Question

1. Spencer Realty & Construction Co. had a lead on a “prime” piece of real estate. Although Spencer did not have a listing agreement with the seller of the property, she contacted Do & Alvarez Properties (“DAP”). Spencer knew that DAP was looking for a location for a commercial development. Spencer told DAP only that she knew of the “finest, most outstanding, viable location in the county and it just came on the market”. Spencer said she would reveal the location of the property and the owner’s name if DAP would sign an agreement which would require DAP to pay a 10% commission to Spencer if a sale of the property resulted. DAP agreed and the agreement was signed by both parties.

Four months later, DAP bought the property after negotiating the deal himself. DAP claims it does not owe a commission to Spencer because there was insufficient consideration to support the payment of so large a commission. DAP claims that all Spencer did in the entire transaction was to reveal the location of the property and the owner’s name.
Was there sufficient consideration to make this promise enforceable?

Answer 1

Was there sufficient consideration to make this promise enforceable?

Yes, the consideration was sufficient enough to make the promise enforceable.

According to contract law, in exchange for an action or non-action, for a consideration to be valid in any enforceable contract, it has to be something of value promised. It can be money, an agreement that does not involve taking a particular action or performing a service.

Certainly, based on the above situation, Spencer signed an agreement with DVP whose terms were as long as DVP managed to buy the land, otherwise the company would have to pay Spencer a fee of 10 percent. In fact, the commission is something of value that would be calculated from the amount of money that DVP will purchase the property: which will be in money form. For this cause, it is a legal criterion under contract law that makes the DVP-Spencer agreement enforceable in every court of law.