Do I have to let sellers out of a listing agreement at their request?

QUESTION: I currently have some clients who have requested that I terminate our listing agreement because they would like to list with another firm. We are 2 months in to a 6 month listing agreement and I have fulfilled my duties. Do I have to let them out?

ANSWER: The short answer is that the sellers have the right to discharge you as their agent, but that doesn’t mean that you must agree to terminate the listing agreement.

There is an important distinction between the rights and duties of the parties under agency law and under contract law regarding a principal’s right to end the agency relationship with an agent. Under agency law, either the principal or the agent has the power to terminate the agency relationship at any time, even though they have previously agreed that the agent’s authority will continue for a definite period.  If the principal exercises this power, the agent has no right to continue acting for the principal, and could actually be subject to liability for continuing to hold himself or herself out as the principal’s agent if it causes loss to the principal.

However, just because a party has the power to terminate the agency relationship doesn’t mean they also have the right to terminate the contract by which the agency relationship was established.  Under contract law, if either party’s termination of the agency agreement is a breach of the agreement, that party may be held liable for any damages that the non-breaching party may be able to prove.

The Exclusive Right to Sell Listing Agreement (Form 101) does not give either party the right to terminate the listing agreement without cause, so you can take the position that the sellers’ termination of your authority to act as their agent is a breach of contract. The issue of what damages you might be entitled to recover is a tricky one, and an answer could depend on the occurrence or nonoccurrence of future events, such as whether or not the sellers’ property is sold during the remaining term of the listing agreement.

If, following a frank discussion with your sellers about your respective views of the situation, they insist on terminating their relationship with you, you should remove your sign, take the listing out of the MLS, and discontinue any other activity that tends to indicate you’re still their agent.  We encourage you to attempt to reach an agreement with the sellers to release them from any further obligation under the listing agreement, perhaps in exchange for their agreement to pay you a sum of money toward reimbursement of costs you’ve incurred in representing them, or perhaps in exchange for a promise from the firm they want to list with to pay you a referral fee on any sale of the property.  That’s negotiable.  However, if the sellers won’t agree to acceptable terms, make it clear to them that you consider their termination of the relationship to be a breach of contract and that you are reserving your rights to seek recovery of any damages to which you are legally entitled as a result of their breach.

Release Date: 10/26/2017