Are Commissions Owned Post-Termination Of Employment Or Engagement? The Procuring-Cause Doctrine Revisited – Contract of Employment

In 1916, the Texas Supreme Court articulated
procuring-cause doctrinewhich is a default rule that applies when a valid agreement to pay a commission’s sale of property or product does not address commissions if sales are closed after the brokerage relationship ends. See Goodwin v. Gunter, 185 SW 295, 296 (Tex. 1916). On May 20, 2022, the Texas Supreme Court revoked the procuring-cause doctrine Perthuis v. Baylor Miraca Genetics Laboratories, LLC-SW3d-, (Tex. May 20, 2022) [21-0036](“Perthuis v. BMGL“).

Brief Statement of Facts. Baylor Miraca Genetics Laboratories, LLC (“BMGL”) develops and analyzes genetic tests and sells its tests to third parties. Perthuis v. BMGL At 2. BMGL employed Brandon Perthuis (“Perthuis”) as Vice President of Sales and Marketing in early 2015. Perthuis signed a two-page at-will employment term sheet, which provided, in the relevant part: “Your commission will be 3.5% of your net sales.In 2017, Perthuis spent months negotiating a substantial sales account. The day before the contract was signed, BMGL terminated Perthuis’ employment and thereafter Perthuis sued BMGL, claiming that it was the reason for procuring all sales on the account that were finalized in the period from its termination through the date of trial in October 2018. See Perthuis v. BMGL at 2-4.

Procedural Posture. The case was tried for a jury, and the jury found for Perthuis but did not award him the full extent that he sought. The trial court declined to award any attorneys’ fees to Perthuis. Perthuis v. BMGL At 5. BMGL appealed, and Perthuis cross-appealed. The Court of Appeals reversed and rendered judgment for BMGL, finding that the employment term sheet entitled Perthuis to commissions only made sales during its employment. The case then proceeded to the Texas Supreme Court for review. Finding for Perthuis based on the procuring-cause doctrine, the Supreme Court remanded the case to the appeals of the court to evaluate the jury’s award from the trial court.

Key Holdings. “When a seller agrees to pay sales commissions to a broker (or other agent), the parties are free to condition the obligation to pay commissions however they like. But if their contract says nothing more than commissions will be paid for sales, Texas Contract law applies a default rule called ‘procuring-cause doctrine.’ Under that rule, the broker is entitled to a commission when ‘a buyer’ [was]produced through [the broker’s] Attempts, ready, able and willing to buy the property on the contracted terms. General Chat Chat Lounge General Chat Chat Lounge . “” Perthuis v. BMGL at 1-2 (quoting)
Goodwin185 SW at 296. In PerthuisHowever, the agreement was silent on any exceptions to the duty to pay commissions for sales that Perthuis procured. The procuring-cause doctrine hence applies.

The Procuring-Cause Doctrine.

“The doctrine provides nothing more than a default, which applies only when a commission does not address a question such as how a commission is realized or whether a commission is extended to the right to close the sale after the brokerage relationship ends.” Perthuis v. BMGL At 6. When faced with this doctrine the courts apply a three-question framework:

(1) Did the parties have a kind of contractual relationship to which the procuring-cause doctrine applies?

(2) If question (1) is the affirmative, did the parties displace the doctrine by the terms of their contractual agreement?

(3) If the procuring-cause doctrine applies to the parties’ dispute and was not displaced, to what extent does the doctrine impose liability for specific commission payments that the broker or selling party demands?

(1) What kinds of contractual relationships does the procuring-cause doctrine apply?

The minimum prerequisite for the doctrine to apply is a contract to pay a commission on a sale. Perthuis v. BMGLAt 7. The doctrine extends “far beyond the real-estate industry” and may apply to a broker, salesperson, or other agent for a commission-generating sale when “a buyer” [was] produced through [the broker’s] Effort, ready, able and willing to buy the property upon the contract terms. General Chat Chat Lounge General Chat Chat Lounge . “” Id. (quoting Goodwin, 185 SW at 296). Under the procuring-cause doctrine, “The broker’s entitlement to a commission vests on him [or her] having procured the sale, not on his [or her] Actual involvement in the execution of a sale or continuing employment through the final consummation of the sale. ” Id. Eliminating a broker’s role in the business immediately before finalizing a sale does not mean that the broker may not have taken the necessary final step to earn a commission on that sale.

The procuring-cause doctrine is not a judicially created “term” for commission contracts. It does not add anything to a contract or take anything away. It does not restrict parties’ ability to modify their contractual relationships and it does not change the law governing whether parties have entered into such a relationship in the first place. Parties are certainly conditioned on the obligation to purchase a commission on something other than the sale – they just need to say so. The doctrine provides nothing more than a default rule to enforce parties’ existing agreements as set forth in their contract. Functionally, it precludes post hoc Try to rewrite contracts by adding exceptions under the guise of ambiguity.

Id. at 9 (internal citations omitted).

Thus, parties to a commissions-based agreement may freely provide for their own rules of paying or withholding commissions. “If they do, the procuring-cause doctrine becomes irrelevant.” Id. at 11. But, where there are no additional terms applicable to the commissions of payment, the procuring-cause doctrine serves to fill that gap and to contribute to the stability of the contract law principles provided by a default rule that understands what it means to promise. Pay commissions for procuring a sale. Id.

(2) Did the parties take any steps to displace the doctrine?

Parties dissatisfied with the common-law rules that apply to a commission-based arrangement, free of charge by contract, for additional or different rules, and a departing from the procuring-cause doctrine requires no “magic language.”
Perthuis v. BMGL at 12. The sales agreement, term sheet or employment contract could, among other things: (i) deny the payment of commissions from sales absent continued employment; (ii) authorize commissions only on sales that close during the employment or business relationship; (iii) the condition commissions on the sale of the money received within a particular time frame; or (iv) provide a time limit beyond the termination at which commissions procured from sales will not be paid. Id. at 13.

“Contractual silence, however, leaves the procuring-cause doctrine intact as to those contracts to which the doctrine applies.” Id. And, an “at-will” employment or independent contractor arrangement for which compensation includes commissionable sales does not displace the procuring-cause doctrine. Sales commissions function differently than standard compensation arrangements for at-will employees — they reward the laborer’s past labor. Accordingly, the engagement of an employer or a hiring entity’s termination does not inherently affect the employee’s or contractor’s entitlement to commissions, absent the parties’ direction to deviate from the default procuring-cause rule. Id. at 14-15.

(3) When the procuring-cause doctrine applies, the party claiming a commission must show that he or she was in fact the procuring cause of specific sales.

A person who properly invokes the procuring-cause doctrine to recover sales commissions must prove that the specific sale was a direct and proximate result of the person’s efforts or services. Id. at 22. This burden may be met by proving the person set in motion “in a chain of events … which, without a break in their continuity, causes the buyer and seller to reach agreement on the sale” as a primary and direct result. of the
[person’s] efforts. Id. (quoting Am. Jur. Proof of Facts 3d 399 § 13 (1998)). This requires that the person claiming the commission was both “proximate” and “but for” the cause of those sales. Many factors are considered in this determination, including the specific or general nature of the buyer’s relationship to the salesperson and the employer’s entity and whether and to what extent a particular sales arrangement may have been modified. after The person claiming a commission was no longer engaged or employed by the selling entity.

For example, a binding, multi-year contract that an employee or agent may broker and generates repeat sales with no material adjustments may require commissions throughout the term, as all those sales may be attributed to the same labor by the individual. Id. at 24. “But significant maintenance may be required for other contractual relationships to endure. If the efforts of others were indispensable to salvaging or preserving a founding contractual relationship, or if the contract itself must be reworked, a jury could conclude that the entitlement to commissions no longer existed. ” Id. But, a person who lacks continued employment could not have under-conceived concepts or theories of speculation-recovering commissions under the procuring-cause doctrine if that person would not be entitled to them if they were still employed. Thus, the procuring-cause status of claims will usually present a fact question that must determine a jury or fact-finder.

Insights. The procuring-cause doctrine is “‘but a rule of fairness and right.'”
Perthuis v. BMGL at 8 (quoting) Goodwin, 185 SW at 296). Under long-standing and firm contract principles, parties may freely provide for their own rules for paying or withholding commissions during and after employment or engagement. And, if they do, the procuring-cause doctrine becomes irrelevant, and the Texas Supreme Court provides an array of low-hanging fruit examples of how parties can specify payment terms for commissions of post-employment or post-engagement. In short, BMGL could have avoided years of litigation and substantial liability to Perthuis by including a simple sentence in the at-will term sheet, such as: Whatever the reason for the Upon Termination’s employment, no commission would be payable to the employee for sales. made or paid for payments from sales or accounts procured by or through the employee’s employment.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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