Brokerage: when the commission is earned even if you close the deal yourself

It is Chapter XIII of Title II of Book Five of the Civil Code of 2020, Articles 1416 to 1420: the contract by which someone procures, without representing anyone, that a deal be closed, and what each side owes.

Principals and brokers under a brokerage contract governed by the Puerto Rico Civil Code, where the broker’s activity is not governed by a special statute.

• That the broker bind itself, for a price or commission, independently and without representing the principal, to procure that they execute the contract they want.Verified against the official source
• That the broker hold the licence required for the professional exercise of their activity.Verified against the official source
• That the broker’s activity not be governed by a special statute: in that case this chapter is inapplicable.Verified against the official source
• To charge expenses on top of the commission: to have expressly agreed it.Verified against the official source

• The contract with the fixed price or agreed commission, and with the express agreement on expenses if any.
• The record that the broker began their work and of what they did: the two payment cases depend on it.
• The broker’s licence, which Article 1417 requires for the professional exercise of their activity.

1. 1

   Step 1: What a broker is, in the Code’s words

   Article 1416: the broker binds itself, for a price or commission, independently and without representing the principal, to procure that they execute the contract they want with a third party or parties. The key phrase is "without representing": the broker brings the parties together, it does not sign for you.

2. 2

   Step 2: A licence is required

   Article 1417, one line: the broker must hold the licence required for the professional exercise of their activity. The Code names no licence, agency or statute, and neither does this guide: the one applicable to that activity must be checked.

3. 3

   Step 3: And this chapter yields to special statutes

   Article 1418: the provisions of this chapter are inapplicable in the case of those agents whose activity is governed by a special statute. The Code does not say which agents those are; this guide does not assert it for it.

4. 4

   Step 4: The broker’s duties run in two directions

   Article 1419 opens with an unusual phrase: the broker is bound towards the principal and towards those who might contract with them. The seven duties are owed to both sides, not only to whoever hired them.

5. 5

   Step 5: Explaining, informing and verifying

   Subsections (a), (b) and (c): set out and explain the business with the greatest possible clarity and accuracy; inform the principal and the third party of all the circumstances they know; and make sure of their identity, capacity and other relevant circumstances.

6. 6

   Step 6: Samples, confidentiality and meetings

   Subsections (d), (e) and (f): keep samples, for a reasonable time, of the products negotiated through their intervention; keep confidential the information received as a result of their work; and meet with the principal and the third party when they require it.

7. 7

   Step 7: And staying out of the deal

   Subsection (g): abstain from participating, directly or indirectly, in the business carried out through their intervention. The article does not say what happens if that duty is breached, and this guide does not fill it in.

8. 8

   Step 8: The commission is earned even if you close it

   Article 1420(a)(1): the fixed price or agreed commission must be paid where the broker has begun their work and the principal concludes the business independently or with a third party’s help. Once the work has begun, closing outside does not avoid payment.

9. 9

   Step 9: And also if you back out

   Subsection (a)(2): payment is also owed where the broker has found a third party who accepted the business proposed by the principal and the principal withdraws. The broker performed; the withdrawal is the principal’s.

10. 10

    Step 10: The rest of what the principal owes

    Subsections (b) and (c): explain clearly and in detail the scope of their business proposal and the terms of the offer to be presented to potential contracting parties; and pay the expenses the broker incurs, where so expressly agreed. Expenses are paid only if agreed.

Brokerage is agreed between the parties; the Code names no agency. The licence Article 1417 requires is issued and regulated by whichever entity corresponds to that activity, under its own statute, which we did not read here. Disputes over the commission are decided by the Court of First Instance.

• Believing the broker represents you: the article expressly says "without representing the principal".
• Closing the deal on your own after the broker began work and not paying them.
• Withdrawing once the broker has found a third party who accepted, and not paying them.
• As the broker, participating directly or indirectly in the brokered deal.
• As the broker, informing only the principal: the duties are also owed to those who might contract with them.
• As the broker, disclosing the information received as a result of the work.
• As the broker, not keeping samples of the negotiated products for a reasonable time.
• As the principal, being charged the broker’s expenses without having expressly agreed them.
• Applying this chapter to an agent whose activity is governed by a special statute.

These are the government pages this guide is based on.

• Poder Judicial de Puerto Rico

  Poder Judicial

  bvirtualogp.pr.gov