After the broker found a buyer, he learned that the owner had previously entered into an option contract with another party. The broker then sued to obtain payment of his commission based on breach of contract and the tort of misrepresentation. The Schlesinger court held that the broker could not sue on a contract theory because the statute of frauds prevented enforcement of the oral agreement. However, the court allowed the broker to proceed under tort on a fraud and deceit theory. The charge is not made to enforce the contents of the oral agreement but to compensate the plaintiff for its loss engendered by the deceit.
Good faith works in both directions.
Chester asserts that through those last two sentences the New Jersey Supreme Court created a tort for breach of the duty of good faith by a principal. This Court believes that two sentences in dictum is too flimsy a hook on which to hang a newly-created tort. No New Jersey court has ever cited Schlesinger as authority for the creation of such a duty, nor has a court ever made use of this tort. However, breach of this duty opens the principal to liability under contract law principles only, not tort. The commentary states that the duty arises from the common understanding that the principal will use care to prevent harm coming to the agent in the pursuit of the enterprise.