Foss v. Berlin: Ohio Broker Who Drafted Real Estate Sales Contract Was Engaged in Unauthorized Practice of Law
In 1981 the Court of Appeals of Ohio addressed whether the drafting of a real estate sales contract by a broker constituted the unauthorized practice of law, thus voiding a contract and relieving the seller from paying a commission. The court held that although the drafting of the contract was the unauthorized practice of law, the broker did not attempt to collect anything for legal services provided and was awarded the commission plus interest.
Berlin, a builder and real estate developer entered into a written contract with Foss (Broker), a licensed real estate broker, for payment of an $80,000 commission for the sale of Concourse Apartments. Broker was able to find a buyer and Berlin paid him an initial installment of $20,000 after the closing. Berlin then refused to pay the remaining $60,000 plus interest, despite the fact that Broker fully performed under the contract. Broker sued Berlin for breach of contract. The trial court found that Berlin breached the contract and ordered him to pay $72,868 and interest. Berlin appealed.
The Court stated that “the drafting of a contract between two parties may constitute the unauthorized practice of law, but in this case did not vitiate the contract." It noted that under state law prohibiting the unauthorized practice of law, Broker would be prevented from collecting a legal fee and could be subject to legal action. The court also noted that nevertheless, if the subject matter of the contract is not otherwise illegal, the unauthorized practice of law did not vitiate the contract.
The Court found that although Broker's actions in drafting the contract constituted the unauthorized practice of law, such conduct would only be available to Berlin as a defense if Broker attempted to profit from the unauthorized practice itself, by attempting to charge a fee for drafting the contract. The court found that Broker did not attempt to profit from the unauthorized practice of law, but rather he sought compensation for selling the real estate as a broker. The court then affirmed the decision.
Foss v. Berlin, 3 Ohio App. 3d 8, 443 N.E.2d 197 (1981).