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Estate agent loses commission due to failings in oral contract

Posted: 20th December 2016   In: Corporate Commercial

An estate agent who found a buyer for a block of flats cannot claim commission because of failings in his oral contract with the seller.

The issue arose over eight flats that had been on the market for some time without selling.

An agent offered to find a buyer for the flats and told the developer that his standard commission was 2% plus VAT. He did not specify the event that would trigger his entitlement to commission.

He introduced a buyer and sent the developer written terms of business shortly after the buyer and developer had exchanged contracts. However, by then the introduction had already been made. Therefore, the agent relied on the oral contract to claim commission.

The judge agreed that an oral contract existed, and implied a term that payment was due on the introduction of a person who completed the purchase. However, he reduced the commission by one-third because of the agent's failure to comply with his obligations under the Estate Agents Act 1979 to provide written details of the agreement.

The developer appealed against the decision that it should pay any commission at all, and the agent appealed against the reduction in the commission.

The Court of Appeal found in favour of the developer. It held that the express identification of the trigger event was essential for the formation of a legally binding contract. There was no such trigger event and so commission was not payable.

It followed, therefore, that the agent’s appeal against the reduction of commission must also fail.

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