Estate agent’s fees – A sensible decision

The recent Supreme Court decision regarding payment of an estate agent’s fees is one that “the man on the Clapham omnibus” would find an eminently sensible one.

Facts

Mr Wells had developed a block of fourteen flats, of which seven remained unsold. He had a telephone conversation with Mr Devani, an estate agent, about the flats and Mr Devani told Mr Wells how his commission was calculated, but he did not mention the event that would trigger payment of the commission. Mr Devani found a buyer for the flats. After Mr Wells had accepted the buyer’s offer, Mr Devani sent to him his terms of business stating that the commission due to Mr Devani was payable on exchange of contracts. Completion of the sale of the flats took place, and Mr Wells refused to pay the commission.

Court decisions

The question facing the judge at first instance was whether, in their initial telephone conversation, Mr Wells and Mr Devani had reached a decision that was a legally binding contract, even though they had not discussed a trigger date for payment. The judge held that a legally binding contract had been made during that initial telephone conversation and that, in the absence of an express agreement on the trigger date, the law will imply the minimum term necessary to give business efficacy to the parties’ intentions.

The Court of Appeal overturned the first instance decision and said that there was no enforceable contract for the payment of the commission, as the parties has failed to agree on an essential term, which meant that there was no contract concluded and no room for an implied term.

Last week, the Supreme Court unanimously allowed an appeal by Mr Devani, overturning the decision of the Court of Appeal. The Supreme Court said that the question they had to consider was whether, objectively assessed, the parties by their words and conduct intended to create a legally binding relationship. The court found that there was an enforceable oral agreement between Mr Devani and Mr Wells, even though it did not expressly specify the event that would trigger the obligation on Mr Wells to pay commission to Mr Devani. The court held that in this case it would naturally be understood that payment would become due on completion and made from the proceeds of sale.

If you wish to discuss this topic further or have any other questions, please contact the Edwin Coe Property team.

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