Brief Fact Summary. A real estate broker entered into an exclusive listing agreement with the owner of a piece of property. The real estate broker was entitled to a 10% commission if certain conditions were satisfied.
Synopsis of Rule of Law. When a statement is made arguably repudiating a contract, the non-repudiating party should seek adequate assurances prior to treating the contract as repudiated.
Points of Law - Legal Principles in this Case for Law Students.
However, when under a fair reading it amounts to a statement of intention not to perform except on conditions which go beyond the contract, it becomes a repudiation.
Facts. The Appellant, Paul Drake (the "Appellant"), on March 5, 1984, signed an exclusive listing agreement with The Charles Hosley Company, Realtors ("Hosley"). The agreement authorized Hosley to act as the Appellant's agent until March 30, 1984, and attempt to sell a piece of land in North Pole, Alaska. Hosley was entitled to a 10% commission "if, during the period of the listing agreement, 1) Hosley located a buyer 'willing and able to purchase at the terms set by the seller,' or 2) the seller entered into a 'binding sale' during the term set by the seller." Hosley found three buyers interested in the property during the relevant time period. On March 23, 1984, the Appellant and the buyers signed an "earnest money receipt". The price and other specified terms were agreed to at this time. The closing was to occur "within 10 days of clear title" and time was to be "of the essence". A typed addendum to the contract, signed by the Appellant and Hosley, required the Appellant to pay Hosley a 10% commission based on the price of the property. On April 3, 1984, it was learned from the title report that the only encumbrance on the property was a judgment in favor of the Appellant's ex-wife. Hosley called the Appellant's attorney, the Appellee, Tom Wickwire (the "Appellee"), to ask about the encumbrance. The Appellee assured Hosley the judgment would be paid off with the cash received at the closing. Two or three days later, the Appellee called Hosley and requested that the closing occur by April 11, 1984, because the Appellant reached a settlement with his ex-wife conditioned upon that closing date. The Appellee alleged Hosley agreed to the April 11, 1984 closing date, but Hosley alleged that the only thing promised would be that the closing would be as quick as possible. On April 11, 1984, the Appellee called Hosley to arrange the closing. The conversation went as follows: "[O]n the morning of April 11 [Wickwire] called Hosley to select a specific time and place for closing. But Hosley's response was that his buyers could not close on that day as they did not have the money but would need until May 1, to get it. Wickwire asked Hosley if the problem was just getting the time to get the money out of the bank or did they not have the downpayment. Hosley replied that the buyers in fact had the money but were 'resisting the pressure to close.' " The Appellee told Hosley he would advise the Appellant not to close, because the buyers failed to perform. The Appellant sold the property to a different buyer, through a different broker on April 12, 1984.
Issue. Did Hosley's comments amount to anticipatory repudiation of the contract?
Held. No. The court observed that the law of anticipatory repudiation is found in the Restatement. It provides "[w]here an obligor repudiates a duty before he has committed a breach by non-performance and before he has received all of the agreed exchange for it, his repudiation alone gives rise to a claim for damages for total breach." Further that "[a] repudiation is (a) a statement by the obligor to the obligee indicating that the obligor will commit a breach that would of itself give the obligee a claim for damages…." The statement constituting the repudiation must be reasonably clear. • The court concluded that the Appellee acted unreasonably in concluding that Hosley's statement was a repudiation. The court concluded that the statement was ambiguous on its face. Further, the court found that the Appellee should have "sought assurances of performance under the rule stated in §251 of the Restatement."
Discussion. The Restatement's anticipatory repudiation section is very similar the Uniform Commercial Code's provision.