## Facts

- A real estate broker procured a prospective purchaser for acreage owned by the sellers, and the parties executed a written contract of sale.
- The transaction did not close because the purchaser could not obtain financing for the planned development.
- The sellers released the purchaser from the contract after his inability to perform became apparent.
- The broker sued the sellers for the commission under an express listing/commission theory, arguing the commission was earned when the sales contract was signed.
- The broker also sued the purchaser, asserting an implied promise to complete the purchase (or otherwise protect the broker’s expected commission).

## Issues

1. Whether, absent wrongdoing by the seller, a broker earns a commission from the seller when a signed contract of sale fails to close due to the purchaser’s inability to obtain financing.
2. Whether a purchaser can be liable to the broker on an implied promise to complete the transaction when the purchaser knew the broker expected to be paid by the seller upon completion.

## Decision

- The court rejected the rule that a broker’s commission from the seller is automatically earned upon execution of a binding sales contract.
- Absent a wrongful act or default by the seller, the broker earns the seller-paid commission only if the transaction closes.
- Because the failure to close resulted from the purchaser’s inability to obtain financing and not seller wrongdoing, the judgment against the sellers was reversed.
- The court held that, on appropriate facts, a purchaser may be liable to the broker for breach of an implied promise to complete the transaction so the broker can receive the expected commission.
- The claim against the purchaser was remanded for a jury determination on whether an implied promise existed and was breached.

## Legal Principles

- Absent a wrongful act by the seller, a broker earns a commission from the seller only when: (1) the broker produces a purchaser ready, willing, and able to buy on the agreed terms; (2) the purchaser enters a binding contract with the owner; and (3) title closes.
- A purchaser is not “ready, willing, and able” for commission purposes if the purchaser cannot perform and the sale fails to close for that reason.
- A seller remains liable for a commission if the seller’s wrongful conduct causes the failure of closing; the seller may not avoid the commission by causing the nonperformance.
- A purchaser may, depending on the parties’ dealings and expectations, incur implied contractual liability to the broker if the purchaser unjustifiably fails or refuses to complete a transaction knowing the broker expects to be paid by the seller upon completion.
- Whether an implied promise by the purchaser exists and whether nonperformance was culpable are fact questions ordinarily for the jury.

## Conclusion

The court reformulated broker-commission law by making seller liability generally contingent on closing absent seller fault, while recognizing that a defaulting purchaser may, in limited circumstances, be liable to the broker under an implied promise to complete the purchase.


Ellsworth Dobbs, Inc. v. Johnson, 236 A.2d 843 (N.J. 1967)