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LSDefine
Simple English definitions for legal terms
brokerage contract
Read a random definition: Stepped-up basis
A quick definition of brokerage contract:
A brokerage contract is an agreement between a person (called the principal) and a broker. The broker is hired to make deals on behalf of the principal and gets paid a commission for their services. It's like hiring someone to help you buy or sell something, and they get a percentage of the sale as payment.
A more thorough explanation:
A brokerage contract is an agreement between a principal and a broker, where the broker is authorized to make contracts on behalf of the principal. The broker receives a commission for their services.
For example, if a homeowner wants to sell their house, they may sign a brokerage contract with a real estate agent. The agent will then market the property, find potential buyers, and negotiate the sale on behalf of the homeowner. Once the sale is complete, the agent will receive a commission based on the sale price.
Another example is a stockbroker who is hired by an investor to buy and sell stocks on their behalf. The investor signs a brokerage contract with the broker, who then executes trades based on the investor's instructions. The broker receives a commission for each trade made.
These examples illustrate how a brokerage contract allows a principal to delegate the authority to make contracts to a broker, who acts as their agent. The broker is compensated for their services through a commission, which is typically a percentage of the transaction value.