Not all Contract Cancellations are Breaches of Contracts

May 13, 2013

A real estate contract is like any other contract and only binds those who agree to it. When a party to an agreement does act as required under the agreement, the other party, or parties, usually have a few ways to deal with the breach of contract. Sometimes parties are able to work it out among themselves but other times, litigation is required. Any type of breach of contract case can be tricky. What one party considers a breach may be a misunderstanding of the contract or an excusable breach which means the non-breaching party could end up losing the case.

Take for example, the California case of Charles B. Webster Real Estate v. Rickard. In this case, Charles B. Webster Real Estate (Webster) is suing H. E. Rickard (Rickard) for commission from a real estate sale. Originally, Dr. Moore and his wife agreed to an exclusive right to sell listing with Warde D. Watson Realty Co., lasting approximately eighteen months. About halfway through the agreement, Warde D. Watson Realty Co. transferred this agreement to Webster, with Dr. Moore’s permission. During the contract under Webster, Dr. Moore died, leaving the property as part of his estate, which was controlled by Rickard. Under the agreement with Dr. Moore, Webster would receive a commission regardless of who sold the pretty as long as the property was sold before the contract ended. Rickard sold the property after Dr. Moore’s death and before the contract ended, but refused to pay Webster the commission.

A real estate contract creates an agency between the broker and the owner of the property. This is important because a real estate agent has the power to make binding agreements for the owner, as long as it is within the terms of their agreement. Because of the power a real este agent has, California laws at the time of this case had already settled that an agency is terminated by the death of the principal, Dr. Moore, unless the agent, Webster, has an interest in the property. Webster admitted that he did not have an interest in the property. The court found that, under California law, once Dr. Moore died, and under the current circumstances, the contract between him and Webster no longer existed. If, for example, Webster was in the middle of making the sale at the time of Dr. Moore’s death, the court notes, there would be a strong case to allow him to complete the deal and receive the commission. In this case, however, because Webster was had not found a buyer, at the time of Dr. Moore’s their contract was terminates. Once terminated, Webster could not ask Rickard to abide by it.

In the above case, time and money may have been saved if Webster had discussed his case with an experienced attorney before going to court. While under some circumstances, the estate is required to pay out debts, an attorney would have been able to explain why in this situation he may not win. There are no guarantees in litigation but working with an experienced attorney can help you bring your best case forward. If you are in the Sacramento area and have business or real estate related legal questions please contact our office.

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