Estate agent entitled to commission despite no written contract

An estate agent has won his claim to be paid commission after finding a buyer for several flats, even though he didn’t have a written contract with the seller.

The case, that went all the way to the Supreme Court, involved the agent and a developer who was trying to sell several newly built properties.

The issue centred on a telephone conversation between the parties in which, as found by the trial judge, the agent indicated that his standard commission was 2% plus VAT but did not specify the event that would trigger his entitlement to commission.

The agent then introduced a buyer who completed the purchase of the flats, and he claimed his commission, relying on an oral contract made during the telephone conversation. The developer refused to pay.

The trial judge found in favour of the agent, holding that the parties had created a binding oral contract. He implied a term to the effect that commission would become payable when the agent introduced a buyer who completed the purchase.

The Court of Appeal found that there was no binding contract, holding that an agreement would be incomplete if it did not specify the event triggering the obligation to pay commission.

The Supreme Court has now reinstated the trial judge’s finding. It held that the existence of a binding contract depended on whether what had been communicated between the parties by their words and conduct led to the conclusion that they intended to create a legally binding relationship.

Although in this case the two sides had not discussed the event that would trigger the payment of the commission, the only sensible interpretation was that they would naturally have understood it to become due on completion.

It was possible to imply into an agreement something that was so obvious that it went without saying. There was no reason in principle why a term could not be implied to make it clear that an estate agent’s commission would be payable upon completion of the sale of the property to a person introduced by the agent.

Please contact Sarah Liddiard if you would like more information about the issues raised in this article or any aspect of contract law.