## Facts

- Robert W. Cross and Arlene R. Cross owned an 80-acre tract near Anchorage that prospective purchasers sought to acquire for residential development.
- Developer Michael Stephens retained real estate broker Warren Sanders to locate suitable land and assist in negotiating a purchase.
- After earlier negotiations failed, Cross proposed acceptable deal terms; Sanders prepared a standard form purchase agreement reflecting those terms.
- The form included boilerplate stating Sanders was the sellers’ agent, but Sanders had been engaged by the buyers and served as their intermediary in locating the property and conducting negotiations.
- Cross expressed concerns about the buyers’ finances and ability to perform; Sanders responded with assurances regarding Stephens’ and Robert Milby’s financial strength and development experience.
- The trial court found Sanders’ statements about the buyers’ financial condition and development expertise were false and material to the Crosses’ decision to enter the agreement, which contemplated a delayed closing and significant seller exposure to performance risk.
- Before closing, Stephens’ and Milby’s financial positions deteriorated; Stephens assigned his contract interest to Sharon Dale, Milby assigned his interest to James C. Foster, and Dale later assigned her interest to Foster, making Foster the sole assignee.
- After receiving financial information and learning Sanders’ assurances were inaccurate, the Crosses refused to close.
- Foster sued for specific performance; the superior court ruled for the Crosses, concluding the agreement was voidable due to material misrepresentations by the buyers’ agent.

## Issues

1. Whether the superior court clearly erred in finding that Sanders was the buyers’ agent despite a standard-form clause identifying him as the sellers’ agent.
2. Whether material misrepresentations by the buyers’ agent regarding the buyers’ finances and development experience made the purchase agreement voidable at the sellers’ option, barring specific performance sought by the assignee.

## Decision

- The Alaska Supreme Court affirmed judgment for the Crosses.
- The court upheld the finding that Sanders acted as the buyers’ agent; the standard-form agency clause did not control over the parties’ conduct and course of dealing.
- The court upheld findings that Sanders made false, material representations about the buyers’ financial condition and development expertise and that the Crosses reasonably relied on them.
- Because the contract was voidable due to those misrepresentations, the Crosses could refuse to perform, and Foster (as assignee) could not obtain specific performance.

## Legal Principles

- Agency in fact is determined by conduct and relationship, not by boilerplate labels in a standard form.
- Material misrepresentations by a buyer’s agent about the buyer’s financial ability and qualifications may be imputed to the buyer and can render a land-sale contract voidable at the seller’s election.
- A seller may reasonably rely on a buyer’s agent’s representations when the buyer’s solvency and competence are central to the transaction’s risk allocation.
- Specific performance, as an equitable remedy, is unavailable to enforce a contract that the opposing party is entitled to avoid for material misrepresentation.
- An assignee generally takes no greater rights than the assignor; assignment does not defeat defenses that make the underlying contract voidable.

## Conclusion

The Alaska Supreme Court held that the broker functioned as the buyers’ agent and that his material misrepresentations about the buyers’ finances and development experience entitled the sellers to avoid the land-sale agreement, defeating the assignee’s claim for specific performance.


Foster v. Cross, 650 P.2d 406 (Alaska 1982)