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Death May End A Contractual Obligation

On Behalf of | Jul 9, 2020 | Business Transactions

Under certain circumstances, contracts that create an agency relationship such as a real estate broker agreement may end at the death of the property owner. The Massachusetts Appeals Court in the case of Newton Centre Realty, Inc. v. David R. Jaffe, Personal Representative, in June 2020, decided that a real estate broker, who had an exclusive listing agreement to real estate, lost the right to a commission when the owner died and thereafter the personal representative of the deceased owner’s estate sold the real estate. The court found that the concept of agency acknowledges a consensual relationship between the parties in which one party acts as the representative or on behalf of the other party with the power to affect legal rights and duties of that other party.  Generally, the death of the principal automatically terminates the actual and apparent authority of the agent as it negates the existence of the person on whose behalf the agent acts.  In other words, the agent cannot act for you when you are no longer alive.  This concept also applies to powers of attorney done for estate planning, which can be set up such that they can still survive the incapacity of the principal, but that power of attorney dies with the principal.   In the Newton Centre case, the amount of the commission over $227,400.00.  The case involved the sale of two Brookline and one Newton, Massachusetts properties that were sold all by the personal representative of the deceased principal within the exclusivity period of the listing agreement.  The decision did not address what would have been the outcome if the listing agreement stated that it was binding upon not only the principal, but his heirs, successors and assigns, which is often placed in contracts.

J. Daniel Marr is a Director and Shareholder at Hamblett & Kerrigan, P.A. His legal practice includes counseling businesses and individuals on a variety of legal issues and advocating on their behalf. Attorney Marr is licensed and practices in both New Hampshire and Massachusetts. Attorney Marr can be reached at [email protected].