Estate agent's commission: Supreme Court on binding agreements and implied terms
13 February 2019
This morning the Supreme Court found, overturning the Court of Appeal, that a short telephone call was enough to create a binding agreement between an estate agent and his client, even though the trigger event for the commission had not been specified (Wells v Devani).
There were very different accounts of the crucial phone call. Devani said he explained he was an estate agent and that his commission was 2% + VAT. Wells said there was no mention of commission and that Devani gave the impression he was an investor looking to buy. The judge at first instance preferred Devani's account.
The Supreme Court had to decide whether there was a binding agreement despite the absence of a trigger to pay the commission. The Court of Appeal had held that there was not on the basis that an implied term could not fix an incomplete bargain (relying on Scancarriers).
The Supreme Court had no difficulty in finding that there was a binding contract. The question was whether, objectively, what was communicated between Wells and Devani by their words and conduct meant they intended to create a legally binding relationship and that they had agreed all the terms that the law requires as essential for that purpose (RTS). The Supreme Court stressed that courts are reluctant to find an agreement is too vague or uncertain to be enforced where it is found that the parties had the intention of being contractually bound and have acted on their agreement.
Here, the bargain was, in substance, “find me a purchaser”. Devani had done that and the property had been sold. A reasonable person, said the Supreme Court, would understand that the parties intended the commission to be payable on completion and from the proceeds of sale.
The analysis on implied terms was therefore not binding. Nonetheless, the Supreme Court said it would have had no hesitation in holding that it was an implied term that payment would fall due on completion of the purchase of the property by a person that Devani had introduced. This was entirely consistent with the test in M&S v BNP Paribas. The Supreme Court did not accept that there is any general rule that it is not possible to imply a term into an agreement to render it sufficiently certain or complete to constitute a binding contract.