A startup company contracted with a broker to find investors for it and signed a brokerage agreement that stipulated that the broker was entitled to a commission for any engagement with the company "following the consultant's referral." The broker connected the company with a potential investor, whom the company also approved, but the investor immediately rejected the opportunity. Despite the aforementioned, without the company trying to bypass the broker and despite the company not reporting to the broker about the new negotiations that had begun with the investor, several months later the investor invested in the company.
The Court dismissed the broker's claim and found that a causal connection was required between the transaction that had been signed and the broker's action in order for the broker to be entitled to a fee. For the purpose of construing a contract which language is unclear, the intent of the parties and their objective purpose must be traced. The question is not what the parties intended for the specific contract, but what the 'intention' of reasonable parties was, with a rebuttable presumption that the parties sought to achieve a purpose that was just, efficient, reasonable and logical. When it comes to brokerage, in the absence of any other agreement, a condition for receiving a fee is that the broker be the effective factor in concluding the transaction, which is a stricter requirement than just a causal connection. Here, the broker's actions amounted to contacting the investor, who immediately replied that it was not interested, so there is no causal connection between the transaction and the broker's actions and it is not entitled to a fee for the transaction. When a client breaches a reporting obligation to the broker in order to bypass the broker and prevent it from receiving a brokerage fee, the broker may be entitled to a brokerage fee even if it was not the effective factor in the transaction, but here the broker was answered negatively by the investor and there was also no intention to bypass it. Therefore, the broker's claim was dismissed.