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Gallagher Real Estate, LLC v Barian, Inc, 2008 AP 2606 (Wis Ct App 2009).

Facts:Jerry Gallagher, on behalf of Gallagher Real Estate, LLC (Gallagher), and Barian, Inc. (Barian) entered a real estate listing contract over a particular property. At a later date, Michael Hanna made an offer for the purchase of a portion of the property. This offer was contingent on Hanna and Gallagher forming a corporation together to hold the property. A commission dispute arose between Gallagher and Barian before the transaction was concluded. Hanna and Gallagher then chose to terminate their agreement and release each other from their contractual duties.

Barian sued Gallagher for breach of duty to act in good faith, as implied by the listing contract. The trial court found that Gallagher and Hanna released each other so that they could enter into a similar transaction that would leave Barian without any commission at all. The court found that this deliberate avoidance was a breach of duty to act in good faith. Gallagher appealed, claiming that the trial court erred in considering good faith before questioning whether the purchase agreement between Gallagher and Hanna had ever been enforceable.

Holding:Judgment affirmed. The question of enforceability does not have to be considered in an action over good faith when the contract in question is not the one that was allegedly breached. The court differentiated a similar case where the breach of good faith and the enforceability question both centered on the seller and intended buyer's sales contract. The enforceability of the contract between Gallagher and Hanna did not need to be questioned to determine that Gallagher breached the duty to act with good faith in the Gallagher-Barian contract.

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[Last update: 10-21-09]