The contract must have consent from all parties affected by such contract. Thus, if the warranty deed has multiple parties to the deed, the contract must also be agreed by all parties. The contract must be for lawful objects that includes duties, obligations, and authorities. The contract must also show the intent of the parties to contract; and thus, it must have sufficient cause or consideration (compensation in return for the lawful service). A copy of any agreement must be delivered to the person signing it when the signature is obtained (i.e. the Broker must provide a copy of the contract to the signatory persons).

If the Broker represents the Seller, there are other requirements in the “Listing Agreement” (separate form). The Listing Agreement must contain a “Disclosure Form” regarding real estate agency relationship (see below). The Listing Agreement must list authorization for Broker to act for the principal (the Seller), identify the property, and be signed by the principal. In authorizing the Broker to act on behalf of the Principal, the Listing Agreement must contains words such as “Employs”, “Authorizes”, or any other specific language that gives authority. The Listing Agreement must identify the property and described with sufficient clarity to permit reasonable identification, a common description (address) may not be sufficient if the property is in a rural area and may be difficult to identify by the address alone. A metes and bounds description may be necessary in some cases. Of course, all agreements must be signed by the principal(s). Finally, Smith & Garg, LLC often advise our clients to have commission rates specified in the Listing Agreement. However, California real property law does not require commission rate be shown on the Listing Agreement. “Parol evidence” may be used to prove commission rate, if other provisions prove that the principal authorized the agent to act on his/her behalf. Parol evidence is evidence that is not written in a contract, such as an oral agreement.

It is important to note that Brokers cannot recover from the Seller on a quasi-contract theory, without written agreement, as required by Statute of Fraud. The quasi-contract theory implies that a contract exists even though there is no written agreement. It is based on the larger principle called Quantum Meruit in which the court will intervene to prevent unjust enrichment. As stated, a Broker may not reply on a quasi-contract to recover Brokerage fee. At most, a Broker may recover costs for incidental or non-Brokerage services fees in providing the Brokerage services under the quasi-contract theory, but may not recover the commission for the sale of the real property. On the other hand, a “finder” can claim under Quasi-Contract.

As in other provisions, there are exceptions in which a Broker may recover the commission under the quasi-contract theory. An exception exists when the agreements are between two Brokers who cooperate in selling real property. An agreement between the two Brokers need not be in writing. The cooperating Broker's share can be recovered if (1) there exists a written agreement with the Seller, or (2) the entire fee has been recovered. In addition, a Broker for the Seller that also acts as a principal (i.e the Broker is also a principal of a joint-venture) will bind the joint venture without writing. A joint venture is an association of two or more people that formed to perform a specific transaction. In these instances, the court will treat the Broker as a Seller; and thus, bind other joint-venture partners. Finally, an implied covenant of good-faith may permit a Broker to recover even when the Listing Agreement has expired. This is a factual question and the court will allow the Trier of facts (the jury in a jury trial or the judge in a bench trial) to make the determination.

Should you have any questions or concerns, please contact our experienced real estate attorneys at Smith & Garg, LLC. The experienced real estate transaction and litigation attorneys at Smith & Garg, LLC can help.

Call Smith & Garg, LLC today at 1-877-517-4275 or complete our Contact Form and let us assist you.