Facts
- A.A. Marchiondo, a real estate broker, was engaged by Frank Scheck, the owner of certain real property.
- Scheck signed a writing offering to sell the property to a named prospective purchaser and stating he would pay Marchiondo a commission (a percentage of the sale price) if the sale was made.
- The writing set a six-day period for acceptance.
- On the morning of the sixth day, Scheck delivered a written revocation, which Marchiondo received.
- Later that same day, Marchiondo obtained the prospective purchaser’s acceptance of Scheck’s offer.
- Marchiondo sued Scheck for breach of contract, seeking the commission stated in the writing.
- The trial court dismissed the complaint on the ground that a principal may revoke a broker’s authority before the broker procures a purchaser.
Issues
- Whether an offer to pay a real estate commission upon sale constitutes an offer to enter a unilateral contract.
- Whether an offeror has the right to revoke such an offer after the broker has begun performance but before completion.
- Whether the broker’s alleged partial performance before receipt of the revocation presented a factual question that precluded dismissal.
Decision
- The Supreme Court of New Mexico reversed and remanded.
- The court treated Scheck’s writing as an offer to enter a unilateral contract to pay a commission upon the broker’s completed performance (a sale).
- The court distinguished the offeror’s power to revoke from the right to revoke without liability.
- The court held that partial performance may cut off the offeror’s right to revoke, creating a contract that becomes binding upon completion of the invited performance.
- Because what constitutes partial performance is fact-dependent, the court held dismissal improper and remanded to determine whether Marchiondo had partly performed before receiving the revocation.
Legal Principles
- An offer to pay upon completion of an act is an offer for a unilateral contract; acceptance occurs by performance.
- A principal may have the power to terminate an agency, but termination can be wrongful if it breaches contractual obligations.
- When the offeree begins performance invited by an offer for a unilateral contract, the offer may become irrevocable for the stated period, functioning like an option contract.
- Partial performance can create a conditional contractual obligation: the offeror must allow completion, and the offeree’s right to payment depends on completing performance.
- Whether conduct amounts to partial performance sufficient to bar revocation is a question of fact.
Conclusion
The court held that a broker’s beginning performance under a unilateral commission offer can bar the offeror’s right to revoke, but remanded because the existence and sufficiency of partial performance before revocation required factual determination.