Sec. 161. Effect Of Failure To Contract

As stated in Sec. 157, those jurisdictions which require an executed contract of sale before the broker is entitled to commissions are expressly excluded from the considerations 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 employer 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 commission until such written agreement to purchase is furnished.22

In Norman v. Reuther, 25 Misc. 161 (N. Y. 1898), it was held in the case of an exchange, that the broker must show that he had procured a valid contract for exchange.

17 Cusack v. Alkman. 93 App. Div. 579 (N. Y. 1904).

18 See Sec. 96 supra; also Dnclos v. Cunningham, 102 N. Y. 678 (1896); Lunney v. Healey, 44 L. R. A. 601 (1898).

19 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. Y.) 203; Krabner v. Heilman. 30 N. Y. St. Rep. 434; Kalley v. Baker. 132 N. Y. 1; Gilder v. Davis, 137 N. Y. 506).

22 McFarland v. Lillard, 2 Ind. App. 165 (1891).

Sec. 162. Modification Of Terms

Where a broker has procured the making of a contract, 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

Sec. 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 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 annexed will not prevent equity from enforcing performance of the very thing and thus carrying out the intention 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 otherwise absolute undertaking, does not constitute an alternative contract." 29

≤≥Jones v. Henry. 15 Misc. 151 (N. Y. 1895).

24 Davis v. Cassette, 30 111. App. 44. 45 (1888). See also Sec. 134, 135 supra.

25 Sec. 149 supra.

26 Benedict v. Pincus. 191 N. Y. 382, 383 (1908).

27 Pomeroy v. Newell, 117 App. Div. 802 (N. Y. 1907).

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 prescribing 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 organized by the purchaser was formed and enough stock subscribed to meet the payment, and that in event of the failure of the purchaser to organize the company and obtain enough subscriptions to pay the balance of the purchase price within a specified time, the payment on account 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 forfeited 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

28 Phoenix Ins. Co. v. Continental Ins. Co.. 14 Abb. Pr. N. S. 266 (N. Y. 1873) ; Zimmermann v. Herzog, 13 App. Div. 213 (N. Y. 1897).

29 Crane v. Peer, 43 N. J. Eq. 558, 563.

≥°But see Lawrence v. Rhodes, 188 111. 96 (1900); Moss v. Wren, 118 S. W. 149 (Tex. 1908).

31 Gilder v. Davis, 137 N. Y. 506 (1893).

But a broker is not entitled to commissions upon effecting a provisional agreement for a sale,33 which fails because the purchaser avails himself of a reserved privilege to recede from the purchase upon the happening of a specified contingency not dependent upon the action of the vendor.34