Testa, J.c.c., Temporarily Assigned.
Plaintiff Kulp Real Estate, a real estate brokerage firm, sued Rudolph Favoretto and Katherine Favoretto, his wife, for the sum of $1,600 allegedly owed under a listing agreement. Defendants, as owners of their home situated in Vineland, New Jersey, entered into an exclusive listing agreement with plaintiff broker. Plaintiff's claim is based upon this written agreement, which contains a provision that entitles the broker to one-half of the purchaser's deposit in the event of a forfeiture. Defendants assert that this provision is void and unenforceable as against public policy of the State of New Jersey.
An agent of plaintiff, Roger Scull, who was not available for the trial, solicited a listing from defendants. On April 27, 1970 the litigants executed an agreement which was entitled "Exclusive Listing Agreement of Multiple Listing Service, Affiliated with Cumberland County Board of Realtors."
The fifth undenoted paragraph of this agreement stated:
In the event of forfeiture the deposit shall be divided equally between Owner and Agent. However, said Agent shall not receive a share which is in excess of the above stated commission.
This agreement was extended by the parties until June 14, 1972. On April 6, 1972 defendants entered into a written contract of sale with a purchaser who was produced by plaintiff. This contract provided for a 10% deposit ($3,200) and a closing date was established.
Nevertheless, settlement was never completed due to the purchaser's failure to consummate the sale. Plaintiff instituted this suit and a trial was conducted without a jury. It now becomes necessary for this court to determine the respective rights of the litigants in the deposit and the validity
and enforceability of the fifth paragraph of the exclusive listing agreement.
The basis of defendants' position concerning the enforceability of the fifth paragraph of the exclusive listing agreement is the landmark decision of Ellsworth Dobbs, Inc. v. Johnson, 50 N.J. 528 (1967). In Dobbs a real estate broker sued the owner and the defaulting purchaser for his commission under a listing agreement. The default resulted from the purchaser's inability to obtain adequate financing. The court, while recognizing the legal principle that persons should not be unnecessarily restricted in their freedom to contract, also indicated its willingness to invalidate unconscionable contractual provisions which clearly tend to injure the public. This especially is true where groups through "experience, specialization, licensure, economic strength or position, or membership in associations created for their mutual benefit and education, have acquired such expertise or monopolistic or practical control in the business transaction as to give them an undue advantage." Id., at 553; Henningsen v. Bloomfield Motors, Inc., 32 N.J. 358 (1960). The court, in considering the status of a broker and seller in a real estate transaction, stated:
Whenever there is substantial inequality of bargaining power, position or advantage between the broker and the other party involved, any form of agreement designated to create liability on the part of the owner for commission upon signing of a contract to sell to a prospective buyer, brought forward by the broker, even though consummation of the sale is frustrated by the inability or the unwillingness of the buyer to pay the purchase money and close the title, we regard as so contrary to common fairness, as to require a court to condemn it as unconscionable. [50 N.J. at 555; emphasis added]
The court held that a broker was not entitled to a commission from the seller if title does not pass due to a default by the purchaser. The court further stated:
Where the buyer is the defaulting party, in our judgment public policy requires the courts to read into every brokerage agreement or contract of sale a requirement that ...