not stated in the contract for sale, the purchaser has a legal right to refuse to accept the proffered title. This is because restrictions, or as the matter is popularly known, " covenants and restric- SUBJECT MATTER OF CONTRACTS. 369 tions "—by which is usually meant covenants against the erection of certain nuisances, or restrictions against certain uses of the property— are encumbrances and what are known in law as " negative easements," and if not specified, give the purchaser the right to refuse to complete the contract and to demand damages as already mentioned. Another factor in the passing of titles to real estate, especially in cities, is the matter of encroachments. The buildings on the land to be conveyed may encroach upon adjoining land, or buildings on adjoining lands may encroach upon the land to be conveyed. Then, too, the buildings or some addition thereto on the land to be conveyed may encroach upon the street. If the vendor has taken the wise precaution of having his property surveyed before entering into a contract of sale he may usually ascertain whether the proposed purchaser is will- ing to accept the property as shown by the survey, and make his contract accordingly. The matter of encroachments is not only a fruitful source of litigation but a troublesome proposition be- sides. Encroachments (not provided against in the con- tract) must be substantial to warrant the refusal to take the title contracted for. That is, the law does not recog- nize immaterial encroachments. De mini mis lex non curat. The difficulty, however, always is to make up one's mind as whether the encroachment is material. The question is often a very close one in the courts. Then, too, the matter is often affected by local statutes which, in effect, permit encroachments to a small extent if they have existed for stated periods, while local ordi nances permitting encroachments of stoops, Btore win dows. bay windows and the like to a limited extent upon the street, may also be found, often the matter of ni croachments may be obviated by so called encroachmenl agreements. Such agreements really amount to a con- 370 CONTRACTS FOR SALE OF REAL ESTATE. sent to the existence of the encroachment by the person who might proceed for its removal. Sometimes, but rarely, the encroachment agreement goes further and grants the soil encroached upon. The encroachment agreement is usually employed where the buildings on the land to be conveyed encroach upon adjoining land. If buildings on adjoining land en- croach substantially upon the land to be conveyed, the vendor is usually unable to convey all the land con- tracted for because, as is obvious, the part encroached upon cannot be conveyed except with the burden of the encroachment, and in some cases the vendor has no means of remedying the matter. Even in such cases, however, arrangements are sometimes made which en- able the title to be passed to the satisfaction of the parties. Forms of encroachment agreements are given elsewhere. 3 These remarks, which scarcely open up the subject of encroachments, must suffice for this chapter which, as has been stated, is not intended as a presenta- tion of the law of real estate contracts but merely as a suggestive and advisory discussion in connection with the precautions to be observed in drawing a contract of sale. " Railroad consents " should also be specified, though there is doubt whether a consent to the use of the street for railroad purposes would be a proper objection to a title, particularly if the railroad is in actual operation. § 360. Leases of Property Held Under Contract of Sale. If there are any outstanding leases, the contract should state that the sale is subject to same. Some con- veyancers also insert a clause that the property is sold subject to monthly tenancies " where that is the fact. 1 1 » Forms 44, 45, Ch. XL infra. SUBJECT MATTER OF CONTRACTS. 371 If property is sold without such exceptions, the vendee may insist on possession of the property without any tenant thereon and may refuse title if the vendor is un- able to deliver the property vacant. § 361. Price and Manner of Payment. The total price to be paid for the property is usually first stated and then follows the manner in which pay- ment thereof is to be made. Usually a fractional amount is paid upon signing the contract. Usually the property is taken over subject to an out- standing mortgage, or, what amounts to the same thing, a " trust deed." The details of such a mortgage need not be stated, for it is held that the mortgage being of record, the purchaser is chargeable with knowledge or notice of its provisions. If the purchaser, however, wants any as- surance, he may require that the details of the mortgage be given in the contract, in which case the contract state- ments would prevail. The contract of sale in case of an outstanding mort- gage, usually reads that the property is to be taken sub- ject to a mortgage, but sometimes, without any reason therefor, there are added the words, " which mortgage the purchaser agrees to assume." The legal effect of this phrase seems not to be realized. It amounts to a guar- antee on the purchaser's part of full payment of the mort- gage. Thus if the mortgage is assumed by the purchaser, and the property is thereafter foreclosed and sold, and does not bring enough to pay the costs of the foreclosure and the amount due on the mortgage, the person " as- suming " payment of the mortgage may be hold person- ally for the deficiency. On the other hand, if he had taken the property merely " subject " to the mortgage, no resort could be had against him for a deficiency, as he personally assumes nothing, the mortgage being then sup- 372 CONTRACTS FOR SALE OF REAL ESTATE. ported entirely by the property and by any preceding guarantors. 4 At times, the purchase price of property is paid in part by the purchaser giving back to the seller a mort- gage for an agreed amount. Such a mortgage is called a " purchase money mortgage." Its details should always be stated in the contract of sale. If they are not, embar- rassing situations may arise, not necessary to be set forth here. In agreeing for a purchase money mortgage, in addi- tion to the principal amount of the mortgage, the follow- ing details should be stated in the contract:— Maturity of the mortgage; rate of interest; when payable; the par- ticular clauses, or otherwise that the mortgage is to con- tain " the usual clauses " in addition to any which are particularized. Also, the contract should specify who is to pay for drawing the mortgage, who bears the cost of recording it, and who is to pay any tax there may be thereon. Where the total amount of the purchase price is to be paid in part in cash, in part by the purchaser taking over the property subject to an existing mortgage thereon, and the balance by the seller taking back a purchase money mortgage on the property, and the purchase money mortgage is consequently to be a second mort- gage,— that is, subordinate in lien to the existing mort- gage on the property,— the purchase money mortgage, although a second mortgage lien when made, would as- cend to the position of a first mortgage if the existing first mortgage is later paid and satisfied. The result would be that the purchaser or any subsequent owner of the property could not obtain a new mortgage which would be prior in lien to the purchase money mortgage 4 The above is a statement of the general rule. Frequently situations arise where the purchaser "assumes" the payment of the mortgage, but the courts will, notwith- standing, refuse to enforce the apparent liability. The legal principles applicable to the various situations must, however, be sought in the works on mortgages and cannot be detailed in a chapter intended to present only suggestions and very general principles. SUBJECT MATTER OE CONTRACTS. 373 unless the then holder of the purchase money mortgage voluntarily or for a consideration consented. To avoid this situation, it is quite common in agreeing for a pur- chase money mortgage which is to remain a second mort- gage lien, to insert a clause in the contract somewhat as follows: "Said mortgage is to contain a clause subordi- nating the same to any new first mortgage of $ should the present first mortgage at any time be satisfied, and such clause shall further subordinate said mortgage to any new first mortgage in place of the present first mortgage, provided the excess of such new first mort- gage above $ is paid to the holder of this second mortgage on account of the principal sum, and that the holder of such second mortgage shall execute, acknowl- edge and deliver any instruments necessary or proper to effectuate such subordination as above agreed, pro- vided he shall not be obliged to incur any expense in do- ing so (or, provided he shall be reimbursed for any expenses he may incur in doing so, to an amount not exceeding $ ) . " § 362. Suburban Property. In purchasing suburban property, if the purchaser wishes to protect himself against subsequent assessments he should require a clause in the contract of sale stating that the sewer, gas and water are in the streets adjoining the property and are properly connected with it, and that there are no assessments, instalment or otherwise, againsl the property. Not infrequently land companies purchase acreage and subdivide it into lots. Maps are made of the prop erty showing it laid out into lots, these maps sometimes being accurate and made by ;i competenl surveyor, and at other times lacking either or both of these desirable qual ities. Difficulty sometimes arises with this suburban 374 CONTRACTS FOR SALE OF REAL ESTATE. property when the municipality or the town in which the property is situated subsequently lays out streets, the lines of which do not coincide with the streets shown on the land companies' maps. Many of these maps are not filed in the public offices at all, and purchasers must then rely on a map which is in the possession of an individual or a land company. One of the several reasons for the reluctance to file such maps is found in the fact that if a map showing the property cut up into lots is filed in a public office, the tax assessors are apt to assess each lot separately, whereas if no map is filed the property is assessed in one parcel as farm land or woodland or meadows as the case may be, and the belief is prevalent and has some foundation, that the tax assessments are considerably less when the prop- erty is assessed as a farm or as woodland than when each lot is assessed as separately laid out. In New York the legislature has made an effort to reg- ulate the filing of such maps by an act which became a law on June 7, 1910. This law makes it the duty of every person who, or corporation which, either as owner or as an agent cuts up property into lots for the purpose of offering them for sale, to cause a map to be filed, and provides a penalty for failure so to do. The law is an addition to the New York Real Property Law, and in full is as follows: "Sec. 334. Maps to be Filed; Penalty for Nonfiling. It shall be the duty of every person or corporation who, as owner or agent, subdivides real property into lots, plots, blocks or sites, with or without streets, for the pur- pose of offering such lots, plots, blocks or sites for sale to the public, to cause a map thereof, together with a cer- tificate of the surveyor or draughtsman attached showing the date of the completion of the survey and of the mak- ing of the map and the name of the subdivision as stated by the owner, to be filed in the office of the county clerk SUBJECT MATTER OF CONTRACTS. 375 or register of deeds of the county where the property is situated prior to the offering of any such lots, plots, blocks or sites for sale. All of such maps shall be placed and kept by some suitable method, in consecutive order and shall be consecutively numbered in the order of their filing and shall be indexed under the initial letters of all substantives in the title of the subdivision. A failure to file any such map as required by the provisions of this section shall subject the owner of such subdivision, or of the unsold lots therein, to a penalty to the people of the state of twenty-five dollars for each and every lot therein sold and conveyed by or for such owner prior to the due filing of such map." 5 § 363. New Buildings. In purchasing property upon which buildings have been recently erected, it is safer to require and so state in the contract that the seller at the time of the delivery of the deed will produce and deliver to the purchaser certificates of the Tenement House Department, if such exist, or otherwise of a corresponding department, if such there be, showing that the buildings and improve- ments on the property have been inspected, passed and approved by the department; also proper certificates showing the right to have the property occupied, and also showing that the buildings have been passed on and ap- proved by the proper building department or bureau. If the property is not " tenement " property, the provision with respect 'to the Tenement House Department is of no value and will not of course be incorporated in the contract for sale, but the building department clause should be included. § 364. Time for Delivery of Deed. Ordinarily the purchaser under a contract for sale of IN. Y. Laws of 1910, Oh. 415. 376 CONTRACTS FOE SALE OF REAL ESTATE. real estate is accorded thirty days in which to complete his purchase— that is, to pay the balance of the purchase money and accept the deed of the property. A day is fixed for the purpose and this day is usually called the " closing of title," or " the law day." The day, hour and place should be precisely fixed. The form of the deed, whether warranty or otherwise, should be stated. 6 The contract should also provide that the rents, interest on mortgages and fire insurance premiums, if any, are to be apportioned or otherwise provided for as may be agreed upon. § 365. Fixtures. While it is not often so, it is a fact that sometimes a purchaser suffers keen disappointment when he sees the condition of the property at the time he actually takes it over. When the contract was signed he saw many " improvements " on the property which have disap- peared when he takes his deed. This is because the vendor has meanwhile removed certain " fixtures." Usually the purchaser has no redress. Although not a strictly correct definition, " fixtures " in popular " real estate language " usually denote such movable articles as do not constitute part of the realty. Close questions sometimes arise as to whether certain forms of property are fixtures and therefore not passed with the sale of the real estate, or whether they are part of and pass with the real estate itself. The vendor, after he has made a contract to sell his real estate, may law- fully remove therefrom such property as shades, awn- ings, chandeliers, mirrors, and in some cases even gas ranges and similar articles not permanently affixed. On e We are not unmindful of the fact that there are eases which hold that a stipu- lation to give a warranty deed refers only to the form of the deed and not to the validity or tne title. Such decisions not only are unreasonable, but have been rarelv followed. 1 he forms of contracts given in Chapter XXXIX infra contain the appropriate words to fully cover the situation. SUBJECT MATTER OF CONTRACTS. 377 the other hand, enterprising vendors are sometimes dis appointed on attempting to remove laundry tubs, bath tubs, wash basins, faucets, heating boilers and water pipes, to learn that these are parts of the realty and pass with the property. Even as to these articles, however, questions have arisen where the vendor had purchased them under what is known as " a conditional sale," i. e., a credit sale where the seller of the goods retains title until full payment has been made. The only safe plan, therefore, is to have a general and inclusive provision in the contract for sale, stating that carpets in halls, chan- deliers, gas fixtures, shades, awnings and the like, " are included in this sale." § 366. Approval Clause. In modern contracts for sale of real estate, especially in the large cities, there is usually inserted what is known as an " approval clause." This innocent looking clause usually provides that " the seller shall give and the pur- chaser shall accept such a title as " a specified or " any responsible "title guarantee company " will approve and insure." Under somewhat similar clauses the courts were for- merly quite unanimous, although possibly not wholly so, that before the title could be disapproved, there must be a reasonable foundation or basis for the disapproval, but, in New York at least, the more recent derisions arc quite unanimous that under such a clause the specified title company may arbitrarily refuse to approve and in- sure the title and that this is sufficient ground to justify the vendee in refusing to accept the same unless the ap- proval is prevented by the purchaser's own ad. We shall not discuss the question as 1<» whether it is the vendor's or the vendee's duty to obtain the approval or disapproval of the title under sueh a clause, although 378 CONTRACTS FOR SALE OF REAL ESTATE. that too has been an interesting controversy. Convey- ancers generally favor the view that if the purchaser wishes to refuse the title, it is incumbent upon him to obtain the disapproval thereof by the specified company and that he does not have the right to refuse to accept the title merely because the vendor has not obtained the title company's approval. The " approval clause " men- tioned is considered beneficial to the purchaser. The vendor rarely 'derives any benefit therefrom. § 367. General Provisions. Other clauses of more or less obvious desirability are usually found in the printed forms of contract. None of them require special mention here. Such standard clauses are based on legal principles, as for instance the clause that the vendor assumes the risk of loss or damage by fire until the delivery of the deed. After the contract is entered into and signed, the purchaser acquires certain equitable rights and also re- sponsibilities, and as the seller usually retains the fire insurance policies until actual delivery of the deed, the clause referred to is inserted in the contract to place definitely the liability for any loss occasioned by fire. The general rule is that the vendee in a contract for the sale of land is entitled to any benefits or improve- ments inuring to the land after the date of the contract, and must bear any losses by fire or otherwise which occur without the fault of the vendor. This applies when the title is satisfactory and the contract is capable of being specifically performed by the vendor. Such is the Eng- lish rule, and, although a contrary view is taken in some jurisdictions, the great weight of authority is in its favor. 7 The English rule is followed in equity, and where the TSewell v. Underhill, 197 N. Y. 168 (1910), where Am. & Eng. Eney. of Law, Vol. 29 (2d Ed.), p. 713, is referred to. SUBJECT MATTER OF CONTRACTS. 379 doctrine is maintained it is upon the theory that the con- tract makes the vendee the equitable owner, and courts of equity regard that which is agreed to be done as actu- ally performed. The reason for the provision in the con- tract definitely providing upon whom the loss shall fall in case of fire, is therefore obvious. PART VII.— SCHEDULES AND FORMS. CHAPTER XXXVIII. BROKERS' RULES. SCHEDULES OF FEES, CHARGES AND COMMISSIONS. Form 1.— Schedule of Charges and Commissions. New York City. 1 (a) Regulations as to Private Sales. The following commissions shall be chargeable on private sales, except where a special contract has been previously made : For selling real estate within the limits of New York and Brooklyn 1 % Leaseholds , . 2 % For selling real estate in the suburbs of New York, Brooklyn, and country property 2 1 /£% Western and Southern lands 5 % Selling leases and leaseholds in the suburbs of New York. ... 5 % Procuring loans, 1% or by agreement. In the case of exchanges, a full commission shall be paid on each side. No sales shall be made for a commission of less than $25. Should the title of property prove imperfect, whereby a sale cannot be consummated, the claim for commission shall not be invalidated thereby. Brokerage shall be deemed to be earned when the price and terms are arranged between buyer and seller, the minds of both parties having fully met. It shall be due and payable when the contract is signed. (b) Regulations as to Agents and Management of Property. The following commissions shall be charged for the management and letting of property, except where a special contract has been previously made: Renting for a term under 3 years on first year's rental, or fraction thereof 2 1 / £% Leasing for a term of three years and upward on gross rental, except by special agreement 1 % Leasing country property, first year 5 % Each subsequent year, to same party 2%% On renting and collecting, except by special agreement 5 % (c) Appraisement Charges. For appraising real estate in the Boroughs of Manhattan, Bronx and Brooklyn, from $10 to % of 1% upon valuation, or according to agreement. Suburban property, % of 1%, or according to agreement. 1 These rates are given on page 15 of tlie diary (100ft) published by the Real Estate Board of Brokers of the City of New York. See page 28 thereof as to fees for appraisals. For commissions on auction sales see pages 34, 35, same book. 380 brokers' rules, schedules of fees, etc. 381 Form 2.— Schedule of Salesroom Fees and Commissions at Auctions. New York City. 1 (a) Regular Salesroom Fees. Knockdowns on all real estate $ 5 Auctioneers not renting stands to pay double rate $10 (b) Legal Sales Fees. Knockdowns on all sales of real estate by order of the court. . $ 2 Salesroom fees on property offered at upset prices shall be the same as if sold. In all cases where property is offered at an upset price and not sold, or where the property is bid in by the owner, or on his behalf, the auc- tioneer shall so inform the manager immediately after the sale. (c) Commissions on Auction Sales. Commissions on sales of real estate shall be as follows, viz: On New York and Brooklyn property, not less than y> of 1%, to be paid by the seller, in addition to the expense, of maps, advertising and salesroom fees; and no member of the association shall be allowed to divide this commission with any person except a real estate broker bringing a sale direct. On country property and leasehold property, wherever situated, the commission shall be not less than 1%, to be paid by the seller, in addition to the expense of maps, advertising and salesroom fees. The purchaser shall also pay the auctioneer's fee of $20 on each num- bered lot, except on sales of property producing less than $1,000, when the fee shall not be less than $10 on each lot. All legal sales shall be at the legal rate, viz: $15 auction fee and $2 salesroom fee, to be paid by the purchaser. The auctioneer shall be entitled to his commission on any real estate advertised by him and sold by the owner previous to the day of sale, the same as if sold at auction. Form 3.— Schedule of Fees, Charges and Commissions. Brooklyn, New York. 2 (a) Appraisals. Lots 25 x 100 feet or less, plot of one to 3 lots $15 Each additional lot up to 10 lots, additional $ 5 Over 10 lots, by special arrangement. Private Houses, 25~x 100 feet or less $15 Each additional lot or fraction thereof, additional $ 5 Tenements and Flats, 25 x 100 feel or less $20 Each additional lot or fraction thereof, additional $10 Elevator Apartments, 25 x 100 toot Each additional lot or fraction thereof $10 Loft Buildings, Factories, Stables, 25x100 feel Each additional lot or fraction thereof, additional $10 Office Buildings, Hotels. Apartmenl Hotels, Hnsiness Build- ings, rate by special arrangement. i The fees and commiBBlons given In this Bchednle r.. r auctioning real Mtate nr<- those adopted by the Real Ratate Anctloneers' A f the City of New yorl *The rates riven in this BCbednle are thos lopted by Hie Brooklyn Board »r Seal Estate Brokers. 382 SCHEDULES AND FORMS. (b) Sales. City Property within old limits, on price obtained 1 % No commission of less than $100 to be charged unless specially agreed upon. City Property outside limits of old city lines (or as may be agreed upon) 2%% Country Property (or as may be agreed upon) 2^% (c) Leases. One year 2%% One to five years on the first year's rent 2%% Each additional year 1 %. Country Property, one year (or as may be agreed upon for term leases) 5 % Form 4.— Schedule of Salesroom Fees and Commissions at Auctions. Brooklyn, New York. 1 (a) Exchange Fees. Knockdown on real estate; to auctioneers renting stands... $ 2 Knockdown on real estate; to auctioneers not renting stands. $ 6 Knockdown on all sales of real estate by order of the court . . $ 2 Auctioneers' stands terms per annum, from May 1, payable in advance quarterly $100 (b) Commission on Auction Sales. The commission on auction sales of real estate shall be as follows, viz. : On New York and Brooklyn property, Va of 1%, and on country property, 1%, to be paid by the seller, in addition to the expense of maps, advertis- ing, and salesroom fees. The purchaser shall also pay the auctioneer's fee of not less than $15, except on sales of property producing less than $1,000, when the fee shall not be less than $10 on each lot. All legal sales shall be at the legal rates, viz: $15 auction fee and $2 salesroom fees, to be paid by the purchaser. Form 5.— Rental and Management Charges. Chicago, Illinois. 2 (a) By-laws. Section I. For negotiating leases for business and residence property where rents are not collected by the agent, and where buildings are already erected, but not including ground leases. Rule 1. Where Term is Six Months or Less. Where the term of the lease is six (6) months or less, charge seven per cent. (7%) on an amount equal to six (6) months' rental. (See Rule 3.) 1 The fees and commissions given in this schedule are those adopted by the Brook- lyn Real Estate Exchange. - The fees, charges and commissions of Forms 5-8 are taken from Article XII of the By-laws of the Chicago Real Estate Board, Sections I-VII, as revised to 1910. brokers' rules, schedules of fees, etc. 383 Rule 2. Where Term is More Than Six Months and Does Not Exceed Two Years. Where the term is more than six (6) months and does not exceed two (2) years, charge five per cent. (5%) on an amount equal to one year's rental. (See Rule 3.) Rule 3. If Monthly Rentals Are Not Uniform. If the monthly ventals are not uniform throughout the entire term of any lease coming under the provisions of Rules 1 and 2, the average monthly rental for the actual period of the lease shall be used as the basis for computation. Rule 4. Where Term Exceeds Two Years. Where a term exceeds two (2) years use as a basis charge, five per cent. (5%) and add for each six (6) months or fraction thereof over two (2) years, one-half (%) of one per cent. (1%), which rate shall be figured on one (1) average year's rental of the entire term. Rule 5. What to Charge if Lease Calls for a Net Rental. In figuring commissions to be charged on leases where the rental to be re- ceived by the Lessor is net, that is to say, where the Lessee agrees to pay taxes and fire insurance premiums, in addition to the rental named in the lease, the annual rental upon which to compute commissions shall be the net rental plus the amount of the annual taxes and estimated fire insurance premiums; the intention being to make the charge on the same basis as if the Lessor paid same and made the lease on the usual gross basis. How to Estimate Taxes and Insurance Premiums Where Lease Calls for Net Rental. As it will be impossible to correctly judge what the future taxes and insurance premiums will be during the term of a lease, the amount of the taxes last paid, or to be paid (if possible of being ascertained) on the property, shall be used as a basis for computa- tion. As such leases obviously state the amount of fire insurance to be carried on the property at the expense of the Lessee, and an approximate insurance rate, contemplating the tenant in possession, can easily be ob- tained from the Underwriters as to the insurance rate at the time the lease is made, the same shall be used as a basis for computation. Rule 6. When Lease Contains Privilege of Renewal. When the lease gives the Lessee a privilege of renewal, the charge shall be made for the actual term of the lease. If the Lessee later avails himself of the priv- ilege of renewal, whether strictly according to the terms expressed in the lease or not, the agent shall also be entitled to a commission on the ex- tended period. This additional commission shall be the difference between the amount of commission due for the entire term, including the extended period, and the amount of commission previously paid. The additional commission shall be paid the agent at the time of renewal. Rule 7. Where Renewal of Lease is Negotiated by Agent. Where renewals of leases are negotiated and the ageni docs not collect the rent, he shall charge the regular rates prescribed in this Section, the same as if the leases were negotiated with new tenants. Rule 8. Minimum Charge for Leasing Residence Property. The minimum charge to be made in any case for leasing residence property shall be Ten Dollars ($10). Rule 9. Where Lease Contains Option to Purchase. Should there be a clause in the lease giving the Lessee an option to purchase the property demised, whether or not the purchase is mad.' exactly " !l the terms stipu- lated in the lease, the owner shall pay the ageni who negotiated the lease two and one half per cent. (2%%) on the purchase price, to be paid when the sale is closed. (See Rule 35.) 384 SCHEDULES AND FORMS. (b) By-laws. Section II. Charges for negotiating leases which contemplate the erection of new buildings. Rule 10. Where Lease Contemplates Erection op New Building. The charge for negotiating leases which contemplate the erection of a building for a tenant, shall be two and one-half per cent. (2%%) on the value of the land as calculated in the making of the lease, and two and one- half per cent. (2%%) on the cost of the proposed building and appurte- nances. Charges for procuring tenants under the conditions mentioned in the foregoing Sections 1 and 2 are to be made at the rates stipulated, unless there shall have been a previous agreement between the owner and the agent for the collection of rent. (c) By-laws. Section III. Charges for management of property where agent collects the rent, makes leases, repairs, etc. Rule 11. Charges for Store, Loft, Office, Residence or Other Property. For renting and collecting rents regardless of the character, use or location of the property, charge five per cent. (5%) on collections, unless special or extraordinary services are required, when an additional charge may be made which will be commensurate with the service ren- dered. Rule 12. For office and residence property, wherever located, charge five per cent. (5%) on collections. Rule 13. Charge on Disbursements. In the management of prop- erty under this Section the agent shall be entitled to charge on disburse- ments as follows, to wit: On amounts paid out for taxes on improved prop- erty, one per cent. (1%) and on unimproved property two and one-half per cent. (2y 2 %), no charge to be less than One Dollar ($1). Members shall have the right to charge for special services not contemplated under ordi- nary agency. Rule 14. For negotiating new leases and for the renewals of old leases the charge shall be in accordance with the circumstances and services performed, and shall be in addition to the amount expended for advertising. Rule 15. When Collection of Rents is Withdrawn. Where the collection of rents on property is withdrawn from an agent, such agent shall be entitled to charge for the unexpired term of any leases he may have made or renewed during his agency, at the rates specified in Section 1 hereof. Rule 16. Agents May Take Management on Other Basis. Agents may take the management of buildings and charge the regular Board rates for making new leases as prescribed in Sections 1 and 2 hereof, and in their discretion reduce the charge hereinbefore provided in this Section for rent- ing and collecting. This policy is recommended to members for the reason that it places them in position to pay commissions to other brokers who may assist them in making leases. Rule 17. For the Transfer or Assignment of Leases. For trans- ferring or assigning leases the charge shall be in proportion to the service rendered, but in no event shall same be loss than Five Dollars ($5) for leases on residence property and Fifteen Dollars ($15) for leases on busi- ness property. brokers' rules, schedules of fees, etc. 385 Form 6.— Charges for Ground Leases. Chicago, Illinois. By-laws. Section IV. The following charges shall be made for ground leases, whether the agent is managing and collecting rents on the property at the time of making lease or not. Rule 18. Where the Term is Seven Years or Less. For making an original lease, or a sub-lease thereof, where the term of lease is seven (7) years or less, charge in accordance with Section 1 of this Article. Rule 19. Where the Term is Over 7 and Does Not Exceed 15 Years. For making an original lease, or a sub-lease thereof, where the term of lease is over seven (7) and does not exceed fifteen (15) years, charge on the total rent for the term two per cent. (2%). Rule 20. Where Term Exceeds 15 Years. For making an original lease, or a sub-lease thereof, where the term of lease exceeds fifteen (15) years, charge on the value of the ground as determined by capitalizing the annual ground rental on a four per cent. (4%) basis, two and one-half per cent. (2%%). Provision (A) of Rule 20. If Annual Ground Rent is Not Uni- form. If the annual ground rental during the entire term of the lease ia not uniform, the charge shall be made on the value of the land as deter- mined by the average annual ground rental capitalized as aforesaid. Provision (B) of Rule 20. If Lease Contains Provision for Re- appraisement. If the lease contains a clause providing for reappraisement of the ground by appraisers during the term of the lease, the average an- nual rental between the date of lease and the date set for the first appraise- ment shall be taken as the basis on which to compute the total rental for the entire term. Rule 21. If Other Consideration is Paid by Lessee in Addition to Rent. In any case, if cash or other consideration is paid in addition to the ground rent, the amount of such cash, or value of such consideration, shall be added to and become a part of the capitalized value on which the charge shall be figured. Form 7.— Commissions on Sales. Chicago, Illinois. By-laws. Section V. Charges for making sales of Real Estate. Rule 22. On a sale of $2,000 or less, 5%, but no charge shall be less than $25. Rule 23. On a sale over $2,000 up to and including $3,000 $120 Rule 24. On a sale over $3,000 up to and including $4,000 1 l'» Rule 25. On a sale over $4,000 up to ami including $5,000 160 Rule 26. On a sale over $5,000 up to and including $6,000 180 Rule 27. On a sale over $6,000 up to and including $7,000 200 Rule 28. On a sale <.vc, $7,000 up to and including $8,000 220 Rule 29. On a sale over $8,000 up to and including $9,000 240 Rule 30. On a sale over $9,000 up to and including $10,000 250 Rule 31. On a sale exc ling $10,000 2 1/ L .% The above schedule docs not apply to the handling of subdivisions where the charge shall lie a matter of contract 3S6 SCHEDULES AND FORMS. Rule 32. Selling Acre and Farm Property. In selling or exchang- ing acre property, outside of Cook County, or farm lands located in said County, the charge shall be five per cent. (5%). Rule 33. Selling Leaseholds. For selling Leaseholds of buildings, or parts thereof, charge for the unexpired term of the lease the same rates as are provided in Section I 1 , as if a new lease were made, plus 20 per cent. of the bonus. For selling Ground Leases and Improvements, charge 4 per cent, on the amount of the sale price of the leasehold .interest and improvements, plus 1% per cent, on the value of the ground as determined by capitalizing on a 4 per cent, basis the annual ground rental being paid at the time of sale. Rule 34. Exchanges. In case of exchanges of property, a full com- mission, based upon the sale price, shall be paid by each party, the same as if a sale of each property had been made. Rule 35. What Shall Constitute Sale Price. All charges herein provided for the sale or exchange of real estate and the sale of leaseholds and buildings, shall be based upon the sale price, meaning thereby that if the sale is made subject to a mortgage or mortgages the sale price shall be construed to mean the price of the equity, plus the encumbrances. Form 8.— Loan Charges and Valuation Fees. Chicago, Illinois. (a) By-laws. Section VI. Rule 36. Real Estate Loans. On Real Estate Loans the mortgagor shall pay two and one-half per cent. (2%%) on the amount of the loan, and in addition thereto the attorney 's fees for the examination of title, Re- corder 's fees for recording the necessary loan papers, and the cost of Guaranty Policy, and of continuation of the Abstract of Title brought down to include the record of the deed securing the loan. Rule 37. Renewal of Loans. For renewal of loans the mortgagor shall pay at the same rate as provided in the preceding paragraph of this Section. (b) By-laws. Section VII. For making valuations on real estate, members shall not charge less than the following amounts: On amounts not exceeding $10,000, charge $25. On amounts over $10,000 and not exceeding $30,000, charge $25 on the first $10,000 and $2 per thousand on excess, up to and including $30,000. On all amounts over $30,000 and not exceeding $200,000, $1 per thou- sand on excess over $30,000 with a further charge of 75 cents per thousand on amounts over $200,000. The above are the minimum fees to be charged for ordinary valuation services, but where a member is called upon to make a special valuation he shall charge according to the service rendered. 1 See Form 5 supra. brokers' rules, schedules of fees, etc. 387 Form 9.— Brokers' Rules, Fees, Charges and Commis- sions. Cook County, Illinois. 1 Rules and Regulations. The members of the Cook County Real Estate Board are requested not to advertise or offer to sell or loan money on real estate without commis- sion. All applicants for Active Membership in the Cook County Real Estate Board shall be regular licensed brokers. No member shall solicit business from owners represented by other members of the Cook County Real Estate Board, by offering less than Real Estate Board rates of commission, rebates or other money inducements. It is the duty of a member having a purchaser or applicant for the purchase, lease or loan of premises represented by another member under authorization of the owner, to communicate with such member whose agency is known or ascertained while negotiations are in progress, and negotiate the sale, lease or loan through such agent member, and the duty is reciprocal on the part of the member having the agency of the property to negotiate with a member bringing a purchaser or applicant for lease or loan, and in either case to make satisfactory arrangements for division of commissions. The following resolution was passed by the members of the Cook County Real Estate Board at their meeting held November 10, 1908: "Resolved: That it is the sense of the Cook County Real Estate Board that the best results in selling Chicago real estate are obtained by placing the sale exclusively with one broker, and the Members of this Board stand pledged to render each other active assistance in selling property listed exclusively with any member of this Board." Schedule of Commissions and Charges. (a) Commissions for Making Sales of Real Estate in Cook County, III. (1) On a sale of $500 or less, $25. (2) On a sale of $500 to $2,000, 5% of sale price. (3) On a sale Over $2,000 up to and including $ 3,000 $120 Over $3,000 up to and including $ 4,000 $140 Over $4,000 up to and including $ 5,000 $160 Over $5,000 up to and including $ 6,000 *' S() Over $6,000 up to and including $ 7,000 *-<| Over $7,000 up to and including $ 8,000 $220 Over $8,000 up to and including $ 9,000 $240 Over $9,000 up to and including $10,000 $2o0 (4) On a sale exceeding $10,000, 2%%. The commission charged shall be upon the total sale price, and not upon the owner's equity. . . (5) SUBDIVISION. On the sale and management ol subdivision pi erty, where the owner does the advertising and jays such general expenses as may be necessarv for placing the property upon the market, the charge for selling lots shall be not less than 5%. Where the collections ol the i These rules, schedules of commissions and charges for handling real estate were adopted by the Cook County (Illinois) Real Estate Board, October 12, I 388 SCHEDULES AND FORMS. contracts are left with the agent, a collection fee of not less than 3% shall he charged. (6) Lands. For selling land or other real estate located outside of Cook County, not less than 5%. (b) Net Prices. When an owner agrees with an agent in writing to offer property for sale at a price net of commissions to the broker, it is understood that all sums secured over and above said price by or through said broker during the time that said price is given, shall be paid over to said agent as pay- ment in full for commissions and services rendered. (c) Exchanges. (1) In the case of exchanges of property, a full commission shall be paid by each party, based upon the consideration for the respective pieces of property so exchanged, the same as if a sale had been made, in accordance with the rates established herein. (2) Exchanging lands or other real estate located outside of Cook County, not less than 5%. (d) Leaseholds. (1) Selling or Loans. The commission for selling leaseholds or making loans on leaseholds shall be 1%% in addition to the present rate established for the sale of or loans on real estate in Cook County. (2) Exchanging. For exchanges of leaseholds in or out of Cook County, 5%. (e) Fees for Valuation. On all amounts up to $15,000, $25. On amounts from $15,000 to $100,000 the fee shall be $25 on the first $15,000, and $1 per thousand on excess up to $100,000, with a further charge of fifty cents per thousand on amounts over $100,000. (f) Place of Closing Sale. All sales shall be closed at the office of the agent representing the owner of the property. (g) Management and Collection of Eents. (1) For negotiating and making leases or for the renewal of old leases, in addition to the amount expended for advertising, the charge shall be in accordance with the circumstances and service performed, the minimum charge to be $3. The owner is to pay for all advertising connected with renting the property. (2) For renting and collecting on buildings used as stores and lofts when occupied by one tenant, and the rents exceed $1,000 per annum, not less than 2y 2 %. (3) Where annual rental is less than $1,000, 5%. (4) When occupied by more than one tenant, 5%. (5) Office and residence property, 5%. (6) Commissions are to be charged on the total rents collected. (7) It is understood that when the collection of rents on property is not left with the agent for a full year, he shall be entitled to charge for any lease he may have made or renewed, at the rate specified herein "for negotiating and making leases where rents are not collected by agent. ' ' (h) For Disbursements. (1) In the management of property the agent shall be paid on dis- bursement for janitor service, coal, repairs and all expenses (except insur- brokers' rules, schedules of fees, etc. 389 ance, taxes and interest) 2%%. The above charge shall not be made when an agent is receiving 5% for collection of rents. (i) For Payment of Taxes. (1) On unimproved property, on amount of taxes paid, 2%%. On improved property, on amount paid, 1%. No charge to be made loss than $1. For preparing affidavits, drawing leases, deeds or other documents, a charge of not less than $3 shall be made. (j) For Negotiating and Making Leases When Kents Are Not Col- lected by Agent. (1) Stores, business, residence and flat property, lease not exceeding one year, charge on amount of the yearly rental of 5%. (2) Where the term exceeds one year, add to the foregoing 1% of the rental for each additional year. (3) Where the term is less than twelve months and more than six months, charge the same as if the lease had been made for one year. Where the term is six months or less, charge 5% on an amount equal to six months' rental at the rate at which the lease is made. (4) The minimum charge to be made in any case for leasing stores, residence or flat property, $10. (k) Ground Leases. (5) Ground lease, term of fifteen years or less, on total rent covered by lease, 2%%. Where property is subject to re-appraisal during the life of lease, the charge is to be computed for the full term, on basis of the average rental for the first five years. (6) Ground leases exceeding fifteen years, on the appraised value of property, at date of making lease, 2%%. If more than one appraisal, or if an agreed increase of rents at stated periods without appraisal is men tioned in the lease, then said increase is to be treated as a revaluation of the property, and the percentage is to be figured on an average of said appraised value. (7) Should there be a clause in the lease giving the lessee an option to purchase the property, and he should avail himself of said option, the owner is to pay the agent 2%% on the purchase price paid, when sale is closed. (8) Where the tenant has privilege for "renewal" expressed in leas.', it is to be understood that the owner of property shall pay the agenl making such lease a commission for said renewal at the same rate as though it was a new lease. This commission is to be paid at the time of the renewal. (9) Where owner erects building: The rate of commission tor ne- gotiating leases where owner erects building or buildings, tor ;, tenant, shall be 2VL>% on the value of the land, and 2V>% on the cost of the im provement. " Charges for procuring tenants are to be made at the foregoing rates, unless there shall have been a previous agreement with the agent that he shall collect the rent. (1) Transferring Leases. For the transferring of leases on any premises, from one tenant Bab- letting to another, a rale of 2M>% of the total balan lue on Buch lines pired lease shall be charged to the tenant subletting, with a minimum charge of $3. (m) Real Estate Loans. (1) On loans of $1,000 or more on improved store, (hit or residence property, not less than L' '■'.':; on amount of loan, and in addition thereto attorney's fees for examination of title, fees tor extra services rendered by attorney or broker in matter of completing loan; recorder's fee tor re 390 SCHEDULES AND FORMS. cording the necessary documents, and the cost of a complete abstract of title brought down to include the deed securing the loan, or a guarantee policy in lieu of abstract continuation. (2) On loans below $1,000 on improved store, flat or residence prop- erty, from 2\U% to 5% on amount of loan; the minimum commission to be $1.1. (3) On loans on unimproved property, 5% on amount of loan; the minimum commission to be $20. (4) On building loans of $1,000 or more, 2M>% to 3%% on amount of loan, and a reasonable fee for extra service. (5) On building loans below $1,000, 3% to 5% and a reasonable fee for extra service; the minimum commission to be $25. (6) On loans outside of Cook County, or outside of the State of Illi- nois, 5% on amounts of $1,000 or more, and from 5% to 7% on amounts below $1,000; the minimum commission to be $25. (7) On loans on theatres, churches, factories, livery stables, storage and warehouses and other properties, not specifically classified, from 2 1 />% to 5%. (8) The commission for renewals of all loans shall be at the same rate as when loan was originally made. (9) The rate of discount for purchase of real estate mortgage paper to be the same as the rate established for making new loans. (10) Commission to brokers placing loans with other brokers in no case over 1% on amount of loan. (n) Buyer's Agent. Where a broker is employed to purchase real estate, he shall receive from the party so employing him the same commission on the amount of the purchase as though he were employed by the seller in the sale of said premises. Where an agent represents a tenant or lessee for the purpose of leasing any premises, he shall be entitled to the same commission or charges from said tenant or lessee as though he represented the owner or lessor in the leasing of said premises. (o) Auction Sales. For the sale of real estate at auction, the same commissions shall be charged as herein provided for the making of sales of real estate in or out- side of Cook County, and in addition thereto the owner to pay all expenses of advertising and conducting the auction sale. Commission fee to be paid on all property at the time of sale. When property is advertised for sale at auction and is sold by the owner previous to the day of sale, or thirty days thereafter, the agent shall never- theless be entitled to his commisssion. (p) Expert Testimony. A minimum fee of $25 shall be charged. For attendance at court, a fee of $10 to $100 per day shall be charged, payable in advance. (q) Salesmen. Any member of the Cook County Real Estate Board employing a sales- man, shall request a reference from the former employer. When a salesman is under contract or indebted to any other member of the Cook County Real Estate Board, such salesman shall not be accepted or employed until an offer has been made by him to adjust his differences to the satisfaction of said other member. It is understood that where a salesman is employed on "a commission basis ' ' that all sums advanced to said salesman shall be charged against all commissions that may be earned by him, and in the event of his resignation brokers' rules, schedules of fees, etc. 391 or discharge, all such sums charged to him shall immediately become due and payable. Where a salesman is employed on "a guarantee basis" and has failed to earn a sum sufficient to pay the amount paid to him, in the event of his resignation or discharge, all such sums paid to said salesman shall be con- sidered as salary for services. When two or more salesmen are employed upon any one particular deal, the commission shall be credited as follows: Salesman representing the purchaser shall be credited with an interest in 50% of the total commission. Salesman representing the seller shall be credited with an interest in 50% of the total commission. Where a salesman is employed on a commission basis, he should be allowed a listing fee for all property listed by him, in the event that same is sold within six months from date of listing by said salesman, through the office he is connected with (with the understanding that his information and particulars were of use in effecting a sale). Such listing fee shall be not more than 5% of the sale commission re- ceived. 10% of the sale commission received should be allowed if property is listed exclusively and the sale is made through the office he is connected with. Sale to be made during the term of exclusive agency. The 5% and 10% credit, however, to be allowed and earned only in the event that the salesman does not effect the sale nor benefits in any other way in sale commissions. When a salesman resigns or is discharged by the office he has been associated with, all previous or pending business shall remain the property of said office. (r) Forms of Contracts, Etc. Forms of contracts and other approved papers shall be prepared under the direction of the Directors, and be offered for sale to all members, who will be requested to use the same in conducting their business. 1 (s) Deposits, Earnest Money and Escrows. On the sale or lease of real estate a deposit of 5% to 10% of the con- sideration shall be deposited by the purchaser at the time of Bigning and delivering of the contract, and same shall be held in escrow by the agent representing the owner. In case a deposit is forfeited by the purchaser the whole thereof, except the commission of the agenl negotiating the sale or lease, together with the expense connected therewith, shall belong to and be paid over to the owner of the property. In the event that the earnest money in contrad is deposited with other than the agent representing the owner, all charges for making said escrow shall be paid for by the party requesting the escrow. (t) Divisions of Commissions. When two brokers are interested in a sale, the commission shall bo divided as follows: 50% to the broker representing the purchaser. 50% to the broker representing the seller. When two brokers are interested in an Exchange, the Commission shall be divided as follows: Each broker to receive 509J of the total commission received from both sides of the exchange. When two or more brokers are interested in one end of a sale , change, the brokers representing that end shall divide 5095 of the Com mission received between such two or more brokers. i See Forms 18, 37 infra. 392 SCHEDULES AND FORMS. Form 10.— Schedule of Fees, Charges and Commissions. Philadelphia, Pa. 1 (a) Commissions on Sales. Improved property in the City of Philadelphia 1% Unimproved property 2% (b) Mortgages. Obtaining first mortgages 1% Obtaining second mortgages, amounts fixed by agreement. (c) Appkaisals. The fees for appraising property are generally a matter of agreement between the parties, or if it is a matter which concerns the Court, the fee is fixed by the Judge. Form 11.— Schedule of Fees, Charges and Commissions. St. Louis, Missouri. 2 (a) Commissions and Charges. In the absence of an agreement to the contrary between the parties concerned, the following schedule of commissions and charges shall obtain with respect to all transactions between members made upon the floor of the Exchange. Sec. 1. On private purchases and sales of real estate, where the amount involved is $1,000 or less, $25; where the amount exceeds $1,000, 2 1 / 4 per cent. Sec. 2. On auction sales the seller to pay 2% per cent, and in addition thereto all expenses of conducting the sale, except the auctioneer's fee. Commissions to be paid on all property knocked down at the sale. Where property is bought by an agent at auction sale for a client, $10 where amount involved is $2,000 or less; % per cent, where amount involved is over $2,000 and under $10,000, and x /± of 1 per cent, where amount involved exceeds $10,000. (b) Loans. Sec. 3. On all loans of $1,000 or less, a commission of $25 shall be paid by the borrower, and on all loans of more than $1,000, 2% per cent. If an agent shall make an application for a loan which shall be accepted, the borrower shall be liable for the foregoing commissions whether he shall in fact accept the loan or not. (c) Leaseholds. Sec. 4. On a leasehold from thirty to ninety-nine years, 2V£ per cent, on valuation of property; from twenty to thirty years, 2 per cent.; from ten to twenty years, 1% per cent.; from one to ten years, 1 per cent, of gross rental ; on annual leases for $2,500 per annum or less, $25. The value of a leasehold is to be determined by capitalizing the annual rental upon a basis of 4 1 / 4 per cent. 1 This information is supplied by Mr, Frederick M. Pile, a member of the Board of Directors of the Philadelphia Real Estate Brokers' Association. 2 From Article VI of the By-laws of the St. Louis Real Estate Exchange. , t BROKERS RULES. SCHEDULES OF FEES, ETC. 393 (d) Collection of Eents. Sec. 5. Where monthly rent of one tenant is less than $100, 5 per cent.; if in excess of $100, 3 per cent. (e) Appraisement. Sec. 6. Where property appraised at $1,000 or less, $10; if over $1,000 and less than $10,000, 1 per cent., and % per cent, on every additional $1,000 up to $100,000; and % of 1 per cent, on every thousand in excess of $100,000. Form 12.— Rules and Regulations of the St. Louis Real Estate Exchange. (a) Auction Eoom Fees — Ordinary Sales — Charges for Use of Auction Eoom. Second. — Knockdown on real estate, when the aggregate amount is less than $5,000, $5. Between the sums of $5,000 and $20,000, $10. All above $20,000, 50 cents for each $1,000 in excess. Commissions on sales of real estate at auction in this Exchange shall be the same as adopted in the by-laws. When property is advertised for sale at auction and is sold by the owner previous to the day of sale, the agent shall nevertheless be entitled to his commission. (b) Judicial Sales. Fourth. — All judicial, sheriff and trustee's sales may be held on the floor of the Exchange free of charge, and in such instances the same facil- ities for selling and posting notices shall be accorded to non-members as to members. (c) Auction Sales. Fifth. — No auctioneer shall raise a bid, and he shall not countenance any fictitious bidding, or by-bidding, or any practice calculated to deceive bidders at auction sales, or to impose a fictitious value on property offered for sale. Sixth. — Any auctioneer violating the above rule, and the persons repre senting him, shall be liable to expulsion or suspension of privileges. Seventh. — When property is offered at auction under Bpecial conditions, announcement of the same must be made before the sale by the agenl or auctioneer. Form 13.— Schedule of Fees, Charges and Commissions. Boston, Massachusetts. 1 (a) Sale or Purchase. Boston Proper— $10,000 or less -"•-•% Over $10,000 and up to $30,000, 2%% on l Schedule <>r rates adopted April 14, 1800 by the Board "f Director* of the Real Estate Exchange and Auction Board (Boston), as amended March 14, 1892; Mai 1908; octr rates adopted by thai Board. CHAPTER XXXIX. FORMS OF CONTRACTS FOR SALE OF REAL ESTATE. 1 Form 17.— Contract of Sale. New York City. CONTRACT OF SALE. Agreement, made and dated October 1st, 1910, between Executive Eealty Company, a corporation incorporated under the laws of the State of New York, hereinafter described as the seller, and Wilmot R. Wetmore, of the City of Boston, State of Massachusetts, hereinafter described as the purchaser; Witnesseth: That in consideration of the sum of Twenty-five Thou- sand, Six Hundred Dollars ($25,600) to be fully paid as hereinafter men- tioned, the seller hereby agrees to sell and convey, and the purchaser hereby agrees to purchase, All that certain plot, piece or parcel of land, with the buildings and improvements thereon erected, situate, lying and being in the Borough of Manhattan, City, County and State of New York, known as No. 901-903 Grant Avenue, and bounded and described as follows: Be- ginning at a point on the Northerly side of Grant Avenue distant seventy- five (75) feet Easterly from the corner formed by the intersection of the Northerly side of Grant Avenue with the Easterly side of Madison Street, and running thence Northerly, parallel with Madison Street and part of the distance through a party wall, one hundred (100) feet; thence Easterly and parallel with Grant Avenue, fifty (50) feet; thence Southerly and again parallel with Madison Street and part of the distance through another party wall, one hundred (100) feet to the Northerly side of Grant Avenue, and thence Westerly and along the Northerly side of Grant Avenue, fifty (50) feet to the point or place of beginning; Together with all the right, title and interest of the seller of, in and to the street or avenue in front of and adjacent to said premises to the centre line thereof; Subject to covenants and restrictions, and railroad consents, if any; and also subject to monthly tenancies and any state of facts an accurate survey would show. The price is Twenty-five Thousand, Six Hundred Dollars ($25,600), payable as follows : Six Hundred Dollars ($600) on the signing of this contract, the receipt of which is hereby acknowledged ; Five Thousand Dollars ($5,000) in cash or certified cheek on the de- livery of the deed as hereinafter provided; Thirteen Thousand Dollars ($13,000) by the purchaser taking said prem- ises subject to a mortgage for that amount, now a lien on said premises, the principal of which mortgage became due December 1, 1909, and bears in- terest at five per cent, payable May 1st and November 1st of each year; i See Chs. XXXVI and XXXVII, supra. 398 CONTRACTS FOR SALE OF REAL ESTATE. 300 Seven Thousand Dollars ($7,000) by the purchaser (or his assigns) executing and delivering to the seller a bond for that amount, and also a purchase money mortgage for like amount, to accompany said bond, the principal of which shall become due and payable, Five Hundred Dollars ($500) on each interest day for five successive times, and the balance of principal, namely, Four Thousand, Five Hundred Dollars ($4,500), shall become due and payable on January 1, 1914, the unpaid principal to hear interest at six per cent, per annum, payable January 1 ami July 1 of each year; and which mortgage is to contain the usual ten days' interest and in- stalment clauses, and twenty days' tax and assessment clauses, insurance, warranty and receiver's clauses, and such other clauses as are usually in- serted in second mortgages drawn by the attorney for the seller, which 'bond and mortgage shall be drawn by the attorney for the seller, the cost of drawing same, and of recording the mortgage and any recording tax there- on, to be paid by the purchaser (or his assigns).' The deed shall be delivered upon the receipt of said payments, at the office of Fred L. Gross at No. 189 Montague Street, Brooklyn, on Decem- ber 1, 1910, at 11 A. M. Rents, interest on mortgages, and insurance premiums, if any, are to be adjusted, apportioned and allowed up to the day of taking title (or day fixed for taking title). The Seller Agrees that Friday & Lehmann are the brokers who brought about this sale and agrees to pay them the sum of Three Hundred Dollars ($300) brokers' commission therefor. The Seller Further Agrees and hereby warrants that the sewer, gas and water are in the streets adjoining said premises and properly connected with said premises, and that there are no assessments, instalment or other- wise, against said premises. The Seller Further Agrees that at the time herein fixed for closing of title, it will produce and deliver to the purchaser certificates of the Tene- ment House Department of The City of New York showing that the build- ings and improvements on said premises have been inspected, passed and approved by said department, and also certifying to the right to have said premises occupied, and also proper proof that said buildings have been passed by the Building Department of The City of New York. It is Agreed that said premises are to be conveyed tree and clear of all violations of the Tenement House Department of The City of New York. This sale covers all right, title and interest of the seller, of, in and to any land lying in the bed of any street, road or avenue, opened or proposed, in front of or adjoining said premises, to the centre line thereof, and all right, title and interest of the seller in and to any award made or to he made in lieu thereof, and the seller will execute ami deliver to the purchaser, on closing of title, or thereafter on demand, all proper instruments tor the conveyance of such title and the assignment and collection of such award. If there be a water meter on the premises, the seller shall furnish a reading to a date not more than thirty days prior to the time herein Bel for 1 Where the property Is to t>e conveyed subject to a (lr^t mortgage, and the pur- chase money mortgage win consequently be n Becond rtgage, the latter would aacend to the position "f a first mortgage If the exlating first mortgage is paid and satisfied. The result would !"• that the owner of tin- property could n.it obtain ■■> new mortgage which would he prior in lien to the purchase money mortgage. To avoid this Bit nation, It Is quite common to insert a clause In the contract somewhat as follows: "Said mortgaRe Is to contain a clause subordinating the same to any new tlr-t mortgage of $ should the present first mortgage at any time !«• satisfied, and locb clanae shall further subordinate said mortgage t" any new first mortgage In plat f the present first mortgage, provided the excess of Buch new first mortgage above t Is paid to the holder of this second mortgag i are.. tint of the principal sum. mid that the holder ..f sueii second mortgage shall ex ite, acknowledge and deliver any Instrn merits necessary or proper t" effectuate such subordination as above agreed, provided be shall not be obliged to incur any expense In doing bo o.r. provided be sball be reim- bursed for any excuses he may Incur In doing BO, to an am t QOl exceeding $ )." 400 SCHEDULES AND FORMS. closing title and the unfixed motor charge for the intervening time shall be apportioned on the basis of such last reading. The deed shall be in proper statutory short form for record, shall con- tain the usual full covenants and warranty, and shall be duly executed and acknowledged by the seller, at the seller's expense 1 , so as to convey to the purchaser (or his assigns) the fee simple of the said premises, free from all incumbrances, except as herein stated. The seller shall give and the purchaser shall accept a title such as the New York Title Guarantee Company will approve and insure. The gas fixtures, chandeliers, shades, awnings, gas ranges, mantels, mirrors over mantels, ash cans or receptacles now in or upon said premises, and the carpets, oil cloths and mattings in the halls of the buildings on said premises, and all personal property appurtenant to or used in the operation of said premises is represented to be owned by the seller and is included in this sale. All sums paid on account of this contract, and the reasonable expense of the examination of the title to said premises are hereby made liens there- on, but such liens shall not continue after default by the purchaser under this contract. The risk of loss or damage to said premises by fire until the delivery of the deed is assumed by the seller. 1 The stipulations aforesaid are to apply to and bind the heirs, executors, administrators, successors and assigns of the respective parties. Witness the signatures and seals of the above parties. Executive Realty Company. j corporate ) By Walter Graham, ( seal ] President. In the presence of 2 Howard McFarlane. Wilmot R. Wetmore. [seal] Form 18.— Contract of Sale. Cook County, Illinois. 3 CONTRACT OF SALE. This Agreement Witnesseth, That hereinafter called the purchaser, hereby agree. . .to buy, and hereinafter called the seller, hereby agree. . .to sell at the price of dollars, and upon the terms and conditions herein specified, the following described real estate, situated in the County of Cook and State of Illinois, to wit: together with all improvements thereon, including all screens for windows or doors, storm doors, storm windows, awnings, shades, gas fixtures and globes, electric light fixtures and globes, heating apparatus, gas ranges and all other fixtures that pertain to and are a part of said premises. 1 Clauses for liquidated damages for breach of the contract are sometimes inserted. For such clauses see Forms 18-21, 25, 28. 2 Acknowledgment may tie added. An acknowledgment makes the contract admis- sible in evidence without further proof. N. Y. Code of Civil Pro., § 937. s This form is supplied by and published with the permission of the Cook County (Illinois) Real Estate Board. CONTRACTS FOR SALE OF REAL ESTATE. 401 Said premises are by feet being also known as Number and improved with On compliance by the purchaser with his part of this agreement, the seller hereby agrees to convey to him a good and merchantable title to said premises by good and sufficient warranty deed, with release of dower and homestead rights, and deliver possession of said premises free and clear of all incumbrances except the following, to which said conveyance is to be made subject, viz.: 1. General taxes levied after the year 19 ... . 2. Special taxes or assessments levied for improvements not completed at the date of this agreement. 3. The following unpaid installments of special assessments which fall due after the date of this agreement, for improvements completed, viz.: 4. The following building lines and restrictions upon the use of the premises, viz. : 5. The following party-wall agreements, viz. : 6. Existing leases, expiring as follows : 7. The following mortgages or trust deeds, viz. : on which there remains unpaid dollars. The purchaser has deposited dollars as earnest money to be applied on the purchase. "Within five days after the title has been accepted, or all material objections thereto have been cured, or after the seller has furnished a guarantee policy as permitted by this agree- ment, the purchaser, provided the said warranty deed is then ready for delivery, agrees to pay to the seller, at the office of the additional sum of dollars, and for the balance of the purchase price to make and deliver to the seller his principal note or notes, of even date with the said warranty deed, for the sum of dollars, payable with interest at the rate of per cent, per annum, payable semi- annually, and further evidenced by interest notes; said principal and in- terest notes to be secured by purchase-money trust deed on said premises to such trustee as the seller shall designate. The said notes shall be payable to the order of and endorsed by the purchaser and both principal and interest notes shall bear interest after maturity at the rate of seven per cent, per annum until paid. Said principal and interest notes and trust deed shall be in the form known as Cook County Real Estate Board forms numbers 2, 3 and 4 respectively, including the provisions there- in contained for payment in gold coin, and all the other provisions, con- ditions and stipulations, whether matters of form or of Bubstance, contained i i the printed forms of notes and trust deed above specified. The seller shall, within days from the date hereof— (a) 1 Furnish to the purchaser for examination a complete, merchant- able Abstract of Title, or merchantable copy, brought down to the date of this agreement by the Title and Trust Company, of Chicago, Illinois, whose decision OB the merchantability ..t said abstract or copy shall be final, showing good and merchantable title de ducible of record in fee simple in the seller, subject only to the exceptions hereinabove specified ; (b) 1 Furnish to the purchaser a Title Guarantee Policy, issued by the Title and Trust Company, of Chicago, Illinois, brought i Of options a, b and c, strike out two, leaving one standing. 402 SCHEDULES AND FORMS. down to the date of this agreement, guaranteeing the purchaser against loss or damage to the extent of the purchase price by reason of defects in or liens upon the seller's title, in their usual form, and subject only to the ex- ceptions hereinabove specified and to questions of survey and rights of parties in possession and mechanics' liens not shown of record; (c) 1 Furnish to the purchaser a Certificate of Title, issued by the Registrar of Titles of Cook County, Illinois, brought down to the date of this agreement, showing good and merchantable title in the seller, subject only to the exceptions hereinabove specified. If an abstract of title be furnished, the purchaser shall, within days after the delivery of said abstract, deliver to the seller, with the abstract, a written statement of his objections, if any, to the title, or a written statement to the effect that the title is satisfactory. In case there are material objections to the title, the seller shall be allowed sixty days to cure the same. If all material objections are cured within said sixty days, the purchaser shall, upon tender of said warranty deed, pay or secure the said purchase price as herein provided. If the purchaser still rejects the title, the seller may, at his option, within days after said rejection, furnish the purchaser with a guarantee policy issued by the said Title and Trust Company in their usual form, guaranteeing the purchaser against loss or damage to the extent ol the purchase price by reason of defects in or liens upon the seller's title, subject only to the exceptions hereinabove specified and to questions of sur- vey and rights of parties in possession and mechanics' liens not shown of record; and said policy shall be accepted by the purchaser as curing all material objections to the title Should the purchaser fail to perform his part of this agreement in the time and manner specified herein, the said earnest money shall, at the seller's option, be retained as liquidated damages, and thereupon this agree- ment shall become and be null and void as to the said premises. The abstract, if any, goes with the title, and shall belong to the pur- chaser on completion of the sale, subject, however, to the right of any mortgagee or trustee in possession thereof. In case of any loss or damage by fire before delivery of the warranty deed herein provided for, the purchaser may, at his option, either declare this agreement terminated, in which event his earnest money shall be refunded ; or complete the agreement according to its terms, in which event he shall be entitled to all insurance money payable to the seller by reason of such loss or damage. Such option shall be exercised by notice to the seller in writing within five days after the loss or damage has been adjusted, and the purchaser notified in writing by the seller of the true amount thereof; otherwise the purchaser shall be deemed to have elected to proceed with the agreement according to its terms. If the building should be destroyed or substantially injured before delivery of said deed by other accident or casualty than fire, the seller may restore the building at once and require performance of this agreement; otherwise the purchaser shall, at his option, be released, and his earnest monev shall be refunded. , Tl 1P warrantv deed and the purchase-money notes ami trust deed' if anv, herein provided for, shall bear the same date as this agreement, but the interest on said incumbrance and on any other incum- brance on said premises, together with the rents, water taxes and the general taxes for the year 19 , reckoning said taxes from the 1st day of April, shall be adjusted pro rata as of the date of delivery of i Of options a. b ami c, strike out two, leaving one standing. CONTRACTS FOR SALE OF REAL ESTATE. 403 said deed. If the amount of the taxes for that year is not ascertainable, it shall be assumed to be the same as for the previous year. The seller shall be entitled to his pro rata allowance for premiums on unexpired insurance, provided said insurance is placed in companies acceptable to the purchaser and to the mortgagee or trustee, and provided all policies arc delivered, properly assigned, at the time of the delivery of the said .1 1. Existing leases shall be assigned and delivered to the purchaser. All canceled notes relating to outstanding incumbrances shall be delivered to the purchaser, or, in lieu thereof, a written statement from the trustee or mortgagee to the effect that said missing notes have been paid. Time is of the essence of this agreement, and of all the conditions thereof. All covenants and agreements herein shall extend to and bind the heirs, executors, administrators and assigns of the respective parties. This agreement and the earnest money aforesaid shall be held in escrow by who shall not record the same unless, .he. .deem, .it necessary for the pro- tection of the purchaser so to do, and who shall dispose of the earnest money according to the terms hereof; but the holder of said escrow shall not be liable except for gross negligence or willful default. In Witness Whereof, the said parties have hereunto set their hands and seals this day of A. J). 19 [seal] j seal] [seal] In Consideration of the execution of the foregoing agreement by the purchaser therein named, the undersigned assents to the terms 1 hereof, and agrees to sign, acknowledge and deliver the warranty deed therein mentioned for the purpose of releasing and waiving all dower and homestead rights. [seal] [seal] The foregoing agreement was negotiated and procured for the under signed by who recognized as the broker. . . .of the undersigned in the transaction. State of Illinois ) County of Cook ) " I, in and for said County, in the State aforesaid, Do Hereby Certify, That personally known to me to be the sanir person whose name subscribed to the foregoing Contract of Sale, appeared before me this day in person, and acknowledged that . .he . signed, sealed and delivered the said Contract of Sale as . free and voluntary act, for the uses and purposes therein set forth, includ ing the release and waiver of the right of homestead. Given under my hand and seal this 'lay of 19.... notarial seal 404 SCHEDULES AND FORMS. Form 19.— Contract of Sale. Chicago, Illinois. 1 CONTEACT OF SALE. This Memorandum Witnesseth, That hereinafter called the purchaser. . . . hereby agree. . . .to purchase at the price of Dollars, the following described real estate, situate in the County of Cook, and State of lllinios, to wit : (Description here.) and hereinafter called the vendor...., agree.... to sell said premises at said price, and to convey by full Warranty Deed with release of dower, inchoate or otherwise, and homestead rights or estates to said purchaser. .. .a good and merchantable title thereto, subject to: (1) Existing leases expiring ; (2) Special assessments for im- provements not yet completed; (3) The installments not at the date hereof due of any special assessment for improvements heretofore completed; (4) Water taxes payable after ; (5) General taxes levied or assessed after the year A. D ; (6) Building lines, if any; (7) Building or liquor restrictions, if any; (8) Party wall rights or agreements, if any. Said purchaser has paid Dollars as earnest money to be applied on said purchase when consummated, and agrees to pay within days after the title has been found good and merchantable or has been accepted, or after a guarantee policy, hereinafter mentioned, has been delivered to said purchaser subject as aforesaid and as hereinafter mentioned, the further sum of Dollars, as follows, to-wit : to be secured by note or notes and mortgage or trust deed of even date with the Warranty Deed above mentioned, on said premises in the form or- dinarily used by the Chicago Title and Trust Company. The said vendor. . . .agree. . . .to furnish and deliver to a complete merchantable abstract of title or merchantable copy thereof, within a reasonable time, brought down to include the date hereof. Upon the receipt of said abstract the said purchaser. . . . shall have. . . . days thereafter in which to examine the title to said premises, and if upon such examination, objections to the title to said premises are found, then said abstract and a written statement of such objections shall be delivered to said vendor. . . .and. . . .he. . . .shall have sixty days after receiving said abstract and written statement of objections within which to cure such ob- jections, and should said objections be not cured within said sixty days, then, unless the said vendor. .. .shall (in case he deems such objections immaterial) within said sixty days furnish said purchaser with a guarantee policy in usual form, to be issued by the Chicago Title and Trust Company, guaranteeing said purchaser. .. .against any loss or damage to the extent of the purchase price, by reason of defects in or liens upon the title of said 1 Form of the Chicago Title & Trust Co. CONTEACTS FOR SALE OF REAL ESTATE. 405 vendor. . . .to said premises at the date hereof, subject only as hereinbefore stated and as follows, to-wit: (1) Rights or claims of parties in possession not shown of record and questions of survey; (2) Mechanics' liens, if any, where no notice thereof appears of record; (3) Special taxes or special assessments, if any, which have not been confirmed by a court of record; said earnest money shall be refunded and this contract shall become in- operative and be canceled, and surrendered to the vendor Should said purchaser .... fail to perform this contract on part at the time and in the manner herein specified, the earnest money shall at the option of the vendor.... be forfeited as liqui- dated damages including commissions to be paid by vendor In case of loss or damage by fire in or about any building or buildings which may be situated upon said premises, the purchaser. . . .shall have the option of accepting all money derived from the insurance for such loss or damage and to complete this contract in the manner herein specified or of declaring this contract terminated, such option to be exercised within 5 days after such loss or damage shall be adjusted and the purchaser notified in writing of the true amount thereof. Existing leases and fire insurance, if any, are to be duly assigned to the purchaser and the rents and premiums are to be adjusted pro rata as of the date of the delivery of said Warranty Deed. It is understood that no tender of the deed or of said policy shall be required but that a notice addressed to said purchaser. . . .at _ and deposited, postage prepaid, in the post office in Chi- cago to the effect that said deed is, or in case of guarantee policy, as afore- said, said deed and policy are, ready for delivery shall have all the force and effect of a tender of the same. Time is of the essence of this contract and of all the conditions thereof. This contract and the earnest money aforesaid shall be held in escrow by for the mutual benefit of the parties hereto. 1 Dated the day of , A. D., iy [seal] [seal] [seal] This Memorandum Witnesseth, That the following Agreement shall be taken to bo a part of the foregoing agreement and supplementary thereto, " After the title to the real estate hereinbefore described has been ex- amined and approved by the purchaser or his attorney, or the Chicago l itie and Trust Company has indicated in writing its willingness to issue its guarantee policy as provided in said contract, then said purchaser shall de- posit with the Chicago Title and Trust Company in escrow the balance ol the purchase price aforesaid, together with the purchase money notes and mortgage or trusl d I. if any. and the said vendor ...shall deliver to said company, all abstracts of title, leases, insurance policies, tax rec gpwajj title papers in his possession relating to Baid premises and ta warrant} Seed aforesaid, which Warranty Deed, together with said mortgage or trust deed, if any, shall be by said company forthwith placed on record and the abstracl aforesaid or the searches for guarantee _ policy ■ " ,„. broughl down to cover the date of record ol said deed a m ■ mortgage, if any, and if it shall then appear that the title passing to purchaser.... by said Warranty Deed answers the require i See Form 32 infra, " Deed uud Money." 406 SCHEDULES AND FORMS. tract, then the Chicago Title and Trust Company shall pay the purchase price and deliver the notes deposited with it hereunder to said vendor.... or to agent designated in writing, and deliver to the purchaser. .. .or agent designated in writing, the abstracts, guarantee policy, leases, tax receipts and title papers deposited with it under the terms hereof. In case the title shall have been examined and approved by the pur- chaser. . . .or attorney as herein set forth, then the title to said premises shall be assumed to be as stated in the written opinion thereon and the title subsequent to the date of such opinion shall be examined and approved by upon whose opinion the said Chicago Title and Trust Company shall act in performing its duties as escrowee hereunder. Real Estate broker 's commission of to be paid by to Escrow fee to be paid by Abstract fee to be paid by Guarantee policy premium to be paid by Recording fees to be paid as follows : In Witness Whereof, the said parties hereto have hereunto set their hands and seals this day of , A. D. 19 [seal] [seal] [seal] The following form of contract for sale of real estate provides for a title guarantee policy instead of an ab- stract of title. Form 20.— Contract of Sale. Chicago, Illinois. 1 CONTRACT OF SALE. This Memorandum Witnesseth, That hereinafter called the purchaser .... hereby agree .... to purchase at the price of Dollars, the following described real estate, situate in the County of Cook, and State of Illinois, to-wit : {Description here.) and hereinafter called the vendor...., agree.... to sell said premises at said price, and to convey by full Warranty Deed with release of dower inchoate or otherwise, and homestead rights or estates to said purchaser. ... a good and merchantable title thereto, subject to: (1) Existing leases expiring ; (2) Special assessments for improvements not yet completed; (3) The instalments not at the date hereof i Form of the Chicago Title & Trust Co. CONTRACTS FOR SALE OF REAL ESTATE. 407 due of any special assessment for improvements heretofore completed; (4) Water taxes payable after ; (5) General taxes levied or assessed alter the year A. D ; (6) Building lines, if any; (7) Building or liquor restrictions, if any; (8) Party wall rights or agreements, if any Said purchaser .... has paid Dollars as earnest money to be applied on said purchase -when consummated, and agree. ... to pay within days after the guarantee policy in substance and form hereinafter mentioned, has been delivered to saiil purchaser. . . ., the further sum of Dollars, as follows, to-wit : to be secured by note or notes and Mortgage or Trust Deed of even date with the Warranty Deed above mentioned, on said premises in the form ordinarily used by the Chicago Title and Trust Company. The said vendor. . . .agree. ... to furnish and deliver to said vendee. . . within days from the date hereof, a guarantee policy in usual form, to be issued by the Chicago Title and Trust Company, guaranteeing said purchaser. . . . against any loss or damage to the extent of the purchase price, by reason of defects in or liens upon the title of said vendor. ... to said premises at the date hereof, subject only to the matters hereinbefore stated and to the following matters, to-wit: (1) Rights or claims of parties in possession, not shown of record, and questions of survey; (2) Mechanics' liens, if any, where no notice thereof appears of record; (3) Special taxes or special assessments, if any, which have not been confirmed by a court of record ; and in case said Chicago Title and Trust Company shall be unable or un- willing to issue said guarantee policy within the time aforesaid, said earnest money shall be refunded and this contract shall become inoperative and be canceled, and surrendered to the vendor Should said purchaser. . . . fail to perform this contract on part at the time and in the manner herein specified, the earnest money shall, at the option of the vendor. . . ., be forfeited as liquidated damages includ- ing commissions to be paid by vendor In case of loss or damage by fire in or about any building or building which may be situated upon said premises, the purchaser shall have the option of accepting all money derived or to be derived from the Insurance for such loss or damage and to complete this contract in the manner herein specified, or of declaring this contract terminated, provided such option shall be exercised at any time after such loss by fire shall occur, and doI later than five days after such loss or damage shall be adjusted and the pur- chaser. . . .notified in writing of the true amount thereof. Upon the consummation of this sale, existing leases and fire insurance if anv, are to be duly assigned to the purchaser , and the rents and premiums are to be adjusted pro rata as of the date of the delivery ot said "W'i rr?in t v I )(*('< 1 . It is understood that no tender of the deed or of said policy shall bo required, but that a notice addressed to said purchaser. ... at ••••.• and depositee], postage prepaid, in the posl office in Chicago, "Illinois, to the effect that said deed and guarantee policy are ready for delivery, shall have all the fore.' and effect of : , tender ot the Time is of the essence of this contract and of all the conditions thereof. This contract and the earnest money aforesaid shall be held in escrow 408 SCHEDULES AND FORMS. by the Chicago Title and Trust Company for the mutual benefit of the parties hereto. 1 Dated the day of , A. D., 19 [seal] [seal] [seal] This Memorandum Witnesseth, That the following Agreement shall be taken to be a part of the foregoing agreement and supplementary there- to, to-wit : After the title to the real estate hereinbefore described has been ex- amined and approved by the Chicago Title and Trust Company, and it has indicated in writing its willingness to issue its guarantee policy as provided in said contract, then said purchaser shall deposit with the Chicago Title and Trust Company in escrow the balance of the purchase price afore- said, together with the purchase money, notes and mortgage or trust deed, if any, and the said vendor shall deliver to said Company all abstracts of title, leases, insurance policies, tax receipts and title papers in his pos- session relating to said premises and the warranty deed aforesaid, which warranty deed, together with said mortgage or trust deed, if any, shall be by said Company forthwith placed on record, and the searches for guarantee policy aforesaid shall be brought down to cover the date of record of said deed and trust deed or mortgage, if any, and if it shall then appear that the title passing to said purchaser. ... by said warranty deed answers the re- quirements of the foregoing contract, then the Chicago Title and Trust Company shall pay the purchase price and deliver the notes deposited with it hereunder to said vendor or to agent designated in writing, and de- liver to the purchaser or agent designated in writing, the abstracts, guarantee policy, leases, tax receipts and title papers deposited with it under the terms hereof. Real Estate broker's commission of to be paid by to Escrow fee to be paid by Guarantee policy premium to be paid by. Eecording fees to be paid as follows : In Witness Whereof, the said parties hereto have hereunto set their hands and seals this c ] ay f , A. D. 19...'.'." [seal [SEAL_ [SEAL' Form 21.— Contract of Sale. Philadelphia, Pennsyl- vania. 2 CONTRACT OF SALE. This Agreement made the day of A - D - 19 between of the first part and of the second part ; Witnesseth: That the said part of the first part agree to sell and convey to the said part of the second part, and the said part of 1 See Form ?,2 infra, " Deed and Money." 8 Supplied by Frederick M. Pile, Esq.] of the Philadelphia Bar. CONTRACTS FOR SALE OF REAL ESTATE. 409 the second part agree .... to purchase on the terms and conditions following to-wit The part. . . .of the second part further agree to pay for all muni- cipal improvements in the course of construction, at the date hereof, and for any such work commenced or completed between the date of this agreement and the time of settlement. The Gas Fixtures, Heaters, Ranges, etc., annexed to the said building are included in said sale. All Perpetual Policies of Fire Insurance to be paid for at withdrawal value and term Policies at proportionate value for unexpired term. The premises are to be conveyed clear of incumbrance, easements and restriction. Possession to be given. Taxes, Water Rent, Interest on Incumbrance (if any) Rents, etc., to be apportioned as of the date of settlement, which is to be within days from date hereof, time being of the essence of this Con- tract. The Title is to be good and marketable and such as will be insured by any responsible Title Company, at the regular rates. If the part. . . .of the second part shall fail to complete this agreement within the time specified the same shall, at the option of the part. . . .of the first part, become null and void and the sum paid on account shall be re- tained by the part. . . .of the first part as compensation for the damage and expense to which he has been put on this behalf. If for any reason a good and marketable title, such as will be insured as aforesaid, cannot be made, this agreement shall be void and the sum paid on account as above provided shall be returned by the part. ...of the first part to the part .... of the second part in lieu of all claims for damage or otherwise. In view of the injury which might result to the vendor from the record- ing of this paper, it is expressly agreed that it is not to be construed as an instrument entitled to record under the recording acts, and that it shall not under any circumstances be recorded. Without precluding the right, if any, which either party may have to obtain by personal suit against the other, either specific performam r damages, it is expressly agreed, that, until consummated by delivery of a Deed, this Agreement shall convey no title to, or interest in the property, and neither this agreement, nor notice of it, nor suit upon it shall affect the rights of third persons and such persons may, until actual delivery and re- cording of a deed for the property to the vendee in accordance with the Agreement, deal with and acquire rights in said property as if no such Agreement had been made. And it is Expressly Agreed that the said are acting as Agents only and shall not be held personally liable or re- sponsible by the Seller or the Purchaser for the fulfillment or aon-fulfill- ment of any part or portion of this Agreement of Rale. The said Parties hereby bind themselves, their h.irs. ex^mturs and administrators for the faithful performance of the above Agreement In Witness Whereof, the said Parties have hereunto set their hands and seals the dav and year first above mentioned. ' [SEAL] Sealed and Delivered I SEAL] in the presence of 410 SCHEDULES AND FORMS. Form 22.— Contract of Sale. Boston, Massachusetts. 1 CONTRACT OF SALE. Agreement made this day of 19 between Seller and Buyer. . . . ; binding each party mutually to the other and his and their respective heirs, executors and administrators. The Seller. . . .agree to sell, and the Buyer to buy, an Estate in Boston, being No on Street, bounded The Seller.... to convey, by a Quit Claim Deed, good title in fee simple to the premises, free of all liens for debts of deceased persons and incumbrances to keep the buildings insured as at present; to pay or assign said insurance, in case of loss, to the Buyer , unless the premises are restored to their present condition previous to the delivery of the Deed. . . .and to pay a com- mission of per cent, to ^ The Buyer to pay Dollars, as follows: Dollars now; Dollars on the delivery of the Deed ; and the balance by three-year note of even date with said deed bearing interest, payable half-yearly, at per cent. per annum, secured by Mortgage on said premises (Conveyancers Title In- surance Company 's form) ; failing so to do, the money paid shall be for- feited as Liquidated Damages for breach of Contract ; Rents, Interest, Taxes and Water Rates to be apportioned. The money to be paid and the papers passed at the Conveyancers Title Insurance Company's office at Twelve o 'clock noon next. Witness said Parties' hands and a common seal. Extension. This Agreement is extended until Witness our hands and common seal this day of 19...- 1 This Is the copyright form used by and supplied to the author by the Convey- ancers Title Insurance Company, Boston, Mass., and is published with the permission of that company. CONTRACTS FOR SALE OF REAL ESTATE. 411 Form 23.— Agreement for Sale of Property. Baltimore, Maryland. 1 CON.TKACT OF SALE. This Agreement is made in duplicate this day of 19 , between , Seller and Purchaser The said seller hereby sell and agree to convey, and the said purchaser hereby buy and agree to pay for, the following prop erty : {Here insert description of property and size of lot.) Being the property described in a dated and recorded among the Land Records of Baltimore in Liber. No fol The said property is in fee. The said property is leasehold, subject to a ground rent of $ per year, which is j J^etmable 16 J after ^ eaTS from the date of lease, at per cent. The said property is a ground rent which is j Redeemable ) aftor years from date of lease at per cent. (Strike out all except the kind of property intended.) The purchase price is Dollars ($ ), payable in cash on or about the Way of 19. . . . ; of the above sum there has been paid on account the sum of Dollars ($ ), which last mentioned sum is to be repaid to the purchaser in the event that the title is not satisfactory; time is of the essence of this agree ment. Possession is to be given on The property is subject to the following incumbrance: Rentals, taxes, water rent, ground rent, and other charges are to be adjusted to the day of transfer. The title is to be clear of all incumbrances and assessments, and satis- factory to the Title Guarantee and Trust Company. Witness the hands and seals of the parties hereto. [seal] j SKAl.j [ SKAl.j Witness : Note. — As soon as the contract is signed, the purchaser should insure the improvements. The signing of a contracl of sale renders void the seller's fire insurance policy; and if the improvements should be destroyed before the property is insured by the purchaser, the loss would fall on the pur chaser. Note. — If the property is in fee, the wife (if any) of the Beller should sign. i Form of Title Guarantee & Trust Co. of Baltimore, Md. 412 schedut.es and forms. Form 24.— Contract of Sale. New Jersey. (Short Form.) CONTEACT OF SALE. Agreement, made the day of , A. D., 19 .... , between the first party, and the second party, in manner following: The first party in consideration of Dollars, to duly paid, hereby agree. . . .to sell unto the second party, {Description here.) for the sum of Dollars, which the said second party hereby agree. . . .to pay the said first party, as follows : On Execution of this Agreement $ On Delivery of Deed, Cash $ Bond and Mortgage for. . . .years, @..% $ $ $ Total, $ And the said first party on receiving payments as above set forth, shall deliver to the said second party or to assigns a duly executed, full covenant and warranty deed, conveying to the fee simple of said prem- ises, free from all incumbrance; said deed to be delivered at the office of The New Jersey Title Guarantee and Trust Company, Nos. 83 and 85 Montgomery Street, Jersey City, N. J., on or before A. D., 19 , at M. In Witness Whereof, the parties to these presents have hereto set their hands and seals the day and year first above written. [seal' Sealed and Delivered in [SEAl/ the Presence of County ^^ . J ! r . Se7 ! . \ Ss ' : Be IT Rem *mbered, That on this day of A. D., 19. . . ., before me personally appeared who, I am satisfied .... the Grantor. .. .in the within Deed of Agreement named ; and I having first made known to the contents thereof, did acknowledge that signed, sealed and delivered the same as voluntary act and deed, for the uses and purposes therein expressed ; j NOTARIAL ) I SEAL ) Form 25.— Contract of Sale. New Jersey. CONTRACT OF SALE. Memorandum op Agreement, made the day of in the year of our Lord, One Thousand, Nine CONTRACTS FOR SALE OF REAL ESTATE. 413 Hundred and between of the of in the County of and State of hereafter designated the party of the First Part; and of the of in the County of and State of hereafter designated the party of the Second Part; Witxesseth: That the said party of the first part, for and in consider- ation of the sum of to be paid and satisfied as hereinafter mentioned, and also in consideration of the covenants and agreements herein contained, made and entered into by the said party of the second part, doth agree to and with the said party of the second part, that the said party of the first part, will convey to the said party of the second part, heirs and assigns, by Deed of free from all encumbrance. . . . on or before the day of Nineteen Hundred and ; all lot tract or parcel of land and premises, hereinafter particularly described, situate, lying and being in the of in the County of and State of (Description here.) And the party of the second part for heirs, executors and administrators, doth covenant, promise and agree, to and with the party of the first part, heirs, executors, administrators and assigns, that the party of the second part, will pay and satisfy or cause to be paid and satisfied, unto the party of the first part the said sum of as and for the purchase money of the foregoing described land and premises in the following manner, that is to say : And It Is Further Agreed by the parties hereto, that the said Deed shall be delivered and received at the office of , Newark, N. J., between the hours of o'clock M. and o'clock M. on the day of 19 In case of loss or damage to the property by fire before the title is passed, the party of the first part shall allow to the party of the second part the amount of such loss or damage, to be ascertained by arbitratiOD it the parties cannot agree. And for the performance of all and singular the covenants and agree- ments aforesaid, the said parties do bind themselves and their respective heirs, executors and administrators; and they hereby agree to pay, upon failure to perform the same, the sum of which they hereby fix and settle as liquidated damages therefor. In Witness Whereof, the said parties have hereunto set their hands and seals in duplicate the day and year first above mentioned. I SEAL J ] [SEAL] Signed, Sealed and Delivered in the Presence of 414 SCHEDULES AND FORMS. Form 26.— Agent's Sale Contract. Chicago, Illinois. 1 AGENT'S SALE CONTRACT. Chicago, Illinois, 19 ... . To OWNER. I Hereby Promise and Agree to purchase upon the following terms and at the price of Dollars, the real estate known as Number Chicago, improved with The legal description is {Description here.) I have paid the sum of Dollars as earnest money, which is to be held in escrow, together with this agree- ment, by You are to furnish a merchantable abstract of title or a title guarantee policy for the amount of said purchase price, covering said property and brought down to this date. If the title is good, I am to accept it promptly, and within five days after such acceptance you are to be ready to deliver a sufficient warranty deed conveying to me a good title to said premises, sub- ject to the following incumbrance, which is to be deemed a part of said purchase price, and the interest on which is to be pro-rated as of the date of delivery of said warranty deed, viz. : dollars due 19 ... . with interest at per cent, per annum ; Dollars due 19 ... . with interest at per cent, per annum. Upon delivery of such warranty deed said earnest money shall be paid to you, and I agree to pay you at the same time the further sum of dollars. The balance of dollars is to be payable with interest at the rate of per cent, per annum, due, at your option, annually or semi-annually, said deferred payment of principal and the in- stallments of interest thereon to be evidenced by notes secured by trust deed on said property, which notes and trust deed are to be delivered to you at the time of the delivery of said warranty deed. [seal] [seal] purchaser. Accepted 19 ... . [seal] owner. ' This form is supplied by and published with the permission of the Cook County (Illinois) Real Estate Board. CONTRACTS FOE SALE OF EEAL ESTATE. 415 Form 27.— Contract for Sale of Restricted Lots on In- stallment Plan. CONTRACT OF SALE. New York, 19 ... . This Agreement, made and entered into the day and year first above written, between the Executive Realty Company, a corporation incorpor- ated under the laws of the State of New York, party of the first part, and party of the second part ; WITNESSETH: The party of the first part in consideration of the sum of Dollars, to be fully paid as hereinafter mentioned, and of the covenants and agreements here- inafter set forth, agrees to sell unto the said party of the second part, and the party of the second part agrees to buy All those certain lots, pieces or parcels of land, each twenty feet in width by one hundred feet deep, situate, lying and being in Nassau County and State of New York, and which on a certain map, filed in the office of the Clerk of Nassau County, entitled ' ' Map of Idlewild Park, situate at Idlewild, Nassau County, Long Island, N. Y.," surveyed by William Williams, Civil Engineer, are known and distinguished as lots number block number And the said party of the second part in consideration of the premises agrees to pay to the party of the first part the said purchase price, as fol- lows: Dollars in cash on the signing of this agreement, and the balance thereof in monthly payments of Dollars, payable at the office of the party of the first part, on the day of each and every month thereafter until the said purchase price is fully paid. The party of the first part on receiving the purchase price as afore- said, shall at its own proper cost and expenses execute, acknowledge and deliver to the said party of the second part a general warranty deed and the usual full covenants for the conveying and assuring to him, the fee simple of the said premises free from all encumbrances, except that the said convey- ance shall be made subject to the following covenants, which shall lie taken to be real covenants running with the land and binding upon the party of the second part until January 1, 1925, when they shall cease and determine. I. The party of the second part shall or will not carry on or suffer or permit to be carried on, on any portion of said premises, any manufacturing or selling or dealing in malt or spirituous liquors, or drinks id' any kind, and will not erect or permit upon any part of said premises, any slaughter-house, smith-shop, forge, furnace, steam-engine, brass foundry, nail or other iron factory, or any manufactory of gunpowder, glue, varnish, vitriol, ink or turpentine, or for the tanning, dressing or preparing of skins, hides or leather. II. The said party of the second part shall or will not ered or permit on any portion of said premises any tent or dwelling except a private detached dwelling house for not more than two families, nor less than two Btories and an attic in height, nor of less cost than Fifteen Hundred hollars, nor with a roof of the character or description known as a flat roof, and DO house shall be erected to front on any street ezcepl on which the lots front. III. No part of any dwelling including piazzas, bay windows or steps shall be erected on any portion of said premises aearer than ten feel from the street line of the said premises, and no stable, automobile house, 416 SCHEDULES AND FORMS. summer house or greenhouse, shall be erected within sixty feet of said street. The main side walls of the dwelling house shall stand at least three feet from the side lines of the plot hereby conveyed, and no dwelling on said plot shall be constructed nearer than six feet from any other dwelling. IV. No close board fence shall be erected or maintained; and no fence or hedge exceeding four feet in height shall be maintained on any part of the plot. It is understood and agreed that the party of the first part will furnish with each deed, a title policy of the Company, of New York City, free of cost to the party of the second part, and that the said party of the first part shall pay all taxes on said premises for the years and The said party of the first part further agrees to lay cement side- walks, plant trees, and cut and grade all streets show T n on the said map. It is further understood and agreed that upon default in the payment by the party of the second part of two successive monthly payments of the purchase price under this contract, the party of the first part shall have the option forthwith to declare this contract void, otherwise the party of the second part shall pay interest at six per cent, on all deferred payments. The deed to the said premises shall be delivered at the office of the party of the first part, No New York City, when the said purchase price and interest charges, if any, shall be fully paid. And it is understood that the stipulations aforesaid are to apply to and bind the heirs, executors, administrators, successors and assigns of the re- spective parties. Witness the signatures and seals of the above parties. [seal] [seal] Signed, Sealed and Delivered in the Presence of Form 28.— Contract for Sale of Lots on Installment Plan. 1 CONTRACT OF SALE. This Agreement, made this day of A. D. 19 .... by and between of party of the first part, and of party of the second part; Witnesseth: That the said party of the first part, in consideration of the payment hereinafter mentioned and of the stipulations hereinafter set forth, agrees to sell to said party of the second part, upon the terms and conditions hereinafter set forth, the following premises situated (Description here:) And the said party of the second part agrees to purchase said premises and to pay therefor the sum of Dollars in Gold Coin of the United States of present standard weight and fineness, or its equivalent, in actual market value in lawful money of the United States, in the manner following, viz.: 1 Showing additional provisions. CONTRACTS FOE SALE OF REAL ESTATE. 417 The sum of Dollars upon the signing and delivery of these presents) receipt of which is herebv acknowledged, and the further sum of Dollars in each and every following the day of the date" hereof until said principal sum, with interest at per cent, per annum on all unpaid balances from date hereof, payable semi-annually hereafter and all taxes or other assessments made subsequent to the date hereof are fully paid. And it is mutually agreed by and between the parties hereto as follows: First— The party of the first part agrees to pay all taxes or other assess- ments becoming due, within one year from date hereof, but should title be taken within one year from date hereof then the party of the first part only pays taxes and assessments due at date of delivery of deed. Second. — That all sums of money payable to said party of first part hereunder shall, until further notice, be paid at the office of in during their regular office hours, and the receipt of said shall be sufficient discharge there- for. All payments elsewhere, to whomsoever made, shall be at the sole risk and hazard of said party of the second part Third. — That prompt performance and time are the nature and essence of this contract and each of its conditions, and therefore if default of pay- ment is made of any one of said installments of said principal sum for a period of days after it becomes due, or if said party of the second part shall fail to perform any other of the Agree- ments on part herein contained, the balance of the principal sum then remaining unpaid shall immediately become due and payable, and all rights of the party of the second part under this Agreement, and all right, title, interest and claim in and to said described premises, shall, at the option of the party of the first part, become void and of no effect; and the said party of the first part shall be released from all obligations here under, and all moneys theretofore paid thereon shall be held as liquidated damages by the party of the first part. Fourth. — That no modification of this agreement, nor waiver of any term or condition hereof, shall be of any force or effect, unless the same is in writing, signed by both of the parties hereto, and all contracts and :i«, r ree ments heretofore made by the parties hereto or their agents are merged into and superseded by this agreement; and that no waiver of the breach of any such term or condition shall be evidence of or construed as ;i waiver of any other or subsequent breach of the same or any other term or condition. Fifth. — Said party of the second part doth hereby covenant and agree to and with said party of the first part, successors, and assigns as follows : That neither said party of the second part heirs or assigns will erect or permit on any part of the herein described premises any build- ings except a detached two story frame dwelling house with peaked roof upon each plot of at least forty feel front by feel in depth that shall cost not less than $ nor shall Such building or any part thereof, except steps, piazzas or bay windows, and other usual projections be erected or maintained upon any part of said premises within feet of the line of excepting that no building for business purposes shall be allowed on any sireet or streets, excepting that part on the west side of and fronting on , but this exception does not include saloons or per mission for sale of liquors of any kind, but does allow such buildings to be erected on the line of said and said building it ere. 'ted, must be two storv frame with peaked roof and detached; nor shall any milkman's stable be built, or slaughter bouse, or any manufactory for 418 SCHEDULES AND FORMS. making gunpowder, glue, varnish, vitriol, ink or turpentine, or for the boil- ing of bones, or for the dressing, tanning, or preparing of skins, hides, or leather, or any brewery, or any building for the carrying on of any noxious or dangerous trade or business; or sell, or suffer, or allow to be sold on the premises hereby conveyed, or any part thereof, strong or spirituous liquors, or ale, beer or wine, or intoxicating liquor of any kind. Such barn or stable for horses as is appurtenant to a private residence, is hereby permitted, and such barn or stable if erected, must stand at least sixty feet from the avenue or street upon which said premises front, and not less than fifteen feet from the line of any side streets or avenues ; excepting that no stables are per- mitted on any part of the lots fronting on and in block number as shown on above mentioned map. Sixth. — Said party of the first part further agrees to grade all streets and plant suitable shade trees thereon and lay cement sidewalks in front of each lot. Seventh. — That upon the full payment of the said principal sum, with the interest as above provided, and the performance of the conditions hereof, said premises shall be conveyed to said party of the second part, by a proper Deed, containing a clause of general warranty, and the full covenants for conveying and assuring the party of the second part or to heirs or assigns, the fee simple of said premises free from all incumbrances except as hereinbefore mentioned in reference to taxes and above restrictions, together with all the right, title and interest of the party of the first part hereto, of, in and to the land lying in the Streets or Avenues in front of and adjoining said premises, to the center lines thereof, re- spectively, but reserving, however, to the party of the first part the exclusive right and privilege of giving and granting all easements, privileges and rights of way for mains of all kinds in any and all Streets or Avenues, and the party of the second part, agrees to accept said Deed as full performance by said party of the first part of his covenants and undertakings. Eighth. — The stipulations aforesaid are to apply to and bind the heirs, executors, administrators, and assigns of the respective parties. In Witness Whereof, the parties hereto have hereunto set their hands and seals the day and year first above written. [seal] [seal] Signed, Sealed and Delivered [seal] in Presence of The form which follows is an assignment of the fore- going contract. This assignment is written or printed on the back of the instrument to which it pertains. Form 29.— Assignment of Contract. Informal. ASSIGNMENT. For a good and valuable consideration to the undersigned, in hand paid, the receipt of which is hereby acknowledged, , the CONTRACTS FOR SALE OF REAL ESTATE. 41 ( .) undersigned, part. . . .of the second part to the foregoing agreement do. . . hereby grant, assign, sell, and set over unto all rights, title, interest, claim or demand in and to the within agreement, including the right to receive the deed therein mentioned in name; and the said in consideration of and by accepting this assignment, agree to the terms and conditions of said agreement, and to make all payments therein agreed to be made by the undersigned, and in all things to carry out and perform the same. This assignment is subject to the approval of the party of the first part to the within agreement. Witness hand this day of 19 Witness : I hereby consent to the foregoing assignment. The following form is for use in New York City. Form 30.— Contract for Exchange of Properties. CONTRACT FOR EXCHANGE. Agreement, made this day of 19 between herein designated as the party of the first part, and herein designated as the party of the second part, for the exchange of property; WITNESSETH, as f ollows : The party of the first part, in consideration of one dollar paid, the receipt of which is hereby acknowledged, and also in consideration of the conveyance by the party of the second part of the real property hereinafter mentioned, hereby agrees to grant and convey to the party of the second part, at a valuation for the purpose of this contract of Dollars, all that certain lot, piece or parcel oi land with the buildings and improvements thereon erected, Bituate, lying and being in and bounded and described as follows : (Description, here.) The party of the second part, in consideration of one dollar paid by tin- party of the first part, the receipt of which is hereby acknowledged, and also in consideration of the above conveyance by the party of the firsl part, agrees to grant and convey to the party of the first part, at a valuation for the purposes of this contract of ' ' ,1,ar8 i all that certain lot, piece or parcel of land with the buildings and improve- ments thereon erected, situate, lying and being in and bounded and described as follows: (Description here.) The premises which are to be conveyed by the party of the first part are to be conveyed subject to the following incumbrances: 420 SCHEDULES AND POEMS. The promises which are to be conveyed by the party of the second part are to be conveyed subject to the following incumbrances: The difference between the values of the respective premises, over and above incumbrances, shall be deemed, for the purposes of this contract, to be $ in favor of the party of the part, and the parly of the part agrees to pay the same as follows : Each of the parties to these presents hereby agrees to convey the prop- erty above described as sold by that party, free from all incumbrances, ex- cept as above specified, and to execute, acknowledge and deliver or cause to be executed, acknowledged and delivered to the other party, or to the assigns of the other party (the deed to be drawn in each case at the cost of the party of the first part thereto), a proper warranty deed containing full covenants duly executed and acknowledged to convey and assure to the grantee an absolute fee of said premises, except as herein stated. The titles to be given and accepted hereunder shall be such as the Company will approve and insure. Said deeds shall be delivered and exchanged at the office of on 19 at M. The chandeliers, gas fixtures, ranges, heating and hot water apparatus, water closets, bath tubs and other plumbing now on said premises are to be included in this sale and in the warranty above set forth. 1 The rents of the said premises, insurance premiums, and interest on mortgages, if any, shall be adjusted, apportioned and allowed up to the day of taking title. Each of the parties hereto assumes the risk of loss or damages by fire prior to the completion of this contract on the premises owned by them respectively. And it is Understood that the stipulations aforesaid are to apply to and bind the heirs, executors, administrators, successors and assigns of the respective parties. And for the true and faithful performance of all and every of the covenants and agreements above mentioned, the parties to these presents bind themselves, each unto the other, in the sum of Dollars, as fixed, settled and liquidated damages, to be paid by the failing party, and which said sum shall constitute a specific lien on the premises of the failing party. The brokers in this exchange are representing the party of the first part, and representing the party of the second part, and the usual commissions are to be paid to said brokers by their respective principals. 2 Witness the hands and seals of the above parties. [seal] [seal] Signed, Sealed and Delivered in the presence of 3 1 See Forms 17-2S for further provisions which may be nsed where appropriate. 2 If the broker has been acting for both sides, and wishes to assure himself that there shall be no question concerning his double employment, this clause may read as follows : " The parties hereto agree that is the broker who brought about this exchange, and that he acted for both parties hereto in doing so, and each of the parties hereto agrees to pay him his full commissions therefor (or, agrees to pay him the sum of $ as broker's commissions therefor)." 3 Acknowledgment may 1k> added. An acknowledgment makes the contract admissible in evidence without further proof. N. Y. Code of Civil Pro., § 937. CONTRACTS FOR SALE OF REAL ESTATE. 421 Form 31.— Contract for Exchange of Property. Chicago, Illinois. 1 CONTRACT FOR EXCHANGE. This Agreement, entered into this day of A. D., 19 .... , by and between of of the County of and State of , party of the first part, and of the County of and State of party of the second part ; WITNESSETH: That the party of the first part, in consideration of the covenants and agreements of the party of the second part hereinafter set forth, hereby agree. . . ., upon the performance by said second party of said covenants and agreements, to convey to said party of the second part by General Warranty deed, including all estates of home- stead and all rights of dower therein, at a consideration of Dollars ($ ) the following described real estate, situated in the County of and State of Illinois, to-wit : (Description here.) Section Township North, Range , East of the Third Principal Meridian. Subject to (1) existing leases expiring the purchaser to be entitled to the rents accruing after the delivery of the deed hereunder; (2) all taxes levied after the year 19 ; (3) all unpaid special taxes and special assessments levied for improvements not com pleted at the date hereof, and any unpaid installments of special taxes and special assessments for improvements completed at the date hereof, falling due subsequent to the date hereof; also subject to any party wall agree- ments of record; to building line restrictions and building restrictions of record, and to The party of the first part further agrees to pay to the party of the second part, at the date of the delivery of the deeds hereunder, the sum of Dollars ($ ) cash, and And the party of the second part, in consideration of the covenants and agreements of the party of the first part above specified, hereby agrees, upon the performance by said first party of the said covenants and agreements, to convey to said party of the first part, by a General Warranty deed, including all estates of homestead, and all rights of dower therein, at a eonsideral ion of Dollars ($ ) the following described real estate situated in the County f and State Of Illinois, to-wit: (Description fa re.) Section Township North, Range EaBl of the Third Pr ipal Men. ban. Subject to ( 1 ) existing leases expiring • ■ ■ • • the purchaser to be entitled to the rents accruing after the delivery ol the i This form is the one adopted by and is published with the permission of The Chi- cago Seal Estate Board, cuicugo, lllln"is. 422 SCHEDULES AND FORMS. deed hereunder; (2) all taxes levied after the year 19....; (3) all unpaid special taxes and special assessments levied for improvements not completed at the date hereof, and any unpaid installments of special taxes and special assessments for improvements completed at the date hereof, falling due subsequent to the date hereof; also subject to any party wall agreements of record; to building line restrictions and building restrictions of record, and to The party of the second part further agrees to pay to the party of the first part, at the date of the delivery of the deeds hereunder, the sum of . . . . Dollars ($....) cash, and It is Mutually Agreed, that each party hereto is to furnish the other within a reasonable time from the date hereof, either a certificate of title issued by the Registrar of Titles of Cook County, or a complete merchant- able abstract of title, or merchantable copy thereof, brought down to cover this date, or merchantable title guaranty policy showing good and sufficient title at date of this contract in the respective parties hereto to the property hereby agreed to be conveyed by them. It is Further Mutually Agreed, that in case an abstract or copy be furnished, the party so receiving same shall within ten days after receiving such abstract or copy deliver to the other party or his agent (together with the abstract) a note or memorandum in writing, signed by him or his attorney, specifying in detail the objections he makes to the title, if any; or if none, then stating in substance that the same is satisfactory. In case material defects be found in said title, and so reported, then if such defects be not cured within sixty days after such notice thereof, this contract shall at the option of the party delivering such objections become absolutely null and void; notice of such election to be given to the other party ; but the party delivering such objections may nevertheless elect to take such title as it then is, and in such case the other party shall convey as above agreed ; provided, however, that such party delivering such objections shall have first given a written notice of such election, wdthin ten days after the expiration of the said sixty days and tendered performance hereof on his part. In default of such notice of election to receive such title and accom- panying tender within the time so limited, the party delivering such ob- jections shall, without further action by either party, be deemed to have abandoned his claim upon said premises and thereupon this contract shall cease to have any force or effect as against said premises, or the title thereto or any right or interest therein, but not otherwise. The notices required to be given by the terms of this agreement shall in all cases be construed to mean notices in writing, signed by or on behalf of the party giving the same, and the same may be served either upon the other party or his agent. If the taxes and assessments to be paid by the vendor cannot be paid at time this contract is to be closed then the vendor is to pay same on or before May 1st, next ensuing. It is Further Mutually Agreed, that interest on encumbrances, if any, and insurance premiums on policies held by mortgagees, if any, shall be adjusted as of the date of the delivery of the deeds hereunder. It is Further Mutually Agreed, that brokerage fees or commissions shall be paid to by the respective parties hereto as heretofore agreed by them. All deeds shall be passed and this negotiation closed at the office of within five days after the titles have been found good. Time is declared to be of the essence of this agreement, and of all the conditions hereof. CONTRACTS FOR SALE OF REAL ESTATE. 423 This contract shall be held by for the mutual benefit of the parties concerned, and after consummation thereof shall cancel and retain this contract permanently. In Testimony Whereof, 'the said parties hereto have set their hands and seals, the day and year first above written. [seal" [seal" [seal [seal Form 32.— Deed and Money. 1 DEED AND MONEY. Application No Escrow No Chicago, 19 . Chicago Title and Trust Company: hereby deposit with you deed from . to conveying .hereby deposits with you $. The said deed is to be filed for record at once and when you are pre- pared to issue your Owners' Guarantee Policy, in usual form, guaranteeing the title of said grantee subject only to : 1. Rights or Claims of parties in possession, not shown of record, and questions of survey. 2. Mechanics' Lien Claims, if any, where no notice thereof appears of record. 3. Special Assessments not confirmed, or confirmed after 19 4. Taxes for the year 19. . . . 5. Building Line established in instrument recorded ;is Document 6. Restrictions contained in instrument recorded as Document. 7. Agreement for party wall, recorded as Document 8. Mortgage Incumbrance, recorded as I >ocumen1 Amount due thereon Interest since to be paid by Old Coupons! 9. Special Assessment, Warrant No 10. Acts done or suffered by, or judgments againsl said grantee. You are then hereby authorized ami directed to disburse said money as follows: Is there any commission to be adjusted through this escrow .' Are Fire [nsurance Policies to he broughl in.' Ire Mortgage Clauses to be attached .' $ i See provisions in contracts of Bale, Forms 10 ami 20. ■12-1 SCHEDULES AND FORMS. Are Leases to be brought in ? Are Water Taxes paid? Is receipt to be produced?. Objections Nos erased before signing. Deliver Abstract and Policy to Your charges are to be paid as follows : Form 33.— Assignment of Contract. ASSIGNMENT. Know All Men by These Presents, that I, jf , in consideration of Dollars to me paid before the sealing and delivery of these presents, the receipt whereof is hereby acknowledged, have sold, assigned, transferred and set over and by these presents do sell, assign, transfer and set over unto of , his executors, administrators and assigns, to his and their own proper use and benefit, all my right, title and interest in and to the annexed contract, to have and to hold the same unto the said , his heirs, executors, administrators and assigns for his and their use and benefit forever; subject, nevertheless, to the covenants and conditions therein mentioned. And I hereby authorize and empower the said upon his performance of the said covenants and conditions, to demand and receive of , the vendor mentioned in the annexed contract, the deed covenanted to be given in the said contract, in the same manner to all intents and purposes as I myself might or could do were these presents not executed; and I hereby direct the said to execute and deliver such deed to said accordingly. In Witness Whereof, I have hereunto set my hand and seal, this day of 19 [seal] In the Presence of, Form 34.— Assignment of Contract. Without Recourse. ASSIGNMENT. Know All Men by These Presents, that I of , in consideration of Dollars to me paid before the sealing and delivery of these presents, the receipt whereof is hereby acknowledged, have sold, assigned, transferred and set over, and by these presents do sell, assign, transfer and set over unto , of CONTRACTS FOR SALE OF REAL ESTATE. 425 his executors, administrators and assigns, to his and their own proper use and benefit, all ray right, title and interest in and to the annexed contract, to have and to hold the same unto the said his heirs, executors, administrators and assigns for his and their use anil benefit forever; subject, nevertheless, to the covenants and conditions therein men- tioned. And I hereby authorize and empower the said upon his performance of the said covenants and conditions, to demand and receive of , the vendor mentioned in the annexed contract, the deed covenanted to be given in the said contract, in the same manner to all intents and purposes as I myself might or could d<> were these presents not executed. And it is understood and agreed that this assignment is made without recourse to me. In Witness Whereof, I have hereunto set my hand and seal, this day of 19.... [seal] In the presence of, Form 35.— Demand for Performance of Contract of Sale. To Margaret Brown, 75 White Avenue, Brooklyn, New York. You will please take notice that we are ready, willing and prepared, and always have been, to deliver the deeds for the conveyance of the prem ises consisting of six lots at the Northeasterly corner of 2nd Avenue and 69th Street in the Borough of Manhattan of the City of New York, which you have contracted to purchase by a written agreement dated September 1st, 1910, and we hereby demand that you accept such deeds and pay the balance of the purchase price and close the title to said premises and per form said agreement on November 15th, 1910, at the place and hour men tioned in said agreement, to-wit, at the office of Francis II. \\ illetts, No. L23 West 42nd Street, New York City, at one P. M. ,,,,.,, And for your failure to comply with this demand you will be held liable according to law. Dated, November 12th, 1910. _ .. _,„ ' James H. McCall. CHAPTER XL. MISCELLANEOUS FORMS. Any provisions of the following form not desired by either the broker or the principal may be omitted. Form 36.— Authority to Broker to Sell. 1 • ••••••••••*•••••• ••••>••••>••>•>>>*>••>•■••.•••••••••••••*••» BROKEK ? S AUTHORIZATION TO SELL. I hereby employ and authorize real estate broker (s), to sell for me, the premises known as No in the city of , being a lot feet by feet on the side of street feet (East) of street (avenue) 2 , upon which there is (a three-story and base- ment brown stone dwelling, or three-story framo store and dwelling, or as the case may be), upon the following terms and conditions: Gross price, $ payable as follows: $ when contract of sale is signed ; $ by the purchaser taking same subject to a mortgage for that amount, due bearing interest at % per annum, payable (May 1) and (November 1) ; $ by the purchaser giving me a purchase money bond and mort- gage for that amount, due bearing interest at. ... % per annum, payable anil , and containing the usual interest, instalment, tax, assessment, insurance and warranty clauses (or special clauses if desired) ; $ in cash when the deed is delivered. Warranty deed to be delivered 30 days after date of contract. Covenants and restrictions against the premises Encroachments Fence variations Railroad consents For bringing about a sale of said premises, or producing a purchaser ready, willing and able to purchase the same, on the above terms, or on any other terms or conditions to which I shall assent, I hereby agree to pay said broker(s) the sum of $ commissions, (or a sum equal to. . . .% on the gross price as his (their) commissions). 1 While written authority is not necessary in all jurisdictions, (see Ch. Ill supra) still it is always wise, even at some inconvenience, to have the vendor state explicitly the terms on which he will sell. If any dispute should then arise as to whether the broker has produced a purchaser on the principal's terms, the dispute will not have to be determined upon any conflicting evidence as to what the terms were, as is often the case when the terms are given to the broker orally. - Space may be reserved for diagram of property. 426 MISCELLANEOUS FORMS. 427 Commissions shall be due and payable when a customer is produced upon above terms and conditions. 1 The authority hereby given shall continue for months. I hereby authorize said broker(s) to give a receipt in my name for any deposit received on a sale according to the above terms and conditions, and also authorize him (them) to sign in my name any contract he (they) may make with a purchaser of said premises on the above terms and conditions. In the event of the sale of said premises by said broker (s) or by any- one else, including myself, 2 while this agreement is in force, I agree to pay said broker (s) the full commissions above agreed upon. 3 Dated Form 37.— Exclusive Agency Contract. Chicago, Illi- nois. 4 AGENCY CONTRACT. Chicago, Illinois 19 I Hereby Grant You, for a period of months from this date, and thereafter until this agreement is revoked by notice in writing de- livered to you, the exclusive right to sell the property hereinafter described; and in consideration of your accepting said agency and endeavoring to sell said property I agree to pay you a commission of per cent, of the price obtained if a purchaser is procured during said period, by you or me or anyone else, upon the terms named or upon any other terms which I shall accept. Said property is known as Number Street, Chicago, and is improved with The legal description is (Description here.) The price of said property is Dollars. The terms of sale are as follows: The sum of Dollars is, upon the signing of an agreement of sale, to be paid by the pur chaser as earnest money, and said agreement and earnest money are to be held by in escrow. The further sum of dollars is to be paid upon acceptance of the title and delivery and acceptant f a sufficient warranty deed conveying a good title to said premisea, Both of said sums are to be paid to me upon delivery of said d I. The said conveyance is to be made subject to the following incum- brance, viz. : dollars f ] ue 19 with interest al per cent, per annum dollars iomit §§ ti 1 1 is'|!r! i : vi"i'^"if exclusive agency Is no) desired. Bven toongh «»»>«*" la given the exclusive agency, the principal may always se 1 Independently of the n broker, unless, as is the case here, he precludes himself from s Ing. *.■<■ ii 239, -i" tupra. 4^;,,;;;;;; hv''';;,,;; 7 ,,;;;'^,,! w m, ,.,, permission * ..,.• - .•..„,„>• h.-,. . ■■■.,,... Roar.l When this form is used the "Agent's Sale Contract" (Form 26) la annexed In order that any Offer made on the property may be In U «Cl terms Of the exclusive agency. 428 SCHEDULES AND FORMS. duo 19 ... . with interest at per cent, per annum. The principal of said incumbrance is to be deducted from the purchase price above named, and the interest thereon is to be prorated as of the date of the delivery of said deed. Payment of dollars of said pur- chase price may be deferred for not more than years, with interest at per cent, per annum, evidenced by notes secured by trust deed, which are to be delivered to me at the time of delivery of said deed. The principal may be made payable on or before a given date. I agree to deliver, at my option, either a merchantable abstract of title or a title guarantee policy for the amount of the above named purchase price, covering said property and brought down to the date of the agreement of sale above provided for; and within five days after the acceptance of the said title I agree to deliver a good and sufficient warranty deed conveying said property in accordance with such agreement. Singular pronouns of the first person shall be read as plural when this agreement is signed by two or more persons. [seal] [seal] Accepted : [seal] Form 38.— Authority to Broker to Exchange Property. BKOKEB 'S AUTHOEIZATION TO EXCHANGE PKOPEETY. I hereby employ and authorize real estate broker (s) to exchange for me, premises known as No ' for such other premises as shall be acceptable to me, (or for premises of the following nature: state same). Such exchange shall be made upon the following terms and conditions: 2 For the purposes of such exchange my said premises shall be valued at $ The premises hereby authorized to be exchanged are subject to : Mortgages Covenants and restrictions Encroachments Fence variations Railroad consents Warranty deeds to be exchanged 30 days after date of contract of exchange. For bringing about such exchange on above terms and conditions, or on any other terms and conditions to which I shall assent, I hereby agree to pay said broker (s) $ commissions, (or a sum equal to % on the gross price fixed for my said premises, as his (their) commissions), and I also agree that said broker (s) may charge, collect and receive com- missions from the other party or parties to such exchange; commissions to be due and payable when a customer is produced upon above terms and conditions. 3 Dated 1 Insert particulars as in Form 36. 2 See Form 36. * See Form 36 for additional provisions, if desired. MISCELLANEOUS FORMS. 429 The following contract may be used where salesmen are employed on commission, this commission to be paid as purchase price is paid to the principal. Form 39.— Salesman's Contract. CONTRACT. Memorandum of Agreement, made this day f 19 , between Executive Realty Company, a corporation incorporated under the laws of the State of New York, party of the first part, and .party of the second part; Witnesseth: That the party of the second part for and in considera- tion of the sum of One Dollar, to him in hand paid by the party of the first part, the receipt whereof is hereby acknowledged, and of the premises and agreements hereinafter contained, hereby agrees to act as the agent of the party of the first part in the sale of lands, upon and only upon the following terms and conditions, and to devote his entire time, attention and talents to the exercise of such agency in strict conformity with the rules and regula tions established by the party of the first part and the terms and conditions herein contained, and such additions, amendments or modifications of the same as may be made from time to time by the party of the first part. And it is Expressly Understood and Agreed by and between the parties hereto, that the party hereto of the second part is hereby vested with and has only the powers hereinafter specifically granted, and has and is to have no implied powers, and is not to act or assume to act for or represent the party of the first part, except as herein directed and authorized, and is not, nor shall not be entitled to receive any other or different or additional compensation than that herein expressed. It is Hereby Expressly Agreed by and between the parties hereto as follows : First. — That the party of the second part shall be entitled to receive a commission at the rate of per cent, (on installment sales and on cash sales) the same to be payable as follows: It BEING Expressly Understood and Agreed that commissions hereunder are to be paid only at the times, in the manner and as hereinafter mentioned. (1) The party of the second part shall be entitled to receive commie sions only after the regular agreement papers and physician's certificate (when required) have been signed and delivered to the party of the first part, and such commissions are payable only from one halt' of the cash re ceipts from the respective sales, and should a customer default in payments before the said party of the second part has receive. I his full commission on a sale on which there has been default in payments, then and in thai case the party of the second part shall have no claim for further commissions on such sale; and it is further provided that when the said party of the Becond part ceases to be actively engaged in the sale of lands for the party of the first part as hereinafter provided, that then an.l thereafter commissions hereunder shall be payable only from one-quarter of the actual cash receipts from such sale. (2) Commissions on cash sales or any Bale where a discount i- allowed to the purchaser on the whole or any portion of the purchase price shall be computed and paid only on the purchase price, less the discount for cash, unless the agent desires to have his commission paid by installments m the same manner as if the purchase price had been paid in installments, then tho 430 SCHEDULES AND FORMS. commission is to be computed and paid on tho full purchase price of the lots sold and as herein provided. Second. — The party of the second part hereby agrees that he will report daily at the office of the party of the first part to which he may be attached, and in case he shall fail to do so for three consecutive days, he shall be deemed to be no longer actively engaged in the sale of lands for the party of the first part, and shall thereafter be entitled to receive on account of commissions only one-quarter of the receipts from lots sold by him as here- inabove provided. Third. — That the said party of the second part shall have no authority whatsoever to alter, modify or change in any manner any of the agreements, contracts, deeds or other instruments under which the party of the first part offers lands for sale and that said party of the first part will not recognize any alteration, modification or other change of any agreement, contract, deed or other instrument nor any claim for commissions on sales made otherwise than upon its regular terms. Fourth. — That the party hereto of the second part is positively pro- hibited from publishing or circulating, or causing to be published or cir- culated any documents or advertising matter of any kind whatsoever relat- ing to the lands which the party of the first part offer for sale unless duly authorized in writing by the party of the first part, except that the fore- going provision shall not apply to any matter furnished and used under direction of the party of the first part. Fifth. — That the party of the second part shall incur no indebtedness of any kind whatsoever for which the party of the first part shall be in any way liable. Sixth. — All moneys received or collected by the party of the second part are to be securely held by him as a fiduciary trust, and shall be in no case used for any personal purpose whatsoever, but shall immediately be paid over to the party of the first part. Seventh. — The party of the second part must report all business to the party of the first part at its office in New York City to which he is attached or as may be directed, and must settle all accounts as often as required. Eighth. — The ledger accounts of the party of the first part shall be competent and conclusive evidence of the state of accounts between the parties to this contract. Ninth. — If in any case the party of the first part shall deem it wise to return the amounts paid in on account of any contract or agreement for sale of lands and cancel the same by reason of any misrepresentations on the part of the party of the second part or for any other cause, then the party of the second part shall be bound to repay to the party of the first part on demand, the amount of commission received on account of the contract or agreement so canceled. Tenth. — Either party hereto may rescind the foregoing contract on ten days' notice in writing to that effect, and upon the mailing of such notice by said party of the first part to the party of the second part to the address hereinabove contained, all the rights and interests of said party of the second part hereunder shall cease and determine, except as herein provided, but it is expressly understood and agreed that the party hereto of the second part shall not have the right to terminate this contract unless all indebted- ness due from him to the party of the first part shall have been settled to its satisfaction ; and after such settlement the party of the second part shall be entitled to receive the balance of his commission on lots sold prior to the termination of this contract at the rate of one-quarter of the cash receipts from such sales, subject, however, to all the conditions and agreements in respect to commissions herein contained. Eleventh. — The rights of the party of the second part in the foregoing contract shall not be sold or assigned. MISCELLANEOUS FOEMS. 431 Twelfth. — This contract shall be construed, interpret ed and enf.u.-. ! according to the laws of the State of New York. Thirteenth. — Any rules of the party of the first part or any additions, amendments or modifications of this agreement made by the party of the first part hereto as herein provided shall be as effective as if herein written and contained when the same are posted on the bulletin board at the main office of the party hereto of the first part in the City of New York or the office to which the party of the second part may be attached. And this shall apply as well to the rate of commissions or salary payable hereunder as to other terms, conditions and agreements herein contained. In Witness Whereof, the parties hereto have set their hands and seals the day and year first above mentioned. [seal] [seal] Sealed and Delivered in the Presence of, Form 40.— Application for Loan. New York City. APPLICATION FOE LOAN. Date No The undersigned desires to procure a mortgage loan on premises de- scribed below, as follows: First Mortgage, $ at % Years Bond of Street and No Dimensions of Lot No. of Stories Dimensions of Building Description of Building Building Material Building finished or unfinished Age of Building , ■ • • Have any alterations or additions been made in the last six months RENT NO. OF KOOMS. (Estimate rents of portion of building occupied by owners) Basement 1 1 1 1 1 1 . . 1st Floor |||||.. 2nd Floor 1 1 1 . 3rd Floor HI 4th Floor 5th Floor Purpose of use • • • • • • • • • ■ Tenant on lease Monthly Present 1st Mtge held by due. . Present 2nd Mtges held by . • • • No payments will be made uutil acceptable fire insurance is furnished. 432 SCHEDULES AND FORMS. Plans and specifications must be furnished when loan is desired on un- finished buildings. VALUATION. Land Building Total ASSESSED VALUATION. Land .. . Building Total If this loan is accepted within days, the undersigned agrees to pay to the sum of $ f o r procuring the same which amount shall cover charges for examination and guarantee of title, drawing and recording papers, sur- vey and mortgage tax. Name. Address. Form 41.— Application for Loan. Chicago, Illinois. APPLICATION FOE LOAN. Chicago, 19 ... . To hereby make application for a loan of $ for years, with interest at the rate of per centum per annum, payable semi-annually, at such place as lender may dictate ; and as security for said loan will give Promissory Note (together with Warrant of Attorney to confess judgment in case of default in payment of same), secured by Deed of Trust on the following described Land and improvements, to- wit: Said land being in the and having a front of feet on with a depth of feet to a foot alley. The improvements thereon are The present cash value of the land is $ The present cash values of the improvements is $ Making a total present cash value of $ • The said premises are free from incumbrance of any and every kind and description, and ha a perfect title thereto, and full authority to incumber or sell the same agree to furnish a complete and full Abstract of Title to the said premises for ex- amination by such Attorney or Attorneys as you may select. Said Abstract of Title to be continued so as to show the loan hereby applied for, and also to insure all buildings situated upon the said premises, and furnish you with the Insurance Policy, with clause therein making the loss (if any) payable to such person as you may elect, the said Policy to be made to cover the amount and time of the loan hereby applied for, by such Insurance Company MISCELLANEOUS FORMS. 433 as you may select or approve also agree to pay all charges and expenses for the examination of title and appraisal of said property, and all advances by you made for Abstracts of Title, or for any other purpose incident to the making of said loan, whether loan is made or not. The Abstract of Title and Insurance Policies furnished, as heroin agreed, to be held by you or your assigns, executors or attorneys, at the risk of the undersigned, during the continuance of said loan, until the same is fully paid. No Having this day made application to for a loan of $ upon Real Estate security hereby agree to pay. . . .h per cent, on said amount applied for, as commis- sion; also for the examination of the Abstract of Title, and money advanced to the undersigned, and all other expenses incident to the making of said Loan. To secure said amounts a first lien is hereby given to said on all written instruments and personal property owned or delivered by undersigned to....h and in case the title to, or the value of, the real estate offered as security is insufficient or unsatisfactory to said then, in such case, if the amount of said commissions, advances and expenses is not paid within days after notice of the rejection of said loan is given by said to the undersigned, then said may, at any time, without notice to the undersigned, sell, at public or private sale, said written instruments and personal property, or either or any part thereof, and apply the proceeds of such sale to the pay- ment of said commissions, expenses and advances. Dated 19 19. accept the within application. When the papers securing the same are executed you will draw for $ on and forward the Notes and Deed, when recorded to Form 42.— Application for Loan. St. Louis, Missouri. 1 APPLICATION FOR LOAN. (Not to be considered unless each question is answered.) I hereby make application to the Title Guaranty. Trust <'<>. for a loan of dollars, payable at per cent, interesl per annum, to be paid (principal ami interest to lie payable at said Company's office) ami state that application is uo1 pending and will not be made elsewhere, until an adverse decision is rendered; said i Form of the Title Guaranty Trust Co. of St. Louis, Mo. 434 SCHEDULES AND FORMS. Company to have days for its consideration, and is hereby given the exclusive right to take the proposed mortgage. Location of property Description of improvements and j when erected I Location, description anil grade \ of lot \ Are street, alley and sidewalk paved ? If so, with what? Is property sewered? Are there gas and water pipes? Mortgagor 's name Give address and business Who would you name as reference?. By whom ami for what purpose j occupied? \ If tenant, give name, business, ) rental, and term of tenancy J ' If by owner, give rental value Have there been any repairs or alterations to premises, any street, sidewalk, sewer or alley improvements made or con- tracted for within six months? Value of ground Value of buildings If improvements to be made, state cost. Date of purchase and cash con- } sideration paid Assessed value for taxation and ) amount of last year 's taxes j Give exact statement of present incumbrance, name and address of mortgagee, amount and rate. How much insurance now carried ? Does applicant agree to have property } insured in amount, company and V terms satisfactory to mortgagee? ) In whose name is title now vested?. Wife or husband's full name. Are there any judgments, taxes, special tax ) bills or other liens against the property ^ not enumerated above? ) What other property, if any, does ) applicant own? \ Give value and incumbrance, if ) . . any. General remarks : MISCELLANEOUS FORMS. 435 Full certificate of title by Title Guaranty Trust Co., lire and Btorm insurance policies payable to mortgagee or trustee, covenanl to pay taxes, and such other papers as are desired by said company, arc to be furnished by me. And I do hereby agree to pay to said Title Guaranty Trust Co. the sum of dollars for expenses in connection with this loan, which amount is to include cost of examining property, title, preparing and recording papers, acknowledgments, etc. If, during the examination, the application shall be withdrawn, I will pay the sum of dollars, for all expenses incurred. I hereby state that I hold or will acquire the undisputed tith in fee simple to the real estate herein described, and the proposed mortgage is to be the first lien thereon; that I do not owe any money to mechanics, builders or others for work done or materials furnished upon the property not otherwise specified; that I am not surety upon any bond which can be- come a lien upon said property, and that these statements are made for the purpose of securing said loan. I promise to furnish to the said Title Guaranty Trust Co. a satis- factory bond insuring erection and completion of improvements and indem nity against mechanics', material liens, or laborers' liens, judgments, costs and fees of any description that may be had against the premises described, by reason of my failure to pay and satisfy any and all such claims. This last clause to apply in case the improvements, if any, have not been completed six months. Any Agreements Made Hereunder by the Title Guaranty TEUST Co. shall be Abrogated if the Applicant has Concealed or Misbepee- sented any material fact in this application. Date Applicant. P. O. or Street Address Form 43.— Application for Loan. Baltimore, Maryland. APPLICATION FOE LOAN. To the Title Guarantee and Trust Company: (of Baltimore, Rid.) The undersigned hereby applies to your company for a ftrsl mortgage loaD of dollars, as follows: (Strike out the loan not desired.) A straight loan for years, with interest at , , ( half yearly. per cent., payable j quarterly . An installment loan, payable in sixty monthly installments o\ $ each, and also a monthly payment of one month's proportion ol the ground rent, taxes, water rent and insurance. (Fill up all the folloiving blanks.) Property Size of Lot'.'.'.'.'.'.'.'.'.'.'.'.'.'.'. ... In Fee? Ground Rent i Redeemable "/ Irredeemable. Brick store ) gize (l) - building Number of Rooms. Frame dwelling f m cn|h Number of Stories Rental, $ P" -j yar 43G SCHEDULES AND FORMS. Are taxes paid up ? Occupied by ] J^t jj** When purchased. Consideration $ What incumbrances are now on the property? Title — Iu whom Remarks: The undersigned agrees to pay to your Company $ for its services for inspection of the property, search of title, drawing legal papers, etc., and also agrees to pay the lawful charges for acknowledgments, recording, etc., and to deposit with your Company fire insurance policies in the amount and companies required. If the undersigned fails to take the loan after it has been accepted by the Company, the undersigned will pay one half of the above sum. If the loan is declined because of a defect in title the undersigned agrees to pay half of the title examination fee. It is agreed that after the Company accepts this application, it reserves the privilege of declining the loan afterwards, for any reason deemed suf- ficient by it. Date 19 Signature Telephone j G -&^. Address REPORT OF REAL ESTATE OFFICER ON THE ABOVE APPLICATION. I have examined the above property and report as follows: The property is a j J?™^ idling No " of stories The rental value is $ per month. Condition of the property — are the walls plumb? I consider the property salable at public auction for $ and recommend that j J^fJument loan ° f $ be S rantecL Real Estate Officer. Date 19 An* installment } loan of $ on the above property is approved: Form 44.— Encroachment Agreement. 1 ENCROACHMENT AGREEMENT. Agreement, made this sixth day of October, in the year Nineteen Hundred and Ten, between Joseph Scott and Annie Scott, his wife, 2 of 1 Available for the protection of a party on whose premises fences or retaining walls encroach. The form may be varied to suit the circumstances of other cases. 2 Though the title is in the husband, his wife should join in the agreement. Some conveyancers require mortgagees to join also. MISCELLANEOUS FORMS. 437 the Borough of Brooklyn of the City of New York, County of Kings and State of New York, parties of the first part, and Lida Moore, of the same place, party of the second part; Whereas, the said parties of the first part are the owners in fee of the lot and premises known as No. 190 Suydam Street in the Borough of Man- hattan of the City of New York, being a lot of ground, twenty-five (25) feet front and rear by one hundred (100) feet in depth on the southeasterly side of Suydam Street one hundred and fifty (150) feet southwesterly from the intersection of the southeasterly side of Suydam Street with the south- westerly side of Hanover Avenue, and hereinafter designated as the lot and premises of the parties of the first part, and the said party of the sec ml 1 part is the owner in fee of the lots and premises known as Nos. 192 and 194 Suydam Street in the Borough of Manhattan of the City of New York, afore- said, being a plot of ground fifty (50) feet front and rear by one hundred (100) feet in depth, on the southeasterly side of Suydam Street one hun- dred (100) feet southwesterly from the intersection of the southeasterly side of Suydam Street with the southwesterly side of Hanover Avenue immedi- ately adjoining to and on the northeasterly side of said lot and premises of the parties of the first part, and hereinafter designated as the lots and premises of the party of the second part; and Whereas, the said land and premises of the parties of the first part, are higher than the adjoining land and premises of the party of the second part, and a wall or fence has been erected for the purpose of retaining the soil of the lot and premises of said parties of the first part, which wall or fence, however, stands wholly or almost wholly on the lots and premises of the party of the second part, and runs along or near the division line of the lots and premises of the parties of the first part and the party of the second part, beginning at a point at or opposite the rear end of the house erected upon the lot and premises of the parties of the first part and running to or beyond the rear end of the lots and premises of the parties of the first part and the party of the second part: Now Therefore, this agreement witnesseth, that in consideration of the sum of one dollar and other good and valuable considerations in hand duly paid to the said parties of the first part, the receipt whereof is hereby acknowledged, the said parties of the first part do hereby covenant, stipu- late and agree that the said parties of the first part do not own or claim to own any part of the soil within the boundaries of the lots and premises of the party of the second part upon which such wall or fence stands, and that the said parties of the first part do not have or claim to have any easement, right, title or other interest in and to any part of the soil within the bound- aries of the lots and premises of the party of the second part upon which such wall or fence stands, and that the parties of the first part do not have or claim to have any right or privilege to have such wall or fence <>r any part thereof standing or remain upon the lots and promises of the party of the second part, or any part thereof, and that the party of the sec I part, her heirs and assigns, may at any time remove such wall or fen< r so much of such wall or fence as is within the boundaries of the lots and premises of the party of the second part, so that no part of such wall or fence shall protrude, extend, bo or remain beyond a line drawn in continuation of the southwesterly side of the house on the lot and premises of the parties of the first part to the rear of the lots and premises of the party of the second part; and It is Further Mutually Agreed between the parties hereto thai do part of the fee of the soil upon which said wall or fence or any pari thereof stands, has passed to or is vested in the said parties of the first pari or of their predecessors in title nor shall pass to or be vested in the said parties of the first part, their heirs or assigns, 43S SCHEDULES AND FORMS. In Witness Whereof, the parties to those presents have hereunto set their hands and seals the day and year first above written. Joseph Scott. [l.s.] Annie Scott. [l.s.] Lida Moore. [l.s.] In the presence of, Horace T. Walsh. Thomas L. Patterson. {Acknowledgments in proper statutory form.) Form 45.— Encroachment Agreement. 1 ENCROACHMENT AGREEMENT. Agreement, made this twelfth day of October in the year Nineteen Hundred and Ten, between Samuel Strong and Sarah Strong, his wife, 2 of the Borough of Brooklyn of the City of New York, County of Kings and State of New York, parties of the first part, and Margareth Black, of the same place, party of the second part; Whereas, the said parties of the first part are the owners in fee of the lot and premises known as No. 187 Thomas Avenue in the Borough of Brooklyn of the City of New York aforesaid, and the said party of the second part is or is about to become the owner in fee of the lot and premises known as No. 189 Thomas Avenue in the Borough of Brooklyn of the City of New York aforesaid, immediately adjoining to and on the South side of said lot of the parties of the first part; and Whereas, the stable or building on the rear of said lot designated as No. 1S9 Thomas Avenue encroaches and stands partly upon the lot desig- nated as No. 187 Thomas Avenue: Now Therefore, this agreement witnesseth, that in consideration of the sum of one dollar and other good and valuable considerations in hand duly paid to the said parties of the first part, the receipt whereof is hereby acknowledged, the said parties of the first part do hereby grant and convey to the said party of the second part, her heirs and and assigns, the right to have said stable or building remain in its present position, encroaching or standing partly on the said lot of the parties of the first part, and the right to use during the life of such stable or building, that part of said lot of the parties of the first part upon which such stable or building encroaches or stands partly thereon, and to have such stable or building, or the wall or the part of such stable or building so encroaching or standing partly on the said lot of the parties of the first part, remain so standing during the life of such stable or building, and no longer. It is Further Mutually Agreed between the parties hereto that no part of the fee of the soil upon which stands the stable or building, or the wall or the part of such stable or building so encroaching or standing partly on the said lot of the parties of the first part shall pass to or be vested in the said party of the second part, her heirs or assigns, by virtue of these presents. 1 Available for protection of party whose buildings encroach on adjoining land. The form may be varied to suit the circumstances of other cases. a Though the title is in the husband, his wife should join in the agreement. Some conveyancers require mortgagees to join also. MISCELLANEOUS FOKMS. 439 In Witness Whereof, the parties to these presents have hereunto set their hands and seals the day and year first above written. Samuel Strong. [seal Sarah Strong. [seal Margareth Black. [seal In the presence of, Willis T. Hefley. Allen F. Moore. (Acknowledgments in proper statutory form.) CHAPTER XLI. FORMS FOR PLEADING. 1 Form 46.— Complaint for Recovery of Broker's Commis- sions. Short. (First Form.) 2 The City Court of Brooklyn. JULIUS N. KELLEY, CHARLES H. MOLTER and FREDERICK D. KELLEY, V. MILTON BUCKLEY The Plaintiffs Complain: I. That in or about February, 1910, the defendant employed the plain- tiffs to find for him a purchaser of him for money or exchange of other real estate, a certain farm situate at North Leominster in the State of Massa- chusetts, and that thereupon the plaintiffs entered upon the said employ- ment and worked therein, and obtained and introduced one Manning to the defendant as the purchaser of the said property, and he agreed with the defendant to purchase the said property of the defendant on the terms stated, and held out by the defendant, through the plaintiffs, and to take a deed of conveyance thereof, and the bargain was struck between the de- fendant and said Manning, and a contract of purchase was entered into. II. That the value and agreed price of the said services by the plain- tiffs to the defendant was and is the sum of $750, but the defendant refuses to pay the same. Wherefore, the plaintiffs pray for judgment against the defendant for the sum of $750 with interest and costs. John J. Gaynor, Atty. for Plffs. (Verified.) Form 47.— Complaint for Recovery of Broker's Commis- sions. Short. (Second Form.) The City Court of Brooklyn. CHARLES B. RODNEY and GEORGE T. STEPHENS, Plaintiffs, against JAMES BUNNELL, Defendant. The complaint of the plaintiff respectfully shows to this Court: I. That at the times hereinafter mentioned the plaintiffs were, and i See Chs. XXXIV and XXXV supra. 2 See also Corbin's New Jersey Forms, No. 896. 440 FORMS FOE PLEADING. 441 still are, copartners in trade, as real estate agents ami brokers, doing business as such in the City of Brooklyn, under the firm name and style of Eodney and Stephens. II. That on or about the first day of April, 1910, the plaintiffs ren- dered certain services to the defendant at his request, as such real estate agents and brokers, in and about the selling of certain property situate "ii the Eastern Boulevard and Kings Highway in the Town of Utrecht, Nassau County, for which services defendant agreed to pay plaintiff two thousand dollars as commissions. III. That no part of said sum has been paid, although payment thereof has been demanded. Wherefore, plaintiffs demand judgment against the defendant for the sum of two thousand dollars with interest thereon from April 1, 1910, and costs of this action. Doyle & Marshall, Plaintiffs' Attorneys, Office and Post Office Address: 4 and 5 Court St., Brooklyn, N. Y. (Btdy verified.) Form 48 —Complaint for Recovery of Broker's Compen- sation. (Two Counts.) 1 Supreme Court, County of Eichmond. ALLEN R. CALLAHAN, Plaintiff, against JACK M. HASKELL and WALTER N. BEARDSLEY, Defendants. COMPLAINT. The plaintiff above named, through his attorney, Willis Clark, com- plains of the above-named defendants and alleges: For a First and Separate Cause of Action : I. That the plaintiff is a resident of the County of Richmond, Borough of Eichmond, City of New York. II That the plaintiff at all times hereinafter mentioned was an. I Btill is an attorney and counselor at law duly qualified as such, with an mine and place of business in the Borough of Manhattan, New ^ oris < lty. P III That between the 1st day of January, L910, and the commence- ment of this action, plaintiff performed professional services for sanl de- fendants at their special instance and request, and upon their promise , to pay therefor, which services were reasonably worth the sum ol $3 61 -^ ; ; ' plaintiff between said dates in performance of said Patera \ "JJJg a J the request of the defendants, paid out an.l advanced tor and in 1m halt said pendants the «tf^£g* ' said professional semees there'LamelueVsaid ph ml ^W^^^S^SJSS have not paid, and refuse to pay, although plamtifl has dulj dem. "" : ;:r;,:^::;"::u---"-' .■ * of Richmond, City of New York. iThis is permissible even under Code pleading. Logan v. Whitley, 188 666 (N. Y. 1008). 442 SCHEDULES AND FORMS. II. That the plaintiff, at all times hereinafter mentioned was and still is an attorney and counselor at law duly qualified as such, with an office and place of business in the Borough of Manhattan, New York City. III. That between January 1st, 1910, and the commencement of this action, the plaintiff, Allen R. Callahan, performed services as agent and broker in causing the sale for defendants of about 4,500 acres of land, for the price of $36,043.80, situated in Oakham township, St. Lawrence County, New York, which land w T as held and owned by defendants at all times herein mentioned, until about April 15, 1910. IV. That said services were performed at the request of the de- fendants and for the reasonable value and agreed compensation of 10% of the selling price of said land, which sum said defendants promised and agreed to pay to the plaintiff herein. V. That by reason of said sale there became due to the plaintiff the sum of $3,604.38, which sum the defendants have not paid and refuse to pay, although plaintiff has duly demanded such payment. Wherefore, plaintiff demands judgment against defendants for the sum of $3,604.38 with interest from April 15, 1910, together with the costs and disbursements of this action. Willis Clark, Attorney for plaintiff. Office and Post Office Address: No. 27 William St., New York City. (Verified.) Form 49.— Motion for Interpleader in New York City Municipal Court. 1 Municipal Court of the City of New York, Borough of District. John S. Eobins and Henry A. Robins, a copartner- ship trading under the firm name and style of John S. Eobins, Plaintiffs, against Frederick Lake, Defendant. ORDER TO SHOW CAUSE. On the annexed affidavit of Frederick Lake verified and on all the papers and proceedings herein, it is hereby Ordered, that the plaintiffs and George Murray, doing business under the name of Geo. Murray Realty Co. 2 show cause before the Municipal Court of the City of New York, Borough of District, at the Court Room thereof, No in the Borough of of the City of New York on the day of 19 .... at nine o 'clock in the forenoon, or as soon thereafter as counsel can be heard, why an order should not be made and entered herein permitting the defendant to deposit with the court the sum of $93.75, and substituting the said George Murray doing business under the 1 See Ch. xxxv. The italicized portions of this form are those which vary with the particular conditions. 2 The other broker who claims the commission. FORMS FOR PLEADING. 443 name of Geo. Murray Realty Co. in his place as a party defendant in this action, and discharging the defendant from liability to either the plaintiffs in this action or the said George Murray doing business under the mime of Geo. Murray Realty Co. upon the payment into court of the said sum of $93.75 or to such person or persons as the court may direct; and that the said George Murray doing business under the name of Geo. Murray Realty Co. be re- quired to appear in this action to answer the complaint herein, in the same time that the defendant herein is required to answer the summons, and that the money so paid into court by the defendant herein shall be paid to the plaintiff in case of the failure of said George Murray to appear and answer, and for such other and further relief as may be just. And it appearing that there is sufficient reason for same, service of a copy of this order and of the annexed affidavit on the said George Murray and on either one of the plaintiffs herein, on or before 19 .... , shall be sufficient service and notice. Dated, 19 J. M. C. Form 50.— Motion for Interpleader. Supporting Affi- davit. 1 Municipal Court of the City of New York, Borough of District. John S. Robins and Henry A. Robins, a copartner- ship trading under the firm name and style of John S. Robins, Plaintiffs, against Frederick Lake, Defendant. AFFIDAVIT. State and City of New York \ Borough of V ss.: County of ) Frederick Lake, being duly sworn, says: I am the defendant above- named; the summons and complaint herein was served on me on ... 19 and the return day thereof is 19 . . . (State the facts of the controversy, as for instance:) The action is brought to recover a commission for the exchange of certain premises which I owned on Mott Avenue, Union Terrace, Queens County, for certain premises owned by the Decker Construction Company on Perry Street. » yckoff Tark. Queen* County. The plaintiff claims to be entitled to the sum of > for the exchange of the aforesaid premises. A written contract for the ex change of the aforesaid premises was entered into and signed by me and the saidDecker Construction Company, which contract is dated. ..... 9. .. . in the presence of one George Murray, who does business under the nam »! Geo. Murray Realty Co. who has a real estate offia at.. in the Borough of and who' makes' a similar claim for commissions for the exchange of the said premises. Said George Murray is not a party to this action, and makes a demand againsl me for the same debt as the plaintiff without collusion with me, and 1 am ready and willing to pay the aforesaid mm of $9t.S0 or Vu sum of $93.75, which is the proper computation oi said commission, i •The italicized parts of this for... are suggestive and will vary with th, conditio*. 444 SCHEDULES AND FORMS. commission for the exchange of said premises, to the person rightfully en- titled thereto. I cannot safely determine to which of said claimants this money should be paid, and I am ready and willing to pay the same into court upon such terms as to costs and payments into court of the amount of said claim as may be just and directed by this court, upon my beino- dis- charge.! from liability to either claimant, and said George Murray "doing business under the name of Geo. Murray Realty Co. being substituted as defendant in this action in my place. I therefore ask for an order to show cause why an order should not be made permitting me to deposit with the court the sum of $93.75 and sub- stituting the said George Murray doing business under the name of Geo Murray Realty Co. in my place as a party defendant in this action, and dis- charging me from liability to either the plaintiffs in this action or to said George Murray doing business under the name of Geo. Murray Realtu Co or to such person or persons as the court may direct, and that the said George Murray doing business under the name of Geo. Murray Realty Co., be re- quired to appear and do appear in this action to answer the complaint there- in in the same time that I am required to answer the summons, and that the money so paid into court by me shall be paid to the plaintiffs in case of the failure of the said George Murray to appear and answer, and for such other and further relief as may be just. I therefore ask that the order to show cause to be made herein be made returnable on 19 for the reason that I have been informed by my attorney and believe that an order for an interpleader must be obtained before the return day of the summons in the action, and that service of a copy of said order to show cause and of this affidavit on the said George Murray and on either of the plaintiffs herein on or before 19 ... . shall be sufficient service and notice. Sworn to before me this: day of 19 Form 51.— Order of Interpleader. Municipal Court of the City of New York, Borough of District. John S. Robins and Henry A. Robins, a copartner- ship trading under the firm name and style of John S. Robins, Plaintiffs, against Frederick Lake, Defendant. On reading and filing the affidavit of Frederick Lake, verified 19 ... . and the order to show cause dated 19. . . .with proof of the due service thereof as required by said order, and on all the papers and proceedings herein, and the plaintiffs appearing by , their attorney, and George Murray appearing by , his attorney, and after hearing , attorney for the defendant, in support of the motion Ordered, that the defendant be permitted to deposit with the Clerk of this Court the sum of $93.75 and that upon the payment of such sum as aforesaid on or before 19 the said George Murray doing business under the name of Geo. Murray Realty Co. be and he hereby is substituted as defendant in this action in the place of said defendant FORMS FOR PLEADING. 445 Frederick Lake and that the said Frederick Lake be, and he hereby is there- upon discharged from liability to either the plaintiffs in this action or the said George Murray doing business under the name of Geo. Murray Realty Co. on account of the cause of action for which this action is brought; and it it is further Ordered, that the said George Murray doing business undt r the name of Geo. Murray Bealty Co. be, and he hereby is required to appear in this action to answer the complant herein in the same time that the above-named de- fendant Frederick Lake is required to answer the summons, and that the money so paid into Court by the defendant Frederick Lake, shall be paid to the plaintiffs in case of the failure of said George Murray to appear and answer. Dated, 19 J. M. C. Form 52.— Complaint after Interpleader. 1 City Court of Brooklyn. CHARLES B. RODNEY and GEORGE T. STEPHENS, Plaintiffs, against THE RIDGWAY DRIVING CLUB, Defendant. SUPPLEMENTAL COMPLAINT. The supplemental complaint of the plaintiffs respectfully shows to this Court: I. That at the times hereinafter mentioned, the plaint ills were and still are copartners in trade, as real estate agents and brokers, doing business as such in the City of Brooklyn, under the firm name and style of Rodney and Stephens. . . . II. That on or about the first day of April, 1910, the plaint ills ren- dered certain services to one James Bunnell, at his request, as BUCh real estate agents and brokers in and about the selling of certain property situ- ate on the Eastern Boulevard and Kings Highway in the Town of Utrecht, Nassau County, for which services the said James Bunnell agr I to pay plaintiffs the sum of $2,000 as commissions. III. That no part of said sum has been paid although payment tnereoi has been demanded. IV. That upon application of said James Bunnell and upon DOtice thereof to the parties hereto, an order was made by this court dated the 19th day of July, 1910, by which it was among other things ordered thai the defendant, 'the Ridgway Driving Club be substituted as defendant in tins action in place of said James Bunnell, as by referee to said order will more fully appear. , Wherefore, plaintiffs demand judgment against the defendant for the sum of two thousand dollars, with interest thereon from April 1, L»1U, i"' sides the costs of this action. Doyle & MARSHALL, Plaintiffs' Attorneys, Office and Post Office Address: i and •" Court St., Brooklyn, N. > • (Duly vt rifled.) 1 See Form 47 supra. GENERAL INDEX. [References are to pages.] Abandonment of Broker by Customer, 135, 182, 183. of Customer by Broker, 102, 103, 173, 174. Ability of Purchaser, 161-165. Acceptance of Offer, Qualified. 168. of Proceeds Test of Principal's Liability, 262-265, 267. Acknowledgment of Contract of Sale, 362. Forms, 403, 412. Acreage Price, 368. Actions, 213, 321-326, 330-352. (See also Pleading.) Forms, 440-445. Broker's, 213, 330-340. for Fraud, 321-326. " Rescission, 322, 323. Acts of Broker, Adverse to Principal, 59-68, 151, 152, 272. 273\ Faith of, 54-56, 59-68, 91, 150-154, 191, 192, 256-25K, 272, 273. (Sec also Good Faith.) Fraudulent. 50, 51, 67, 68, 91, 258, 265, 273. 202. 293, 305-309. (See also Fraud of Broker.) Pleading, 340. Principal Bound by, 36, 37, 267-270. Not Bound by, 43, 44, 47. Ratification of, 45, 51, 52, 65, 71, 72, 109-113, 262-265, 267, 319, 320. (See also Ratification.) Unauthorized, 37, 45, 100-113, 267, 268, 282-286. Which Are Not Usually Fraudulent, 291-304. Administrator, Liability for Commissions, 217, 218. Power to Make Contract of Sale, 360, 361. Signature to Contract of Sale, 360, 361. Advertising by Broker, 83, 84, 94. 134, 135. Agency. (See Authority of Broker.) Exclusive, 100, 101, 251, 252. Forms, 426-428. Renting, 75-77. Sub, 70-74. Termination of, 24, 33, 76, 79-02. (See also Termination.) 447 448 GENERAL INDEX. [References are to pages.] Agent. (See Broker.) Agreements. (See also Contracts.) Commission, 50, 03, 154, 108-170, 179, 180, 200, 201, 223-228, 235, 23G, 241-248. Forms, 426-431. Absence of, 228-237. As Affected by Special Conditions, 168-170, 179, 180, 200, 201. Contingent, 243-245. Custom as Part of, 229, 230. Deferring Commissions, 241-248. Enforcement of, 50. Express, 222, 223. for All in Excess of Fixed Price, 63, 154, 224-228, 244-246. Rules of Real Estate Boards as Part of, 235, 236. Special, 115, 118, 121-124, 128, 146, 170, 178, 179, Z18-220, 223-228, 241-248, 338, 339. to Wait until Title is Closed, 245-247. Unsupported, Deferring Commissions, 241-243. Valid, Deferring Commissions, 243. Encroachment, 369, 370. Forms, 436-439. Not to be Performed within a Year, 31-35. Oral, 34, 35, 47, 356, 357, 363, 364. Unlawful, of Agent, 329. Alien's Right to Make Contract of Sale, 360. All in Excess of Fixed Price, 63, 154, 224-228, 245, 246. Allegation of Authority, 336, 337. of Performance, 337, 338. Alternative Contracts, 171-173'. Amount of Commissions, 63, 154, 204, 207-209, 222-237, 245, 246. All in Excess of Fixed Price, 63, 154, 224-228, 245, 246. as Affected by Rules of Real Estate Boards, 235, 236. " Fixed by Agreement, 223-228. " Custom, 228-237. (See also Custom.) in Absence of Agreement, 228-237. " Custom, 236, 237. Measure of, 223, 224. on Leases, 207-209. " Loans, 204. When Agent is Not a Broker, 231, 232. Application for Loan, 28. Forms, 431-436. Appointment as Agent, Powers Conferred by, 36-38, 43-45, 70. Approval Clause in Contract of Sale, 377, 378. Assertions as to Value of Property, 300-304. Assignment of Contract of Sale, Forms, 418, 419, 424, 425. GENERAL INDEX. 449 [References are to pages.] Authority of Broker, 26-47, 69-92. (See also subheads.) Forms, 426-431. Allegation of in Complaint, 336, 337. as to Cancellation of Contract, 46. " " Third Parties after Revocation, 92. Conferred by Appointment as Agent, 36-38, 43-45. 70, 115-117. " " Instructions to Sell, 37, 115-117, 187. Duration of, 31-35, 80-92, 147, 148. Exclusive, 100, 101, 251, 252. Forms, 426-428. Extent of Ordinary, 36-45, 75-78. Form of Authorization, 26-35. Must be Exercised in reasonable Time. 81-84, 147. " Not be Exceeded, 257, 258. (See also Unauthorized Acta.) Naked, 80. Oral, 26-35, 39-42, 44-47, 82. Ratification of. (See Ratification.) Revocation of, 79-92. (See also Termination.) Termination of, 24, 33, 79-92. (Sec also Termination.) to Collect Rents, 31, 75, 76. " Employ Other Brokers, 70-74. " Exchange Property, 29, 187. Forms, 428. " Make and Endorse Negotiable Paper, 258, '250. " Contracts, 36-47. 268-270, 2S0-2SC. 360-362. " Loan, 28-30, 201, 202. " Purchase Property, 29-31. " Receive Payment for Property Sold, 70. 275-279. " Sell Property, 27-31. Forms, 426-431. " Sign Contract for Sale of Property, 26, 27, 36-47. 269-270, 360-362. Written, 26-34, 38-42, 44, 46, 71, 201, 202. Availability of Purchaser, 155-165. Bad Faith of Broker, 151, 152, 191, 192. 272. 273. (See also Fraud.) of Principal, 81, 84-87. Baltimore, Application for Loan, Forms, 435, 436. Contract of Sale, Forms, 411. Bankruptcy Terminates Agency, 87, 88. Board of Brokers, Rules of, 235. 236. Forms, 380-397. Boston, Contract of Sale, Forms, 410. Schedule of Fees, Charges and Commissions, Forms, 393, 394 450 GENERAL INDEX. [ References are to pages. 1 Broker, Abandonment of Customer by, 102, 103, 173, 174. Abandonment of by Customer, 182, 183. Acting as Middleman, 19, 20, 36, 51-56, 66, 67. " Principal, 47, 61, 62, 64, 66, 67, 151, 152. " for Both Parties, 48-57, 66, 67, 151, 187, 272, 273. (See also Double Employment.) Acting for Purchaser, 125, 126, 151, 152, 220, 221. • Undisclosed Principal, 70, 151, 152, 269, 270, 286-289. Actions by, 213, 330-340. (See also Pleading.) Forms, 440-442, 445. Acts of. (See Acts.) Advertising by, 83, 84, 94, 134, 135. Affixing Signs, 289, 290. Agreements with Principal. (See Agreements, Commission.) Application of Term, 19, 20. as Purchaser, 05-67. Authority of. (See Authority.) Bad Faith of, 151, 152, 191, 192, 272, 273. (See also Fraud.) Bankruptcy of, 87, 88. Combination by to Secure Secret Profits, 59, 67, 68. Commissions. (See Commissions.) Compensation. (See Commissions.) Complaint of, for Recovery of Commissions, 331-340. (See also Plead- ing.) Concealment of Facts by, 258, 293-296. Contracts of. (See Contract; also Agreements.) Corporation as, 24. Corrupt Influencing of, 68, 329. Death of, 90. Definition of, 19, 20, 43. Double Employment of, 48-57, 66, 67, 151, 187, 272, 273. (See also Double Employment.) Duty of to Principal. (See Duty of Broker.) Effort Required of, 130, 131. Employees of, 63. Employment of. (See Employment.) Exclusive, 100, 101, 251, 252. Forms, 426-428. Failure of Efforts. (See Failure.) Fraud of. (See Fraud.) Function of, 20. General Rule as to Discretion, 54-56. Good Faith of, 49, 54-56, 59-68, 150-154, 256-258, 272, 273, 339-340. (See also Good Faith.) Insurance, 77, 78. Introduction of Purchaser by, 94, 95, 133, 134. GENERAL INDEX. 451 [Uefereuces are to pages.] Broker — Continued. Liability of. (See Liability.) License to Act as, 24. 2.3, 78. Married Woman as, 22, 23. May be Personally Interested with Consent of Principal, 05. GG. Minor as, 24. Misfeasance of, 277-279. Misrepresentations by, 258, 260-2G5, 274, 305-309. (See also Fraud.) Must Act in Interest of Principal, 48, 59-G8, 150-153. 250. 257. " be Procuring Cause of Sale, 114-140. (Sec also Procuring Cause.) " Disclose Relevant Information to Principal, 154. 25S. " Not be Personally Interested, 59-G8. 151. 152. 272. '■' Not Exceed Authority, 257. 258. (See also Unauthorized Acts.) " Secure Best Offer Possible, 49, 152, 153. Negligence of, 278, 279. Non-Feasance of, 277-279. Notice to as Notice to Principal, 270-273. Partnership as, 24, 271. Pleading Acts Done by, 340. Powers of. (See Authority.) Presence at Consummation of Sale Not Necessary, 94, 95, L31, 132. Ratification of Acts of. (See Ratification.) Relations of Principal to, 250-254. " " to Principal, 255-259. i See also Relations.) Renting, 75-77. Representing Purchaser, 125, 120. 151-152, 220. 221. (See also Double Employment.) Revocation of Authority, 79-92. (See also Termination.) Secret Profits of, 59-68, 151. 152. 272. Signature to Contract, 40, 47, 3G0-3G2. Silence of Not Usually Fraudulent, 293-296. Termination of Agency, 24, 33, 70. 79-92. (See also Termination.) •• ' •• by, 33, 80, 84. Unauthorized Acts of. 37, 45, 106-113, 207. 268, 282-286. Unlawful Agreements of. 329. Intrusion on Real Property by, 289, 290. Usury of, 274. Volunteer, 105-113, 231. 232. Who May Act as. 22-25. With Discretion, 52-50, 00, 07, 151. 187. Without Discretion, 51-56, 66, 67. Brooklyn, Schedule of Fees, Charges, and Commissions, Forms, 381, 3 Burden of Proof as to Broker's Good Faith, 68. as to Principal's Knowledge of Double Employment, 51. " " Purchaser's Fnancial Ability. 164, 165 !-",_> GENERAL INDEX. [References are to pages. J California, Broker's Authority to Purchase and Sell, 29. Broker's Authority to Sign Contract of Sale, 41. Cancellation of Contracts, 46. Caution, Degree Required of Vendee, 313-310. Change of Mind by Vendor, 129, 159, 168-170, 244, 24G-248, 254. Change of Terms, 95, 142-147, 157, 1G8, 169, 171. Acceptance by Owner of, 95, 144, 145. after Acceptance by Purchaser, 142, 143. Charges, Schedules of, Forms, 380-397. Chicago, Agent's Contract of Sale, Forms, 414. Application for Loan, Forms, 432, 433. Contract of Exchange, Forms, 421-423. " Sale, Forms, 404-408, 414. Exclusive Agency Contract, Forms, 427, 428. Schedule of Fees, Charges and Commissions, Forms, 382-380. Claims for Commissions, Double, 95-101, 341-352. (See also Interpleader.) Closing of Title, 370. Collection of Rents, 31, 75, 76. Combination for Secret Profits, 59, 07, 08. Commissions, 93-249. (See also subheads.) Agreements for. (See Agreements.) All in Excess of Fixed Price, 63, 154, 224-228, 245-240. Alternative Contracts of Sale do Not Defeat, 171-173. Amount of, 03, 154, 204, 207-209, 222-237, 245, 240. (See also Amount.) as Affected by Abandonment by Broker, 102, 103, 173, 174. " Broker's Bad Faith, 151, 152, 191, 192, 272, 273. " Custom, 74, 228-237. " Defective Title, 177-179, 182, 184, 188-192, 194-201, 244, 240-248. " Failure of Broker's Efforts, 85, 102, 103, 127-129, 135, 173, 174, 252-254. " Fraud of Principal, 213. " " " Misrepresentations by Vendor, 183, 184, 201. " Provisional Contract of Sale, 158, 173. " Promises to Pay, 51, 52, 54, 120, 127, 213, 214, 219, 220. " Rules of Real Estate Boards, 235, 236. " " " Special Agreement. (See Special Agreements.) Complaint for Recovery of, 331-340. (See also Pleading.) Forms, 440-442, 445. Completed Transaction Necessary, 117-125, 166-174. Conveyance of Property Not Necessary for, 170. Deferred, 241-248. Division of, 59, 60, 70-74, 230. GENERAL INDEX. 453 [References are to pages.] Commissions — Continued. Double Claims for, 95-101, 341-352. (See also Interpleader.) Due, Time When, 238-249. as Affected by Agreements to Defer, 241-248. - Wait until Title is Closed. 245-247. " Contingent Commission Agreements, 243-245. " Defective Title, 247, 248. Unsupported Agreements Deferring Commissions, 241 243. " Valid Agreements Deferring Commissions, 243. Earned, Presence of Broker Not Necessary for, 131, 132. Production of Purchaser Sufficient for, 115-122. 141, 142. Requirements of, 94-104, 117-125, 130-134, 166-174, 240-242. Contract of Sale Necessary, 115, 117-125, 166, 170, 171. Contract of Sale Not Necessary, 1G0, 170. Delivery of Deed Required, 119. When, 87, 94, 95, 114-140, 186, 193-203, 205-211, 238-249. for Unsuccessful Efforts, 127-120. in Absence of Agreement, 228-237. Introduction of Purchaser Not Necessary for, 94, 95, 133, 134. Liability for. (See Liability.) Measure of, 223, 224. Methods of Earning, 114, 115. Not Defeated by Change of Terms, 95, 142-147. 157. L68, 169, 171. " Failure of Purchaser, 120, 181-184. " Failure of Principal. (See Failure.) " Failure of Tenant, 208-211. " Interference of Principal, 135. 139, 227. 228, 2fi I 253. " Wife's Refusal to Sign Deed, 118, 177. Not Earned if Broker is Not Procuring Cause. (Sec Procuring < ause.) on Exchanges of Property, 50, 51, 59, GO,. 185-192, 228, 220. (See also Exchange.) " Installment Sales, 248, 249. " Leases, 205-211, 230, 230. (Sec also Leases.) " Loans, 193-204. (See also Loans.) " Options, 158, 150. " Rentals, 75, 7G. '• Sales Affected by Advertising, 83, 84, 134, 135. Payment of. (Sec Payment.) Purchaser's Responsibility for, L83, 218-221. Recovery of. (See Recovery; also Pleadin Rule as to. (See Rule.) Sale must be on Employer's Terms, ill I 17. 156 L58, L67 169, Sehe.lules of, Forms, 380-397. Sharing. 59, GO, 70-74, 230. 454 GENERAL INDEX. [References are to pages.] Commissions— Continued. Subagents', 70-74. Volunteers', 105-107, 231, 232. Waiver of by Broker, 108, 224. When Agent is Not a Broker, 231, 232. " Broker Acts for Both Parties, 50-57, 66, 67, 151, 187, 272, 273. " Principal is Undisclosed, 151, 152. Sale is Consummated by Another Broker, 135-137. " " " " Principal, 100-102, 137-140, 251-254. " Several Brokers are Employed, 95-101, 135-137. Compensation. (See Commissions.) Agreed, 223-228. Amount of. (See Amount.) Complaint for Recovery of Commissions, 331-340. (See also Pleading.) Forms, 440-442, 445. after Interpleader, Forms, 445. Completed Transaction, Necessary to Commissions, 117-125, 166-174. Completeness of Transaction, as Affected by Change of Terms, 168, 169, 171. as Affected by Special Conditions, 168-170. Concealment, by Broker, 258, 293-296. by Principal, 293-298. " Purchaser, 296-298. Conspiracy, 67, 68, 325, 328, 329. Proof of, 325. Punishment of, 328, 329. Consummation of Sale by Another Broker, 86, 135-137. by Principal, 100-102, 137-140, 251-254. Contingent Commission Agreements, 243-245. Contract. (See also Agreements.) Action Based Upon, 334-340. (See also Pleading.) Cancellation of, 46. Commission. (See Agreements.) Compelling Execution of, 327, 328. Encroachment, 369, 370. Forms, 436-439. Executed for Undisclosed Principal, 47, 287-289. Liability of Agent for Improper, 280-282, 329. " Unauthorized, 281-286. " Principal for Agent's, 46, 47, 268-270. of Corporation, 47, 360-362. " Employment, 26-34, 39-42, 49, 50, 73, 74, 223-228, 243-245. Forms, 426-431. Double Employment a Breach of, 49, 50. • Married Woman, 22, 23. " Salesman, Forms, 429-431. GENERAL INDEX. 4j5 [References are to pages.] Contract — Continued. Unauthorized, 281-286. Under Seal, 40, 46, 47, 269, 270, 3:54. Contracts for Exchange of Property, 170, 171, 187-192. Forms, 419-423. Contracts for Sale of Property, 353-379. (See also subheads.) Forms, 398-425. Acknowledgment of, 362. Forms, 403, 412. Agent's Sale, Forms, 414. Alternative, 171-173. Approval Clause in, 377, 378. as Affected by Statute of Frauds, 38, 39, 356, 357. Assignment of, Forms, 418, 419, 424, 425. Covenants and Restrictions in, 368-370. Demand for Performance of, Forms, 425. Description of Property in, 364-366. Drafting, 355, 356. Enforcement of, 46. 47. Essential Features of, 358. 359. Execution of, 46, 47. 280-289, 360-362. General Provisions in, 37S, 379. Informal, 356, 357. Deposit to Bind, 356, 357. Installment Plan, Forms. 415-418. Leased Property, 370, 371. Liability Under in Case of Fraud. 322, 323. Made by Broker, 36-47. 268-270, 280-286, 360-362. Cancellation or Surrender of, 46. Enforcement of, 46. 47. in Broker's Own Name, 47. Ratification of, 45, 319, 320. Signature to, 46, 47. (See also Signing.) Necessary to Entitle Broker (<» Commissions, L15, 117 1-"-. 106, L70, 1.1. Not Necessary to Entitle Broker to Commissions, 166, IT". Oral. :!4, 35, 356, 357. Understandings as t<>. 363, 364. Parties to, 359, 360. Power to Make, of Administrator, 360, 361. " Alien, 360. " Broker, 36-47, 268-270, 360-362. " Business Corporation, 47, 360-362. " Executor, 360., 361. " Guardian, 360, 361. •' Party Noi an Owner, 215, 216, 360. 456 GENERAL INDEX. [References are to pages.] Contracts for Sale of Property — Continued. Power to Make, Trustee's, 360, 301. Provisional, 158, 173. Recitals in Not Waiver of Fraud, 320, 321. Rescission of, 311, 318-320. Restricted Lots, Installment Plan, Forms, 415, 416. Signatures to, 40, 47, 300-302. (See also Signing.) Special Clauses in, 300, 377, 378. Statement in as to Easements, 305, 308-370. " " " Encroachments, 308-370. " " " Fixtures, 370, 377. " " " Gross or Acreage Price, 308. " " " Incumbrances, 365, 368-370. " " " Manner of Payment, 371-373. " " " Mortgages, 371-373. " " " New Buildings, 375. " " " Ownership in Adjacent Streets, 300-308. " " " Price, 371-373. " " " Restrictions, 368, 369. " " " Time for Delivery of Deed, 375, 370. Suburban Property, 373-375. Unauthorized, 280-280. under Seal, 40, 40, 47, 269, 270. Vitiated by Material Fraud, 292. Conversion of Money by Broker, 259. Conveyance of Property Not Necessary for Commissions, 170. Cook County, Illinois, Agent's Sale Contract, Forms, 414. Contract of Sale, Forms, 400-403, 414. Exclusive Agency Contract, Forms, 427, 428. Schedule of Fees, Charges and Commissions, Forms, 387-391. Corporation as Broker, 24. Power to Make Contract of Sale, 300. Signature to Contract of Sale, 47, 301, 302. Covenants and Restrictions in Contract of Sale, 308-370. Criminal Fraud, 327-329. Compelling Execution of Instrument, 327, 328. Conspiracy, 67, 68, 325, 328, 329. Corrupt Influencing of Agent, 08, 329. Extortion, 328. Obtaining Property by False Pretenses, 327. Punishment for, 328, 329. Unlawful Agreements of Agents, 329. Custom, as Affecting Commissions, 74, 228-237. Absence of, 230, 237. as Affected by Rules of Real Estate Boards, 235, 230. " Part of Agreement, 229, 230. GENERAL INDEX. 45; [References are to pages.] Custom — Continued. Binding upon Parties, 230-232. Evidence of, 75, 231, 233-235. for Division of Commissions, 230. How Established, 230, 232, 233. Ignorance of, 232, 233. Customer. (See Purchaser.) Damages, Liquidated, 171-173. Measure of in Case of Fraud, 321. Death of Broker, 90. of Principal, 76, 90, 91. Deed, Delivery of, 119, 375, 376. Deed and Money, Forms, 423, 424. Defective Title, 177-179, 182, 184, 188-192, 194-201, 244. 246-248. Defense in Pleading, Matters of, 56, 57, 174, 339, 340. Deferred Commissions, 241-248. Delivery of Deed, 119, 375, 376. Demand for Performance of Contract of Sale, Forms, 425. Denver, Schedule of Fees, Charges and Commissions, Forms, 397. Deposit to Bind Informal Contract, 356, 357. Descripticn of Property in Contract of Sale, 364-366. Destruction of Property Terminates Agency, 87. Disclosure of Information, 154, 258, 295, 296. of Purchaser to Principal, 159-161. Waiver of Right to, 160, 161. Discretion, Broker With, 52-56, 66, 67, 151, 187. Broker Without, 51-56, 66, 67. General Rule as to, 54-56. Dispossession of Tenant, 76, 77, 211. Division of Commissions, 59. (iO, 70-74. 230. Double Claims for Commissions, 95-101, 341-352. (See also Interpleader.) Double Employment, 4S-57. 66, 67. 151, 187, 272, 273. Broker with No Discretion May Act for Both Parties, 51-56. General Rule as to Discretion, 54-56, 151. in Exchanges of Property, 50, 51, 66, 67, 187. Not Unlawful in Itself, 52-56. Pleading, as a Defense, 56, :>7. Ratification of, 51, 52. With Knowledge of Principals, 51, 52, 273. Without Knowledge of Principals, 49-51. Drafting Contract of Sale, 355-379. Due, When Commissions Are, 238-249. (See also < ommiaaions.) 458 GENERAL INDEX. [References are to pages.] Duration of Broker's Authority, 31-35, 80-92, 147, 148. Duty of Broker to Principal, 38, 48-50, 55, 59, GO, 75, 115-117, 130, 131, 175- 177, 255-258. E Earned Commissions. (See Commissions.) Easements, 365, 368-370. Employees of Broker, 63. Employer. (See Principal; also Purchaser.) Employment of Broker, 36-57, 66, 67, 105-113, 186, 201, 202, 207, 213, 214, 220, 221. ( See also subheads.) by a Broker, 70-74. " Purchaser, 125, 126, 151, 152, 220, 221. Contract of, 26-34, 39-42, 49, 50, 73, 74, 223-228, 243-245. Forms, 426-431. Double, 48-57, 66, 67, 151, 1S7, 272, 273. (See also Double Employment.) Implied, 111-112. Manner of, 108. Must be by Owner or His Authorized Agent, 10S, 109. of More than One, 95-101, 135-137, 250, 251, 341-344. Powers Conferred by, 36-38, 43-45, 70, 115-117. Ratification Equivalent to, 109-113. Termination of, 24, 33, 76, 79-92. (See also Termination.) Time of, 31-35, 80-84, 147, 148. Encroachments, 368-370. Agreements for, 369, 370. Forms, 436-439. Enforcement of Commission Contract, 50. of Contract of Sale Made by Broker, 46, 47. Equity Suits, Interpleader Makes Actions at Law, 351, 352. Essential Features of Contract of Sale, 358, 359. Evidence. (See Proof.) Exchange of Property, 185-192. (See also subheads.) Authority of Broker to Effect, 29, 187. Forms, 428. Commissions on, 50, 51, 59, 60, 1S5-192, 228, 229. as Affected by Broker's Bad Faith, 191, 192. " " " Defective Title, 188-192. Conflicting Decisions as to when earned, 185, 186. from Both Parties, 187. Rule when Contract has been Executed, 187-192. When Earned, 186. Contracts for, 170, 171, 187-192. Forms, 419-423. Defeated by Defective Title, 192. Double Employment in, 50, 51, 60, 07, 187. GENERAL INDEX. 4.7.1 [References are to pages.] Exclusive Agency, 100, 101, 251, 252. Forms, 426-428. Execution of Contract by Broker, 47, 280-289. of Contract of Sale, 46, 47, 280-289, 360-362. Executor, Liability of for Commissions. 217. 218. Power of to Make Contract of Rale, 360, 361. Signature of to Contract of Sale, 360, 361. Exercise of Caution Required of Vendee, 311-316. Extent of Broker's Ordinary Authority, 36-45, 75-78. Extortion, 328. Facts Constituting Cause of Action, Pleading, 333-337. Failure of Broker's Efforts, 75, 81, 85, 102, L03, 127-129, 135, 173. 174. 252- 254. Caused by Principal's Interference, 135. Liability for, 75, 148, 149. Rights of Principal after, 10?, 103, 135, 173. 174. 252-254. of Customer to Complete Sale, 120, 135, 181-1*4. Caused by Customer's Abandonment of Broker, 135, 182, 183. " " Misrepresentations of Vendor, 183, 184. General Rule as to, 181, 182. of Lease, 208-211. " Principal to Complete Loan, 194-201, 203. 204. " Principal to Complete Sale, 103, 117, 120, 126, 129, 159, 167-170, 175- 180, 182-184, 188-192, 244, 246-248, 254. Caused by Defective Title, 177-179, L82, 188-192, 244. 246-248, 254. " Refusal of Vendor, 120, 126, 159, 167-170, 254. Vendor's Wife, 118, 177. General Rule as to, 176, 177. Special Causes for. 179, 180. False Pretenses, Obtaining Property by, 327. False Representations, 258, 260-265, 274, 296-317. (See also Misrepresenta- tions; also Fraud.) Fees. (See Commissions.) Schedules of, Forms, 380-397. Financial Ability of Purchaser, 161 165. Burden of Proof as to, 164, 165. Need Not be Shown, 162, 16.;. First Mortgages, 372, 373. Fixed Price, All in Excess of, 154, 224-228, 245. 240. Fixtures, 376, 377. Forfeit Money, 245. Fraud, 291-329. (See also subheads.) Acts Not Usually Considered ■■>. 291 -'it- Assertions and Opinions ;i- to Value, 300, 301. 460 GENERAL INDEX. [References are to pages.] Fraud— Continued. Acts Not Usually Considered a,— Continued. Promises, Hopes, etc., 298, 299. Silence and Concealment, 293-298. Assertions and Opinions as to Value, 301-304. Contract of Sale Vitiated by Material, 292. Criminal, 07, OS, 325, 327-329. (See also Criminal Fraud.) False Representations, 258, 200-205, 274, 290-298, 301-317. Liability on Contract in Case of, 322, 323. Negligence of Vendee No Bar to Relief, 316, 317. of Broker, 50, 51, 59, 00, 04, 07, 08, 91, 258, 200-205, 273, 292, 293, 305- 309, 318-321. Concealment of Material Facts from Principal, 258. Double Employment Without Knowledge of Principals, 50, 51. Pleading, 265. Termination of Agency by, 91. Waiver of, 318-321. of Principal, 213, 200, 314, 316, 317. " Vendee, 296-298. Pleading, 265, 324-326. Proof of, 325, 326. Remedies for, 321-326. Rescission in Case of, 318-326. Statute of, 26, 31-35, 38, 39, 45, 356, 357. (See also Statute of Frauds.) What Constitutes, 291, 292. When Concealment is a, 296-298. Functions of Broker, 20. Good Faith of Broker, 49, 54-56, 59-68, 91, 150-154, 250-258, 272, 273, 339 340. Broker Not Required to Establish, 151, 339, 340. Double Employment Not, 55, 56, 151. Requirements of, 54-56, 59-68, 150-154, 250-258, 272, 273. Revocation of Agency Must be in, 81, 84-87. Gross or Acreage Price of Property, 308. Guardian, Liability for Commissions, 217, 218. Power to Make Contract of Sale, 360, 301. Signature to Contract of Sale, 300, 301. H Hopes, Expression of, 298, 299. I Ignorance of Custom, 232, 233. Illinois, Authority of Broker to Sign Contract of Sale, 41, 42. GENERAL INDEX. 401 [References are to pages.] Improper Contracts, Broker's Liability for, 280-282, 329. Improvements, 75. Misrepresentations as to, 308. Incidental Power to Contract, Broker's, 44. 4.~>. Increase of Price of Property, 14G, 147. Incumbrances, 365, 3G8-370. Information, Disclosure of by Broker, 154, 258, 293-29G. Vendor's Duty to Give, 311, 312. Insanity Terminates Agency, 88-90. Installment Sales, Commissions on, 248, 249. Contracts for, Forms, 415-418. Instructions to Sell Property, Power Conferred by, 37. 115-117, 187. Insurance Brokers, 77, 78. Interference of Principal in Broker's Negotiations, 135, 139, 227, 228, 2;>1- 253. Interpleader, 341-352. (See also Pleading.) Forms, 442-445. Complaint after, Forms, 445. Method of Procedure, 348-351. Nature of, 344. Requisites of, 351, 352. When Permissible, 345-348. Intervention of Principal. (See Interference.) Introductions, 94, 95, 133, 134. Intrusion on Real Property, 289, 290. J Jersey City, Schedule of Fees, Charges and Commissions, Form-. 305, 390. Joint Interest in Property, 213. Severance of Revokes Agency, 87. K Knowledge, Principal Chargeable with Broker's, 270-273. law Day, The, 37G. Law, Proof of Fraud at, 325, 32G. Leases, 125, 370, 371. Commissions on, 205-211, 230, 236. Amount of, 207-209. as Affected by Dispossession of Tenant, 211. « " » Failure of Lease, 208-211. General Requirements for Recovery of, 206, 207. Tenant's Liability for, 207. When Earned, 205-211. 462 GENERAL INDEX. LKefi'ivni'cs arc to pages.] Legal Effect, Pleading, 332, 333. Liability of Broker, 260-265, 275-290. (See also subheads.) for Affixing Signs, 289, 290. " Contracts Executed by Him, 37, 280-289. " Conversion of Money, 259. " Defective Title, 177-179. " Exceeding Authority, 257, 258, 282-280. " Failure to Rent, 75. " Sell, 148, 149. " Fraud. 68, 260-263. " Improper Contracts, 280-282, 329. " Misfeasance and Non-feasance, 277-279. " Misrepresentations, 260-265. '• Moneys Received, 275-277. " Negligence, 278, 279. " Secret Profits, 68. " Unauthorized Acts, 100-113, 282-286. Contracts, 281-286. '• Unlawful Intrusion on Property, 289, 290. to Third Parties, 275-290. When Principal is Incapable, 281. " Non-existent, 280, 281. " " Undisclosed, 286-289. Liability of Joint Employers for Commissions, 213. of Persons Sharing Profits, 68. of Principal, 212-221, 260-265. (See also subheads.) Acceptance of Proceeds Test of, 262-265, 267. for Agent's Contracts, 46, 47, 268-270. " Broker's Representations, 261-265, 274. 305, 300. " " Wrongdoing, 267. for Commissions, 81, 95-102. 183, 212-221. as Affected by Fraud, 213. " Promises to Pay, 213, 214. to Exclusive Agent, 101. When Negotiating Sale, 101, 102. When Not Owner of Property, 214-218. for Misrepresentations, 260. " Notice to Agent, 270-273. to Third Parties, 206-274. When Undisclosed, 47, 269, 270. of Purchaser for Commissions, 183, 218-221. " Tenant for Commissions, 207. " Trustees, Executors and Administrators for Commissions, 217, 218. on Contract in Case of Fraud, 322, 323. License to Act as Broker, 24, 25, 78. Liquidated Damages, 171-173. GENERAL INDEX. 4(33 [References are to page-.] Loans, 28-30, 123, 193-204. Authority to Negotiate. 28-30, 201, 202. Application for. 28. Forms, 431-430. Commissions on, 193-204. as Affected by Defective Title, 194-201. Failure of Principal. 194-201, 203, 204. " Misrepresentations of Principal, 201. " " Refusal of Principal. 203, 204. " Special Conditions, 200, 201. Employment Requisite to, 201, 202. Not Earned unless Principal's Terms arc Met, 202, 203. Recovery of, 203, 204. When Earned, 193-203. New York Rule, 194-19G. Rule in Other States, 190-200. Location of Property, Misrepresentations as to, 308. Lots, Restricted, 308, 309. Forms, 415, 410. M Manner of Payment for Property, 371-373. Maps of Suburban Property, 373-375. Married Women as Brokers, 22, 23. Massachusetts, Broker's Authority to Sign Contract of Sale, 41. Measure of Broker's Compensation, 223, 224. Methods of Closing Sale, 354-356. of Describing Property, 364-366. " Earning Commissions, 114, 115. " Pleading, 332. Middleman, Broker as, 19, 20, 36, 51. 56, 66, 67. Minnesota, Broker's Authority to Sign Contract of Sale, 42. Minors as Brokers, 24. Misfeasance, Agent's Liability for, 277-279. Misrepresentations, 258, 200-205. 274. 200-2!>s. 301-317. by Broker, 258, 260-265, 274, 305-309. Liability of Principal for. 261-265, 274. 305, 306. by Principal, 183, 184, 201. 260, 313-316. " Vendee, 296-298. Missouri, Broker's Authority to Make Loans, 30. « •■ " Sell. 29, 30. Money, Conversion of by Broker, 259. Deed and, Forms, 423, 124. Forfeit, 245. Received, Liability of Broker for. 275 277. Montana, Broker's Authority to Purchase or Sell, 3L 464 GENERAL INDEX. [HefiTi'iices are to pages.] Mortgages, 371-373. First, 372, 373. Misrepresentations as to, 30S. Purchase Money, 372. 373. Second, 372, 373. Motion for Interpleader, Forms, 442-444. N Nebraska, Broker's Authority to Sell, 30, 31. Negative Easements, 30S-370. Negligence, Broker's Liability for, 278, 270. of Vendee, 310-317. No Bar to Relief against Wilful Fraud, 31G, 317. Omission of Due Caution, 312-310. " " Investigation, 312. Reliance upon Statement of Vendor, 310, 311. Negotiable Paper, Broker's Power as to, 258, 250. Net Price of Property, 03, 224-228, 245, 240. New Jersey, Broker's Authority to Negotiate Sale or Exchange, 20. Broker's Authority to Sign Contract of Sale, 40, 41. Contract of Sale, Forms, 412, 413. New York, Broker's Authority to Make Loan, 28, 20. Broker's Authority to Sell, 27, 28. " Sign Contract of Sale, 30. 40. Rule as to Commissions on Loans, 104-100. Statute of Frauds, 33-35. New York City, Application for Loan, Forms, 431, 432. Contract of Exchange, Forms, 419, 420. " Sale, Forms, 398-400. Schedule of Fees, Charges and Commissions, Forms, 380, 381. Non-feasance, Broker's Liability for, 277-279. Non-Performance, Pleading Excuse for, 337, 338. North Dakota, Broker's Authority to Sign Contract of Sale, 42. Notice to Agent, 270-273. of Death of Principal Not Necessary, 90. of Revocation, 92. When Notice to Principal, 270, 271, 273. " Not Notice to Principal, 271-273. " Principal is Chargeable with Agent's Knowledge, 270-273. Obligations of Broker to Principal. (See Duty of Broker.) Opinions as to Value, When Fraudulent, 301-304. When Not Fraudulent, 300-301. GENERAL INDEX. 1,,;, [References are to pages. 1 Oral Agreements, 34, 35, 47, 356, 3.57, 303. 364. Authorization of Broker, -20-3:). 39-42, 44-47 82. Option, 86, 171-173, 214, 215, 357, 358. Not a Previous Sale, 86. Not a Sale, 158, 171, 172. Without Consideration, 358. Order of Interpleader, Forms, 444. 445. Owner. (See Principal.) Ownership in Streets Adjacent to Property, 366-368. P Parties to Contract of Sale, 359, 360 Partnership as Brokers, 24, 271. Party Walls, 365. Payment for Property, 371-373. Agent's Power to Receive, 70, 275-277. by Installment, Forms, 415-418. to Agent as Payment to Principal, 27i;. 277. of Commissions, by Purchaser, 218-221. on Installment Sales, 248, 24!). Promises for, 51, 52, 54, 120, 127, 213, 214. 219, 220. Performance of Contract of Sale. Demand for, Forms, 425. Pleading Full, 337, 338. Terminates Agency, 79, SO. Time of, 31-35, 80-84, 147, 14s. Philadelphia, Contract of Sale, Forms, (08, 409. Schedule of Fees, Charges and Commissions, Forms, 392. Pleading, 3:;ii-::r>2. (Sec also Interpleader.) Forms, 440-445. Action Based upon a Contrail. 334-340. Acts Done by Agent, 340. Authority of Broker. 336, 377. Change of after Litigation is Begun, 180. Complaint after Interpleader, Forms, 445. " for Broker's Commissions, 331-340. Forms, 440-442. 445. Double Employment, 56, 57. Facts Constituting Cause of Action, 333 337. " to be state,!, 335 :::i7. Fraud of Agent. 265, 324-326: When Committed by More than One, I Full Performance and Excuse for Non-Performanci Legal Effect, 332, 333. Matters of Defense, 56, :>7. 17 1. 339, 340. Methods of, 332. Special Agreements, 3 IS 466 GENEEATi INDEX. [References are to pages.] Powers, Authority and Rights of Broker. (See Authority.) Presence of Broker at Consummation of Sale, 04. 95, 131, 132. Previous Sale, Option Not a, 80. Termination of Agency l>y, 86, 87. Price of Property, 368, 371-373. (See also subheads.) Agent Must Secure Best Possible, 49, 152, 153. All in Excess of Fixed, 03, 154, 224-228, 24.3, 240. Gross or Acreage, 308. Increase of, 140, 147. Net, 63, 224-22S. Paid, Misrepresentations as to, 305, 300. Requirements as to, 145-147. Procuring Cause of Sale, Broker as, 114-140. (See also subheads.) Contract of Sale Necessary, 115, 117-125. 166, 170. 171. " " Not Necessary, 166, 170. Degree of Effort Required of Broker, 130, 131. Delivery of Deed Requisite, 119. Effect of Change of Terms, 142-145. " Promises to Pay Commissions, 120. 127. " Special Agreements, 118, 121-124. General Rule as to, 124, 125, 238-240. Good Faith of Broker Necessary, 150-153. Introduction of Purchaser Not Necessary, 94, 95, 133, 134. Presence of Broker at Sale Not Necessary, 131, 132. Production of Purchaser Sufficient, 115-122, 141, 142. Sale Must be on Employer's Terms, 141-147. When Broker Represents Purchaser, 125, 120. Sale is Made by Principal, 100-102, 137-140, 251-254. Profits, Secret, 58-08, 151, 152, 272. (See also Secret Profits.) Promises, Hopes, etc., 298, 299. Promises to Pay Commissions, 51, 52, 54, 126, 127, 213, 214, 219, 220. Effect of, 51, 52, 120, 127, 213, 214. Purchaser's, 219, 220. Proof of Conspiracy, 325. of Custom, 75, 231, 233-235. " Financial Ability of Purchaser, 104, 165. " Fraud, 325, 326. Property, Contracts for Sale of. (See Contracts.) Conveyance of not Necessary for Commission, 170. Description of in Contract of Sale, 304-300. Destruction of Terminates Agency, 87. Easements on, 365, 368-370. Encroachments on, 308-370. Exchange of. (See Exchange.) Fixtures on, 376, 377. GENERAL INDEX. 4(j7 [Refereuces aie to pages.] Property — Continued. Improvements on, 75. Incumbrances on, 365, 368-370. Intrusion on, 289, 290. Leases on, 125, 205-211, 230, 236, 370, 371. Misrepresentations as to, 260-265, 274. 296-298, 302, 303, 305-317. Mortgages on, 371-373. Obtained by False Pretenses, 327. Opinions as to Value of, 300-304, 306. Options on, 80, 158, 171, 172. 214. 215, 356-358. Ownership of Streets Adjacent to, 366-368. Party Walls on, 365. Payment for, 70, 275-277, 371-373. Price of. (See Price.) Purchase of, 29-:?l. (Sit also Purchaser; also Sale.) Restrictions on. 368, 309. Sale of. (Sec Sale.) Signs on, 28!), 290. Suburban. 373-375. Title to, 309. Provisional Contracts of Sale, l.">s. 17:. Provisions, General, in Contract of Sale, 378, 37!". Punishment for Con-piracy. 328, 329. for Criminal Fraud, 328, 329. Purchase Money Mortgage, 372. 373. Principal. (See also Purchaser.) Agreements with Broker. (See Agreements} also ( ontracl Bankruptcy of, 87, 88. Bound by Broker's Ads. 36, 37. 267-270. Broker as, 47. 61, 02. 64, 66, 67, 151, 152. Must be Employed by, ins. 109. Broker'- Obligations to. (Sec Duty of Brokei Concealment by, 293-29S. of Material Facts from, 258. Death of. 70, !I0. 91. Deli ii it ion of ; 21 . Duty to Volunteer Information, 311, 312. Employment of Several Brokers by, 95 101, 135 137, 250, 251, ::n 144. Failure of. to Complete Loan, 194-201, 203, 204 Complete Sale, in:;. 117. 120, 120, 129, l 170, 175 180, 182-184, 188-102, 244, 246 248, 254. Fraud of, 213,. 260, 314, 316, 317. Good Faith of, 81, 84 87. Incapable, 281. Insanity of, ^s 90. Intervention of, 135, L39, 227. 22* -J68 GENEKAL INDEX. [References are to pages.] Principal— Continued. Liability of. (See Liability.) Misrepresentations by, 183, 184, 201, 260, 313-316. Need Not Recognize Volunteer, 10,5-107. Non-Existent, 280, 281. Not Bound by Broker's Acts, 43, 44, 47. Notice to Broker as Notice to, 270-273. Not Owner of Property, 214-217, 300. Purchaser as, 125, 126, 220, 221. Relying upon Statements of, 310, 311. Ratification of Broker's Unauthorized Acts by, 45, 51, 52. 05. 262-265. " Volunteer's Acts by, 107-113. Refusal of, to Accept Loan, 203, 204. Relations of Agent to, 255-259. (See also Relations.) " to Agent, 250-254. Rights after Failure of Broker's Efforts, 102, 103, 135, 173, 174. 252-254. Termination of Broker's Employment, 81, 82. 85, 102, 103, 252-254. Sale Consummated by, 100-102, 137-140, 251-254. Termination of Broker's Agency by, 80-86. Terms of. (See Terms of Sale.) Undisclosed, 47, 70, 151, 152, 269, 270, 286-289. Purchase, of Property. (See Purchaser; also Sale.) Authority of Broker to Purchase, 29-31. Purchaser. (See also Principal.) Abandonment by, 135, 182, 183. of by Broker, 102, 103, 173, 174. as Principal, 125, 126, 158, 159, 220, 221. Availability of, 155-165. Broker also acting for, 48-57, 66, 67, 151, 187, 272, 273. " as, 65-67. Commissions by, 125, 126, 183, 218-221. Disclosure of, 159-161. Employment of Broker by, 125, 126, 151, 152, 220. 221. Failure of, to Complete Purchase, 120, 181-184. (Sec also Failure.) Fraudulent Concealment of Facts by, 296-298. Financial Ability of, 161-165. Must Exercise Caution, 312-316. Negligence of, 310-317. (See also Negligence.) Not Ready, and Willing, 156-158. " Responsible for Commissions, 183. Ready, Willing and Able, 115-122, 141, 142, 155-158. Relying upon Statements of Vendor, 310, 311. Taking Title in Another's Name, 129. Undisclosed, 159-16L GENERAL INDEX. 4(ji) [References are to pages.] Q Qualified Acceptance of Vendor's Offer, 16S. R Railroad Consents, 370. Ratification of Broker's Acts, by Acceptance of Proceeds, 262-265, 267. by Implication, 111, 112, 262, 263. " Promise or Payment of Commission, 51, 52. Equivalent to Employment, 107, 109-113. Intent to Must be Plain, 107, 111). 111. Must be with Full Knowledge, 112. 113. of Broker's Contract. 4.5. 319, 320. " " Unauthorized Acts, 45, 109-113. " Double Employment, 51, 52. " Subagent's Acts, 71, 72. " Volunteer's Acts, 107-113. Real Estate. (See Property.) Boards, Rules of, 235, 236. Broker. (See Broker.) Sale of. (See Sale.) Reasonable Time, Termination of Agency after. 81-86. What Constitutes, 81-84, 147. Recitals in Contract Not a Waiver of Fraud, 320, 321. Recovery of Commissions, 70-74, 102-104, 107, 108, 115-117, 203, 204, 206. 207. (See also Pleading.) by One Not a Broker, 231. " Subagent, 70-74. Complaint for, 331-340. (See also Pleading.) Forms, 440-442, 445. Employmenl Necessary to, 107, 108. on Leases, 200, 207. " Loans, 203, 204. Requirements for, 102-104. 115-117. 206, 207. Relations of Agent to Principal, 48 57, 59-66, 255-259. Must Act in Interest of Principal, 48, 40. 59, 60, 64, 65, 250. " Disclose Relevanl [nformation, 2i " (Jive Faithful Service, 256, 257. " Not Exceed Authority, 257, 258. Responsibility to Principal, 25.5. Relations of Principal to Agent, 250 25 1. Relief, When Negligence of Vendee is No Bar to, 316, 317. Remedies for Fraud, 321-326. Renting Agency, 7.5-77. Rents, Authority of Broker 1 lie. t. 31, 75, 76. Misrepresentations ;i- \<<. 258, 307. Repairs, 75. 470 GENERAL INDEX. [References are to pages.] Requirements as to Earned Commissions, 94-104, 117-12.5, 130-134, 100-174, 240-242. (See also Commissions.) as to Good Faith of Broker, 54-50, 59-68, 150-154, 256-258, 272, 273. " " Interpleader, 351, 352. •• " Price, 145-147. " " Procuring Cause, 114-120. (See also Procuring Cause.) " " Recovery of Commissions, 102-104, 115-117, 206, 207. Rescission, 311. in Case of Fraud, 318-320. Action for, 322, 323. Must be Prompt, 319, 320, 323. Responsibility of Broker to Principal. (See Duty of Broker.) Restrictions on Property, 308, 309. Forms, 415, 410. Revocation of Broker's Authority, 79-92. (See also Termination.) Notice of, 92. Rights of Principal, after Failure of Broker's Efforts, 102, 103, 135, 173, 174, 252-254. after Termination of Broker's Agreement, SI, 82, 85, 102, 103, 252-254. Rule as to Broker with Discretion, 54-50. " " Caution Required of Vendee, 313-31(1. " " Commissions, 93-104. (See also subheads.) All in Excess of Fixed Price, 220-22S. on Exchanges, 187-192. " Loans, 194-200. When Broker's Efforts Fail, 102, 103, 253, 254. Customer Fails to Complete Sale. 181, 182. Due, 238-240. " Lease Fails, 208-211. " Principal Fails to Complete Sale, 170, 177. as to Completed Transaction, 1»>7. " " Double Employment, 54-50. " " When Broker is Procuring Cause, 124, 125, 238-240. Rules of Real Estate Boards, 235, 236. Forms, 380-397. Sale of Property, Agreements for. (See Agreements.) Authority of Broker to Negotiate, 27-31. Forms, 426-431. Does Not Include Authority to Exchange, 187. Broker as Procuring Cause of. (See also Procuring Cause.) Consummated by Another Broker, 86, 135-137. " Principal, 100-102, 137-140, 251-254. Contracts for. (See Contracts.) Forms, 398-425. GENERAL INDEX. 171 t References are to pages.] Sale of Property — Continued. Failure of. (See Failure. I Must be on Employer's Terms, 141-149, 156-158, 167-169, 202, 203. Nature of, 353, 3.54. on Installment Payments, 24S, 240. Forms. 415-41S. Option Xot a, 158, 171. 172. Oral Understandings as to, 363, 364. Previous, 86, 87. Termination of Agency by, 70, 80. •• Previous, S6, 87. Terms of. (See Terms.) Usual Methods of Closing, 354-356. Salesman's Contract, Forms, 429-431. San Francisco, Schedule of Fees, Charges and Commissions, Forms, 397. Schedules of Fees, Charges and Commissions, Forms, 380-397. Seal, Contracts Under, 40. 46, 47. 269, 270, 334. Second Mortgages, 372, 373. Secret Profits, 56-68, 151, 152, 272. Combinations to Secure, 59, 07, 68. Seller. (See Principal.) Signature to Contracts, 46, 17, 360-362. (See also Signing.) Signing Contracts of Sale, 30-47, 300-302. Authority of Broker, 20, 27. 36-47, 360-362. Broker's Incidental Power as to, 44, 45. Corporation's Signature, 47, 301. 362. Executor's Signature, 360, 361. Powers as to Conferred by Appointment as Agent, 30 38, 13 10. » « « « " Instructions to Sell, 37, 115 117. L87. Statutory Requirements as to, 38, 39. Signs, Affixing, 289, 290. Silence Not Usually a Fraud, 293-298. Special Commission Agreements, 115, 118, 121-124. 128, 146, 170, 178, 17!'. 218-22(1, 223-228, 241-248, 338, 339. as to Title, 178, 179. Pleading, 338, 339. Special Clauses in Contract of Sale, 366, 377, 378. St. Louis, Application for Loan, Forms, 133 135. Schedule of Fees, Charges and Commissions, 392, 393. Statute of Frauds, 20. 31-35, 38, 39, 15, ■ Agreements Not to be Performed Within a Year, as Affecting Contracts oi Sale, Streets, Ownership in, 366-368. Subagents, 70-74. Suburban Property, 373-375. Maps of, 373 : i75. 472 GENERAL INDEX. [References are to pages.] Suit. (See Pleading; also Interpleader.) Surrender of Contract, 46. T Tax on Right to Act as Broker, 24, 25. Tenant, 75-77. Dispossession of, 76, 77, 211. Failure to Consummate Lease, 208-211. Liability for Commissions, 207. Termination of Broker's Authority, 24, 33, 76, 79-92. as to Third Parties, 92. at Pleasure of Principal, 33, 80-86. General Rule, 83, 84. by Bankruptcy, 87, 88. " Broker, 33, 80, 84. " Death, 76, 90, 91. " Destruction of Property, 87. " Fraud of Broker, 91. " Insanity, 88-90. " Mutual Consent, 79. " Performance, 79, 80. " Previous Sale, 86, 87. " Principal after Reasonable Time, 81-86. General Rule, 83, 84. " Severance of Joint Interest, 87. Good Faith Must be in, 81, 84-87. Must be Timely, 86. of Naked Authority, 80. Principal's Rights after, 81, 82, 85, 102, 103, 252-254. When for Definite Time, 84. Termination of Renting Agency, 76. Terms of Sale, 141-149. (See also subheads.) Acceptance by Owner of Different, 95, 144, 145. Broker Must Secure Best Offer Possible, 49, 152, 153. Cannot be Changed after Acceptance by Purchaser, 142, 143. Change of, 95, 142-147, 157, 16S, 169, 171. Principal's Terms Must be Met. 141-147, 156-158, 167-169, 202, 203. When Not Specified, 52-56, 66, 67, 142, 148, 156, 167. Third Parties, Authority of Broker as to after Revocation, 92. Broker's Contract with after Death of Principal, 91. Liability of Broker to, 275-290. " Principal to, 266-274. Time for Delivery of Deed, 375. 376. of Performance, 31-35, 80-84, 147, 148. Title, Agreement to Wait for Closing of, 245-247. Approval Clause in Contract of Sale, 377, 378. Closing of, 376. GENERAL INDEX. 47! 1 , [References are to pages.] Title— Continued. Defective, 177-179, 182, 184, 1SS-192, 194-201, 244. 246 - Misrepresentations as to, 309. Opinions as to Marketability of, 179. Purchaser Taking in Another's Name, 129. Special Agreements as to, 178, 179. Vendor's Warranty of. 247. 248. Transaction Must be Complete, 1GG-174. Trespassing by Broker, 289, 290. Trustees, Liability for Commissions, 217, 218. Power to Make Contract of Sale, 360, 361. Signature to Contract of Sale, 360, 361. U Unauthorized Acts of Broker, 37, 100-113, 267, 268, 282-286. Acts of Volunteer, 106-108. Contracts, Ratification of, 45. Liability of Agent for, 281-286. Undisclosed Principal, 47, 70, 151, 152. 269, 270, 286-289. Purchaser, 159-161. Unsuccessful Efforts. (See Failure.) Unsupported Agreements Deferring Commissions, 241-24.;. Usage. (Sec Custom.) Usury of Broker. 274 V Valid Agreements Deferring Commissions, 243. Value, Assertions and Opinions as to, 300-304. Misrepresentations as to, 306. Vendee. (See Purchaser.) Meaning of Term, 21. Vendor. (See Principal.) Meaning of Term, 21 Volunteers, 105-113, 231, 232. Ratification of Acts by Principal, 107-113. W Waiver of Commissions, 168, 224. of Fraud, 318-321. \.,f Effected by Recitals in Contract, 320, 321. Whal Constitutes, 319. 320. of Righi to Disclosure of Purchaser, 160, 161. Walls, Party, 365. ,«,,,« , n Washington, Authority of Broker to Purchase and Sell Property, 31. Who May Act as Broker, 22 25. Written Authority of Broker, 26-34, 38 12, M. U, ,1. 201, M» Forms, 426-431. I AW LIBRARY UHIVB^OJCAUFOKNU t/vC ANGELES r so HERN REGIONAL LIBRARY FACILITY AA 000 176 829 o UNIVERSITY OF CALIFORNIA l.lltK MO Los A.ngel< s This hook is DUE on tin- last date stamped below. w AUP 1 S 10ft fl AUG 2 3 1880 law Utran ^ r;d 9 ^°° pun* Vv ^ A «Q For- I f . - V