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Associated Business Brokers, Inc. v. Calderone

A-5895-08T2 (N.J. Super. App. Div. 2010) (Unpublished)

BROKERS; COMMISSIONS — A brokerage agreement that requires that it be amended in a writing by both parties can not be altered merely by a course of dealing even if that course of dealing would have seemed to indicate that the client was willing to accept business terms less favorable than those specified in the brokerage agreement.

A businessman decided to sell his business and entered into a listing agreement with a broker to sell the business’s assets. If certain conditions were satisfied, the businessman was to pay a 10% commission. The required purchase price in the listing agreement was to be $200,000 with a required down payment of fifty percent. The balance was to be paid within three to five years after the sale at an interest rate of between six and seven percent per year. The listing agreement indicated no other condition and there was no agreement outside of the document. All changes had to be in a writing signed by both parties.

The business listed its yearly gross revenue as $265,000 and its net profit as $132,400. Four months later, the broker negotiated with a couple who made an offer to purchase the business for $225,000 with a down payment of $110,000. The balance consisted of the buyers’ assumption of a promissory note and an automobile loan. The offer was conditioned upon a yearly minimum gross income of $265,000 and a net profit of $160,000. It called for a covenant not to compete executed by the businessman.

Despite the broker’s efforts to convince the businessman to negotiate, the businessman never accepted the offer. The businessman refused mail from the broker and seemed to otherwise stall in his reply to the couple. No other purchasers were brought forth by the broker, and the listing agreement expired by its express terms.

The broker then sued the businessman for breach of contract on the theory the couples’ offer satisfied the condition under the listing and thus required payment of its commission. After trial, the lower court concluded the broker was entitled to a commission, finding the businessman acted in bad faith in response to the broker’s procurement of a ready, willing, and able buyer in accordance with the terms of the listing agreement, as reasonably altered by the course of dealing between the parties. The Court said the course of dealing proved the contract had evolved to where the offer was more favorable to the businessman than called for by the listing agreement.

On appeal, the Appellate Division reversed and dismissed the lawsuit, finding no amendment of the brokerage agreement had been proven. The Court disagreed the offer was in accordance with the terms of the listing agreement, as altered by a course of dealing, because any amendment was required to be in a writing signed by both parties. The Court also held the offer did not necessarily favor the businessman, as he never promised in the listing agreement to execute a covenant not to compete, and his written representations regarding gross revenue and net profit did not approach what the offer demanded. The Court found it entirely reasonable for the businessman to refuse to accept the offer; and, the businessman’s crass conduct was insufficient to amend the listing agreement or confer an equitable right upon the broker.

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