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
The rule that a broker cannot act for both sides, without 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 exchange of property, a broker receives commissions from both sides.13
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 enforceable contract of exchange has been entered into, the conditions are different. "The ordinary rule is that, in 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 customer and the person with whom the exchange was to be effected, even though one of the parties be unable to fulfill the contract."14
10 Kearns v. Nlekse. 66 Atl. 779 (Conn. 1907), (citing Woodward v. Jewell. 140 U. S. 253; 35 L. Ed. 481; 11 Sup. Ct. Rep. 784; Hayes v. Colby. 65 N. H. 193; 18 Atl. 251 ; Drury v. Barnes. 29 111. App. 166; Cleveland v. State Bk. 16 Ohio St. 236; 88 Am. Dec 445; Trndo v. Anderson. 10 Mich. 357; 81 Am. Dec. 795; Brown v. Smith. 67 N. C. 245) : Moran v. James, 20 Misc. 235 (N. Y. 1897); Davis v, Cassette, 30 111. App. 44 (1888). Bee also Menifee v. Higglns, 57 111. 50 (1870).
11 See Sec. 51 supra.
12 Willner v. Seale. 127 App. Div. 180 (N. Y. 1908).
13 Marks v. O'Donnell. 66 Misc. 147 (N. Y. 1910). See Sec. 48-53 supra as to broker's right to act for both sides.
Thus, where the broker is employed in the ordinary way to bring about an exchange and the defendant enters into a contract for the exchange, and it then develops 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 perform the written agreement of exchange previously entered 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 this is particularly so where the contract of exchange provides that if either of the parties neglect or refuse to perform the same, the other shall be entitled to a fixed amount as damages.18
14Norton v. Genesee Nat. Savings & Loan Assn., 57 App. Div. 520 (N. Y. 1901), (citing Kalley v. Baker, 132 N. Y. 1 (1892) ) ; Charles v. Cook, 88 App. Div. 81 (N. Y. 1903).
15 Baumann v. Nevlns, 52 App. Div. 290 (N. Y. 1900).
16 Roche v. Smith, 176 Mass. 595; 51 L. R. A. 510 (1900).
"Leete v. Norton, 43 Conn. 219 (1875).
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 furnished 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