Kaelin v. Warner, 27 N.Y.2d 352 (1970)
A real estate broker is entitled to a commission only when the buyer and seller reach a complete agreement on all essential terms of the sale, not merely the price.
Summary
This case addresses when a real estate broker earns a commission. The New York Court of Appeals held that a broker is entitled to a commission only when the buyer and seller reach a complete agreement on all essential terms of the transaction. Here, the prospective buyer introduced by the broker proposed significant changes to the seller’s initial contract terms, which the seller rejected. Because the parties never reached a complete agreement, the broker was not entitled to a commission. The court also noted that the seller could negotiate with other potential buyers until the initial prospective buyer accepted the original terms.
Facts
The Warners (defendants) listed their farm for sale with Kaelin (plaintiff), a real estate broker, at $100,000 (later $100,500), with terms to be arranged. Kaelin found Mrs. Appleby as a potential buyer. The Warners’ attorney drafted a contract with desired terms and sent it to Mrs. Appleby. Mrs. Appleby wanted additional terms, including release clauses, prepayment options, acreage guarantees, delayed payments, and a later closing date. After discussions, Mrs. Appleby’s lawyer drafted riders reflecting these changes. The modified contract was submitted to the Warners three weeks later, but they refused to proceed. The property was later sold to a buyer procured by another broker while Mrs. Appleby’s counterproposal was being drafted.
Procedural History
The lower courts ruled in favor of the plaintiff, Kaelin, awarding him the real estate brokerage commission. The defendants, the Warners, appealed this decision to the New York Court of Appeals.
Issue(s)
Whether a real estate broker is entitled to a commission when the prospective buyer and seller agree on the price but not on all other essential terms of the sale.
Holding
No, because a “mere agreement as to price on a proposed sale of real property does not constitute a meeting of the minds of vendor and vendee so as to entitle the real estate broker to commissions. The parties must be brought to agreement with respect to all terms customarily encountered in such a transaction.”
Court’s Reasoning
The Court of Appeals reversed the lower courts’ decision, holding that a mere agreement on price is insufficient to entitle a broker to a commission. The court emphasized that the parties must agree on all essential terms of the transaction. Since Mrs. Appleby never agreed to the Warners’ initial terms and instead proposed substantial changes, there was no meeting of the minds. The court cited precedent, including Matter of Altz, reinforcing the need for agreement on all terms, not just price. The court stated,