Legal Memorandum: Agreement to Pay Commissions in MI

Issue: Under the laws of the state of Michigan, must an agreement to pay commissions conform to the requirements of the statute of frauds?

Section 566.132(1)(e), Michigan Compiled Laws, provides that "an agreement, promise or contract," to "pay a commission for or upon the sale of an interest in real estate" is void unless either it or a note or memorandum of it is (1) in writing, and (2) signed with an authorized signature by the owner or other party to be charged with the payment of the commission. MCL § 566.132(1)(e) (1993); Ekelman v Freeman, 350 Mich 665; 87 NW2d 157, 159 (1957); United Listing Serv v Shepherd, 96 Mich App 547; 293 NW2d 624, 625 (1980).

The statute was enacted specifically to protect owners of property against undocumented claims of brokers for commissions.  E.g., Ekelman, supra, 350 Mich 665; 87 NW2d at 159.*FN1  It has been held to apply not only to owner-broker contracts, but to all contracts where an obligation to pay commissions arises in a non-employment context.*FN2  Thompson v Carey’s Real Estate, 335 Mich 474; 56 NW2d 255, 256 (1953); Smith v Starke, 196 Mich 311; 162 NW 998, 999 (1917).  It includes a subcontract by a broker with another person in furtherance of its agreement to market property for a landowner.  Id., 162 NW at 999.  Allowing plaintiff to recover from defendants in this case, based on an implied contractual relationship, directly violates the letter and spirit of MCL § 566.132(1)(e). Ekelman, supra, 350 Mich. 665, 87 NW2d at 159.

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