Broker/Agent Is Generally Not a "Party" to Real Estate Purchase and Sale Agreement

San Antonio Texas Real Estate Attorney Trey Wilson wrote:

With increasing frequency, unhappy parties (usually a Buyer) to a real estate transaction are filing lawsuits for breach of the real estate Purchase and Sale Agreement pertaining to certain property. The suits generally allege that the opposing party to the contract (usually the Seller) has, in some manner, breached the buy/sell contract.  I've observed a recent trend in these suits whereby the  real estate broker(s) who represented the party who committed the alleged breach is also named as a Defendant. 

Breach of the real estate purchase contract is a viable cause of action where a Seller (or even a Buyer) has failed to perform an obligation under the contract. However, the only proper defendant in a breach of contract suit is an actual party to the underlying contract. The real estate agent merely representing a party to the contract (whether Buyer or Seller) is almost never a party to the contract, itself. This distinction is legally significant.

In order to prevail in a breach of contract lawsuit in Texas (whether the underlying contract relates to real estate or not) a Plaintiff must establish each/all of the following elements:

(1) the existence of a valid contract, 
(2) the plaintiff performed or tendered performance, 
(3) the defendant breached the terms of the contract, and 
(4) the plaintiff suffered damages as a result of the defendant's breach. 

Transworld Leasing Corp. v. Wells Fargo Auto Fin., LLC, No. 04-12-00036-CV, 2012 WL 4578591, at *3 (Tex. App.-San Antonio 2012, pet. denied); McLaughlin, Inc. v. Northstar Drilling Tech., Inc., 138 S.W.3d 24, 27 (Tex. App.-San Antonio 2004, no pet.). 

Further, Texas law holds that parties form a binding contract only when the following elements are present: (1) an offer; (2) an acceptance in strict compliance with the terms of the offer; (3) a meeting of the minds; (4) each party's consent to the terms; and (5) the execution and delivery of the contract with the intent that it be mutual and binding. Williams v. Unifund CCR Partners Assignee of Citibank, 264 S.W.3d 231, 236 (Tex. App.-Houston [1st Dist.] 2008, no pet.).

A real estate broker almost never forms or enters into a binding contract with any party other than the party he or she represents as their client. In addition, he or she is usually not the offeror/accepter/signatory to a Real Estate Purchase Contract. As such, breach of contract suits are very rarely proper against brokers, where the contract that has allegedly been breached is one for the purchase and/or sale of real estate. This is the case because a Plaintiff in a breach of a real estate contract suit can almost never prove the first element --  " the existence of a valid contract" -- as that element applies to a real estate broker.

This is not to say that a real estate broker (and/or her agent) cannot be liable for negligence, misrepresentation, fraud, breach of fiduciary or other legal duties and/or other improper conduct related to the sale or purchase of real property. Those claims, however, are distinguishable from the duties of a party to the real estate buy/sell contract, itself. Further, the character of a cause of action that may lie against a Texas real estate licensee depends largely on which party is asserting the claim, and the nature of that party's legal relationship with the real estate broker/agent.