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In the Absence of an Express Agreement that the Plaintiff Was Entitled to a Commission Upon the Sale of Assets by the Principal, the Agreement Created an Exclusive Agency, which Merely Precluded the Principal from Hiring Another Agent, but Did Not Create, in the Agent, an Exclusive Right to Sell

The Court of Appeals, in a full-fledged opinion by Judge Lippman, over a dissent, in another case arising from the “toxic debts” crisis, determined that the plaintiff was an exclusive agent for the sale of assets, and was not granted an exclusive right to sell the assets. If plaintiff had been granted an exclusive right to sell, it may have been entitled to a commission when the assets were sold by the principal.  But, since the contract was silent about the plaintiff's right to a commission when the principal sells the assets, plaintiff was granted only an exclusive agency for the sale of the assets and the principal could sell the assets without any obligation to pay a commission to the plaintiff.  The exclusive agency agreement only precluded the principal from hiring another agent:

The distinction between an exclusive agency and an exclusive right to sell is well established in a body of Appellate Division case law … . As stated nearly a century ago, “The general rule is that where an exclusive right of sale is given a broker, the principal cannot make a sale [herself] without becoming liable for the commissions. But where the contract is merely to make the broker the sole agent, the principal may make a sale [herself] without the broker's aid, if such sale is made in good faith and to some purchaser not procured by the broker”… .

Put differently, “[a] broker is entitled to a commission upon the sale of the property by the owner only where the broker has been given the exclusive right to sell; an exclusive agency merely precludes the owner from retaining another broker in the making of the sale” … . We have endorsed this dichotomy implicitly in the past …, and now do so explicitly.

Furthermore, we agree with the case law of the lower courts holding that a contract giving rise to an exclusive right of sale must “clearly and expressly provide[] that a commission is due upon sale by the owner or exclude[] the owner from independently negotiating a sale” … . Requiring an affirmative and unequivocal statement to establish a broker's exclusive right to sell is consistent with the general principle that an owner's freedom to dispose of her own property should not be infringed upon by mere implication. Morpheus Capital Advisors LLC v UBS AG, 2014 NY Slip Op 04112, CtApp 6-10-14

 

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