James is a Partner and Head of the Dispute Resolution team and primarily handles commercial…View Profile View all
In a recent case decided by the Supreme Court, it has been decided that an estate agent was entitled to his commission, although the oral agreement between him and the property owner had not specified when that commission would become payable.
The owner had developed a block of 14 flats of which seven had not been sold. He was telephoned by an estate agent and the two had a conversation about the flats and during the course of that conversation, the agent told the owner how his commission would be calculated, but did not say when payment of the commission would become due. The agent was instructed by the owner and he found a buyer for the flats. On acceptance of the offer for the flats, the agent sent his term of business to the owner. Those provided that commission was payable on exchange of contracts. At completion the owner refused to pay the agent any commission.
The agent sued the owner for his commission. The trial judge found that a legally binding contract had been made during the telephone call. The Judge was satisfied that the parties had discussed the amount of commission, but also he was satisfied that they had not agreed the trigger event that would entitle the agent to his commission. He found that despite that he could imply a term into the agreement to give business efficacy to what the parties had intended.
The owner appealed that decision arguing that the judge had been wrong to conclude that a binding contract had been agreed. The Court of Appeal shared that view and decided that there was no enforceable contract for the payment of the commission. Not surprisingly, the agent appealed to the Supreme Court which had to consider whether the agreement between the agent and the owner was complete and enforceable, despite the lack of agreement as to a trigger date for the payment of commission.
The Court analysed the situation and concluded that under common law, once the seller of a property agrees to pay commission to an estate agent in return for the estate agent finding a purchaser, and if the agent does find a purchaser, then it is inherent in that agreement that commission will be payable from the proceeds of sale no later than the date of completion and there was no need to imply such a term into the contract.
The Court’s view was that there was no contractual uncertainty because there were a number of cases in the past, which had established that an agent would be entitled to commission on completion, in the absence of any contrary agreement.
The Supreme Court found that in the circumstances it was unnecessary for a term to be implied into the agreement, but had it been so, “there would have been no hesitation” in finding that there was an implied term in the agreement that payment would fall due on completion of the purchase of the property by the buyer introduced by the agent.
The important lesson to take away from this is that it is still important to agree all the essential terms of a contract up front, but in certain circumstances, uncertainty may be remedied by the implication of the missing term.
Disputes are an unfortunate part of business and making the right decisions about how to approach their resolution is vital. If you have any questions and would like our help, we'd love to hear from you. Please call James Staton on 01274 377651.