"PROCURING CAUSE FACTORS
Whether a broker is the procuring cause of a sale must be factually determined on a case-by-case basis. Many factors can impact a determination of procuring cause, but no one factor is by itself determinative. Procuring cause is in fact the interplay of factors which together demonstrate that the unbroken efforts of a specific broker were responsible for the buyer making the decision to consummate the sale on terms which the seller found acceptable. In other words, a broker who is the procuring cause of a sale is a sine qua non of the sale -- the sale would not have occurred but for the broker's efforts.
When reviewing the factors listed below, it is important to note that the occurrence of any particular factor ina fact situation does not necessarily mean that procuring cause does or doesnot exist. This is because it is the interplay of factors that is so important in recognizing procuring cause, not the presence of any one factor alone. A specific factor can, in fact, cut either way, depending on its importance compared to the other factors in the case and depending on when it occurs in the timeline of the case.
Procuring cause factors may be grouped, for organizational purposes, into nine different categories. These categories are:
The nature and status of the transaction
The nature, status and terms of the listing agreement or offer to compensate
The roles and relationships of the parties
The initial contact with the purchaser
The conduct of the broker* or agent
Continuity and breaks in continuity
The conduct of the buyer
The conduct of the seller
In the analysis that follows,specific procuring cause factors are grouped by the above categories. In addition, where there is supporting case law, citations and brief explanations are provided to offer examples of the interplay of that factor with other factors and to suggest outcomes. Please note that much of the case law does not resolve disputes between brokers, but between sellers and brokers. Likewise, most of the cases involve open listings rather than exclusive listings. Nevertheless, these cases focus on two issues which are relevant to fact situations involving exclusive listings and broker-broker disputes -- that is,what has the broker been promised (by either the seller or the listing broker)and what must the broker do to attain his promised commission.
PROPOSED Procuring Cause Factors:
I. The Nature and Status of the Transaction
A. What was the nature of the transaction?
B. Is or was the matter the subject of litigation?
II. The Nature, Status and Terms of the Listing Agreement or Offer to Compensate
A. What was the nature of the listing or other agreement: exclusive right to sell, exclusive agency, open or some other form of agreement?
B. Was the agreement in writing?
C. Was the agreement in effect at the time the sales contract was executed?
D. Was the property listed subject to a management agreement?
E. Is the claimant a party to whom the listing broker's offer of compensation was extended?
F. If an offer of cooperation and compensation was made, how was it communicated?
G. Were the broker's actions in accordance with the terms and conditions of the agreement or offer of cooperation and compensation (if any)?
The nature, status and terms of the listing agreement or offer to compensate are the starting points for any procuring cause analysis. For the brokerto be the procuring cause, however, the agreement need not be exclusive. Farm Credit Bank of St. Louis v. Miller,872 S.W.2d 376 (Ark. 1994); Hennessy v. Schmidt, 384 F.Supp. 1073 (N.D.Ill. 1974); Atkinson v. S.L. Nusbaum & Co., 59 S.E.2d 857 (Va. App.1950). Neither must the agreement be written. Christo v. Ramada Inns,Inc., 609 F.2d 1058 (3d Cir. 1979); Ahrens v. Haskin, 299 S.W.2d 87(Ark. 1957); Feeley v. Mullikin, 269 P.2d 828 (Wa. 1954); Wilson v.Sewell, 171 P.2d 647 (N.M. 1946). The critical questions are whether the agreement was in effect at thetime the sales contract was executed and whether the claiming broker was aparty to whom the agreement extended. Farnsworth ***** *****mited v. Grant, 470 So.2d 253 (La.App. 1985); Winograd, Inc. v.The Prudential Insurance Company of America, 476 N.Y.S.2d 854, aff'd.472 N.E.2d 46 (1984); Mohamed v. Robbins, 531 P.2d 928 (Ariz. App.1975); Hampton Park Corporation v. T.D. Burgess Company, Inc., 311 A.2d35 (Md. App. 1973); Wright v. Jaegeris, 427 S.W.2d 276 (Mo. App. 1968).
For instance, in Winograd, one broker supplied information about the subject space to a second broker who finalized the transaction. 476 N.Y.S.2d at 856. Neither activity was dispositive. Id. The second broker, not the first, was the procuring cause because the listing agreement did not extend to the first broker. Id.
In Mohamed, the extension clause of an exclusive listing agreement was a key factor in establishing that the broker was the procuring cause. 531 P.2d at 930. Here the broker made contact with an appropriate representative of the ultimate purchaser during the period of the listing agreement, initiated negotiations with him and followed up after thelisting agreement expired. Id. The broker took no part, however, in the final negotiations. Id. Nevertheless, the broker was the procuring cause of the ultimate sale because the listing agreement provided that a commission would be due the broker if the property was sold to any person whom the broker had negotiated with prior to the expiration of the listing. Id.
1. Were all conditions of the agreementmet?
Where a condition precedent to the payment of commission is not met, the broker is not the procuring cause -- even though he has produced a buyer/lessee who is otherwise ready, willing and able and even though the sell or/lessor has acted in bad faith. The Quadrant Corporationv. Spake, 504 P.2d 1162 (Wash. App. 1973). In Quadrant, the agreement provided that the broker would get a commission if he produced a lessee who would agree to the terms acceptable tothe lessor and if the lessor was able to secure construction financing necessary to make improvements to the property. Id. With regard to the financing, the broker found lenders willing to take loan applications from the lessor, but the lessor refused to sign said applications. Id. at 1164. The court held that the lessor's refusal was in bad faith and constituted a breach of his agreement with the broker. Id. Nevertheless, the broker was not the procuring cause because it was factually unlikely that the lessor would have been approved for the loans and thus unlikely that the condition precedent to the payment of the broker's commission could have been met. Id.at 1166.
2. Did the final terms of the sale meet those specified in the agreement?
Fora broker to be the procuring cause of a sale, the final agreed-upon price need not be the same as that specified in the listing agreement. Follman Properties Company v. Daly,790 F.2d 57 (8th Cir. 1986); Fanning v. Maggi et al., 126 N.Y.S.2d 551(1953); Wilson v. Sewell, 171 P.2d 647 (N.M. 1946). Courts recognize that the buyer and seller will negotiate and that the seller's agreement to a lesser price than originally asked for should not negate the broker's efforts. Wilson, 171 P.2d at 649.
It is not, however, sufficient for the broker to bring the parties to agreement only as to price. Kaelin v. Warner267 N.E.2d 86 (N.Y. App. 1971). There must be agreement as to all essential terms for the broker to be entitled to receive the commission specified in the listing agreement. Id. For instance, in Kaelin, the listing agreement required the broker to procure a buyer at a sale price of $100,500, "with terms to be arranged." Id. at 87. The broker procured an offer of $100,500, but the parties could not agree as to the terms normally required for a real estate transaction, including payment terms and closing date. Id. Since there was no agreement as to all essential terms, the broker did not earn his commission. Id. at88.
In In re Fox' Will, a broker who introduced the parties and showed the property to the buyer first was not the procuring cause where it was another broker who was able to bring the buyer to the terms specified in the listing agreement. 126 N.Y.S. 158 (1953).....
This is up to the agent if they want to claim the commission. In essence the seller owes the commission and this would be between the seller or listing agent and the buyers agent.