A 1998 case from the Court of Appeals of Arkansas, Cantrell-Waind & Associates, Inc. v. Guillaume Mortorsports, Inc., addressed a real estate broker’s right to a commission in the context of an option to purchase and the property owner’s duty of good faith and fair dealing.
On August 1, 1994, Guillaume Motorsports, represented by its president and sole shareholder, Todd Williams (the “Owner”), agreed to lease property located in Bentonville, Arkansas to Kenneth and Kay Bower. The lease granted them an option to purchase the property. It specified that if the Bowers exercised their option and the sale closed within two years of the date of the lease, the Owner would pay a commission to the real estate broker, Cantrell-Waind & Associates, Inc. (the “Broker”).
On April 23, 1996, the Bowers notified the Owner in writing that they were exercising the option to purchase and wanted to close the transaction as soon as possible. Soon thereafter, the Owner offered them a credit , equal to one-half of the commission amount, if they agreed to close after August 1, 1996. They declined.
The Bowers attempted to set a July closing date. The Owner stated that he would be out of the country and unavailable to close the transaction until after August 1st. He also refused to execute a power of attorney so that the closing could occur in his absence. The closing took place on August 14th. The Broker was not paid the commission. There was evidence that the Owner had been in Bentonville July 22nd - 25th. He claimed he was unaware that the Bowers had wanted to close the transaction quickly.
The Broker filed a complaint against the Owner, claiming breach of contract. The Owner claimed he was not under any obligation to close prior to August 1st, and he filed a motion for summary judgment. The court ruled for the Owner. In the order, the judge stated that the Owner did not have an obligation to the Broker to arrange for a closing date that would have entitled the Broker to a commission, and that “the real estate commission was ‘clearly avoidable.’”
On appeal to the Court of Appeals of Arkansas, the Broker argued that while the Owner did not have a duty to ensure that the closing took place prior to August 1, 1996, he did have a duty “not to actively hinder or prevent the transaction from closing before that date.” The court agreed. Quoting an Arkansas Supreme Court case, the court stated that “he who prevents the doing of a thing shall not avail himself of the nonperformance he has occasioned.” It explained that there is an implied obligation in a contract that a party will not hinder or delay perfomance. According to the Restatement (Second) of Contracts, “Every contract imposes upon each party a duty of good faith and fair dealing in its performance and enforcement.” The court specifically stated that this legal principle applies to contracts providing for commission payments to real estate licensees. The entry of summary judgment was reversed and the case was remanded for trial.
Cantrell-Waind & Associates, Inc. v. Guillaume Mortorsports, Inc., 62 Ark.App. 66, 968 S.W.2d 72 (Ark. Ct. App. 1998).