Gaston, Williams & Wigmore of Canada, Ltd. v. Warner

Background

A New York resident broker and a Canadian shipping company entered a written arrangement in New York whereby the broker was authorized to offer the British steamship Eskasoni for sale at $475,000 and to receive a two and one-half percent commission. The broker found buyers, and the parties signed a separate contract for sale and charter that called for payment in installments in New York; $5,000 was paid down and the broker received a portion of his commission. Later the seller discovered a binding British government rule forbidding the sale without written permission, permission was refused, and the seller canceled the sale and returned the $5,000. The broker sued in the United States District Court for the Southern District of New York to recover the balance of his commission; the lower courts entered judgment for the broker and awarded $11,750.

Reasoning

The Court explained that the agreement with the broker was made in New York and thus its validity is governed by New York law, under which the contract was valid. Because the broker had completed the task of producing buyers with whom the seller contracted, he had earned the agreed commission. The seller’s later inability to complete the sale due to a foreign government’s regulation did not undo the broker’s separate contract rights. The Court therefore affirmed the judgments that required the seller to pay the broker.

Real world impact

The decision means that when a sale contract and a broker’s contract are made and performed in the same place, a seller cannot avoid paying an earned commission merely because a foreign law later prevents the sale. Brokers who secure buyers in such circumstances may still collect agreed commissions. The ruling clarifies that local contract law governs the broker’s claim when the agreement was made in that place.