In the service sector, you strive to be helpful. You’re sometimes so keen to help your client that you forget to look after yourself. Cobbler’s bairns are the worst shod, so they say. The Supreme Court has gone some way to help the hapless service provider who cracks on without getting his terms of business pinned down, in the English case of Wells v Devani (2019).
Mr Wells had developed a block of flats, but he was having trouble selling all of them. Mr Devani, an estate agent, called him and the two spoke about the flats. Mr Devani explained how his commission was calculated, but did not mention the event that would trigger payment of his commission.
Mr Devani found a buyer for the flats. After Mr Wells accepted the buyer’s offer for the flats, Mr Devani sent Mr Wells his terms of business, which stated that his commission was payable on exchange of contracts. When the sale was completed, Mr Wells refused to pay.
The case wound its way through the High Court, the Court of Appeal and ended up in the Supreme Court. In the end, Mr Devani won, and got his commission (but not all of it, because he had breached the Estate Agency Act 1979).
The case turned on whether the agreement between Mr Wells and Mr Devani was too vague to be enforced. If an agreement is too vague, it can be void for uncertainty. That would have been bad news for Mr Devani. However, where two business people have had a grown up discussion, appear to have intended to be contractually bound and have acted on their agreement, the court will not be keen to find that there is no agreement.
In the Court of Appeal, the court found that there was a high degree of uncertainty because there was no specific trigger date for payment of the commission. This was an essential term of the contract and, because it was missing, there could be no contract.
The Supreme Court disagreed. It looked at the case law on estate agency (there’s been a fair bit over the years, perhaps unsurprisingly) and held that where a property owner had agreed to pay commission to an estate agent in return for the estate agent finding a purchaser, commission is to be paid no later than the date of completion of the sale. This is an inherent term of the estate agency agreement.
Therefore, because Mr Wells knew what the commission structure was and accepted the buyer Mr Devani found, Mr Wells had to pay commission by no later than completion of the sale.
It’s hard to feel sorry for Mr Wells in this case. But Mr Devani was lucky that there was a body of case law that helped to define the essentials of an estate agency commission agreement. I find it hard to believe either Mr Wells or Mr Devani were aware of Lord Denning’s musings on estate agency agreements in the 1950s when they made their fateful call.
How to avoid this? Make sure you agree all your essential terms up front, and for preference write them down!
Source: PLC article “Estate agency agreement binding despite lack of express agreement on timing of commission payment (Supreme Court)”, 14 February 2019.
The information and opinions contained in this blog are for information only. They are not intended to constitute advice and should not be relied upon or considered as a replacement for advice. Before acting on any of the information contained in this blog, please seek specific advice from Gilson Gray.