This section is from the book "Practical Real Estate Methods For Broker, Operator & Owner", by Thirty Experts. Also available from Amazon: Practical Real Estate Methods for Broker, Operator, Owner.
We have seen that the broker is obliged to produce a customer ready, willing and able to comply with the terms prescribed by the vendor. This brings up for discussion the question whether the broker is entitled to compensation in a case where the vendor has entered into a contract with a purchaser who afterwards turns out to be financially irresponsible. As a general rule, it may be stated that where the vendor enters into a contract legally binding upon both parties and the broker has been innocent of any misrepresentations of the responsibility of the purchaser, his commission is earned, no matter how worthless the purchaser may be; and that it is the duty of the principal to be on guard and ascertain the financial standing and ability of the party with whom he is dealing. In a late case the broker effected a sale, which culminated in the execution of a valid contract between the owner and the purchaser. The latter paid to the owner on account of the sale the sum of fifty dollars, the purchase price being ten thousand dollars, and the contract was actually delivered and was in proper form and enforcible by either party. The purchaser failed to carry out the conditions of the contract, and suit was brought against him by the owner for damages, and judgment was obtained against him, which was uncollectable, the purchaser being financially irresponsible. The broker sued the owner for his commission. The Court held that where the contract was 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. If, from a defect in the title of the vendor or from a refusal to consummate the contract upon the part of the purchaser for any reason attributable to the owner, the sale falls through, nevertheless, the broker is entitled to his commission, for the simple reason that he has performed his contract. The owner having entered into a contract with the purchaser and received fifty dollars upon account of the sale is in no position to urge that the broker is not entitled to his compensation. The law fixes the time when the commissions are due as of the date when the broker produces to his principal a party with whom he contracts. His acceptance of the payment of fifty dollars upon the contract is sufficient in law to establish that the contract of sale was made, and that the broker had performed his part of the contract and was entitled to his commission.