A recent Tennessee breach of contract case involving a real estate commission should probably be on the mandatory reading list for all real estate agents and agencies in Tennessee. (Ditto for any lawyer drafting listing agreements for real estate agencies). The pertinent facts of the case are as follows:
• The homeowner/seller ("Seller") entered into a six month exclusive listing agreement with a realty company, Crye-Leike, for the sale of her home ("Home")
• The listing agreement provided that Crye-Leike would receive a 7% commission if the home was sold during the six month term of the listing agreement
• The listing agreement provided that Crye-Leike was entitled to the commission if the sale occurred within 90 days after the six month term had expired provided that the buyer was someone to whom Crye-Leike had "shown or submitted" the Home or to whom Crye-Leike had "offered" the Home
• The listing agreement expired on August 21, 2007
• On August 21, 2007, a real estate agent named Ms. Weir contacted Crye-Leike to schedule an appointment for her clients to view the Home
• On August 22, 2007, Ms. Weir showed the Home to her clients, a couple from Alabama named the Sammons
• On October 22, 2007, the Seller sold the Home to the Sammons
• Crye-Leike was not paid any commission for the sale of the Home
At trial, Crye-Leike argued that it was entitled to a commission because, although its agents had never shown the Home to the Sammons by having an agent present at the Home for the Sammons to view it, nevertheless, it had shown, submitted and offered the Home to the Sammons prior to the termination of the listing agreement. How had Crye-Leike done this?
The basis for this argument on the part of Crye-Leike was that it had placed detailed information about the Home on the Multiple Listing Service ("MLS") and on several internet websites. Moreover, Crye-Leike proved that it had booked the showing of the Home to the Sammons one day prior to the termination of the listing agreement.
The trial court held in favor of the Seller. Its decision was affirmed on appeal. Both the trial court and the Tennessee Court of Appeals found that the words "shown," "submitted," and "offered" were ambiguous. The trial court judge acknowledged that those words could be interpreted to encompass placing information about the Home on the MLS or on internet websites.
Although an interpretation that favored Crye-Leike was possible, the trial court interpreted the words in question in favor of the Seller. The trial court construed the words in question strictly against Crye-Leike since it had drafted the listing agreement. (In Tennessee breach of contract cases, if a contract is ambiguous, it is generally construed against the party that drafted it.)
The trial court held that the word "shown" included only those situations "where a representative of Crye-Leike was physically present at a property to allow access to it so that a prospective buyer may view it." The trial court concluded that the word "submitted": "[C]oncerned a scenario where Crye-Leike provided a prospective buyer and his or her agent an opportunity to view a property by giving access to a secure lock box or comparable device...."
Real estate agents and agencies using listing agreements with the same or similar language as the one involved in this case should expect, based on the outcome of this case, that individualized or direct contact with a purchaser will be required to satisfy the "shown," "submitted," or "offered" language. Where the listing agreement is worded like, or similar to, the Crye-Leike listing agreement in this case, a real estate agency should not expect that it will receive its commission simply because it placed information about a home on the web even if that information was viewed during the term of the listing agreement by the ultimate purchaser.
The outcome in this case reminds us that the deciding factor in a case can be the long standing principle of contract interpretation that, where a contract term can be interpreted in multiple ways, the court should adopt the interpretation that favors the party that did not draft the contract.