The legal definition of “procuring cause” is, as legal definitions are wont to be, a little on the arcane side. An abstract definition commonly used by courts defines the standard as: “The proximate cause; the cause originating a series of events, which, without break in their continuity, result in the accomplishment of the prime object.” Courts apply this abstract procuring cause definition to real estate commissions by saying that procuring cause is “a cause originating a series of events which without break in their continuity result in the accomplishment of prime objective of the employment of the broker who is procuring a purchaser ready, willing and able to buy real estate on the owner’s terms.”
Legal definitions have not, of course, prevented disputes over procuring cause. The “cause originating a series of events which without break results in the accomplishment of prime objective” part of the definition is far from self-explanatory. There are endless court cases in which the actions of the broker are tested to see whether they were sufficient to “cause” the buyer to purchase. Invariably these fights involve some variation of the one broker shows and another broker writes theme. These kinds of procuring cause fights are about whom among competing brokers actually “caused” the buyer to enter the contract. This subject is covered in depth in the Applying Procuring Cause to Real Estate section of this topic.
The other part of the procuring cause definition most tested in court cases is the buyer’s actual readiness, willingness and ability to purchase. In such cases what is being fought over is not just who caused the buyer to enter the contract, but when that buyer is actually “procured.” When, exactly, is the buyer “procured?” Is it when they enter a binding contract? It is when the seller actually gets the money? Is it somewhere in-between?
We are fortunate here in Oregon to have had both the “caused” and “procured” parts of “procuring cause” worked out by the Oregon Supreme Court. Here, in the Court’s own words, is the legal standard in Oregon:
“When a broker is engaged by an owner of property to find a purchaser for it, the broker earns his commission when (a) he produces a purchaser ready, willing and able to buy on the terms fixed by the owner, (b) the purchaser enters into a binding contract with the owner to do so, and (c) the purchaser completes the transaction by closing the title in accordance with the provisions of the contract. If the contract is not consummated because of lack of financial ability of the buyer to perform or because of any other default of his, * * * there is no right to commission against the seller. On the other hand, if the failure of completion of the contract results from the wrongful act or interference of the seller, the broker’s claim is valid and must be paid. In short, in the absence of default by the seller, the broker’s right to commission against the seller comes into existence only when his buyer performs in accordance with the contract of sale.”
The Court’s statement makes clear that in Oregon a commission is not due until the buyer takes title in accordance with the contract. The single exception is a sale that is not completed because of the “wrongful act or interference of the seller.”
Requiring a closed transaction before a brokerage fee can be earned makes the buyer’s performance of the contract part of procuring cause. That goes a long way toward explaining why the work of real estate agents does not end with the acceptance of the sale agreement. Although often cast in terms of “agency duty,” the continuing efforts of the agents to close the sale after the parties have a contract is really just an artifact of being paid commissions under a procuring cause standard.
If continuing efforts on the behalf of the client is an artifact of procuring cause, one would expect changes in what agents do or are expected to do for clients when commissions give way to fee for service arrangements. The beginnings of such changes can be seen in the industry today. MLS only and Limited Service brokerage models are fee based. It is hardly surprising that these fee based relationships significantly change the continuing efforts of the agents. It really doesn’t have anything to do with agency duties or providing minimum services. Click here for detailed discussion of working with MLS Only and Limited Service listings.
Being clear on what it means to “procure” a buyer in Oregon is useful in dealing with procuring cause issues. We know as a result of the clear standard that no commission is due any agent if the buyer for whatever reason does not close the transaction. Entitlement to a commission is less clear when the deal fails because of the seller’s actions instead of the buyer’s. Although a commission can be due if the buyer’s failure to close is the result of the “wrongful act or interference of the seller,” it is not clear exactly what acts a court might consider “wrongful” or what kind of seller “interference” would justify a commission on a failed deal.
Two reoccurring patterns emerge from the legal standard of procuring cause used by Oregon courts. In one pattern, competing brokers fight over who “caused” the sale. In the other pattern, the dispute involves whether the seller wrongfully prevented or interfered with the buyer’s performance. Both of these patterns are discussed in the following Applying Procuring Cause to Real Estate section of this topic.
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