NOTES OF CASES
| DOI | http://doi.org/10.1111/j.1468-2230.1950.tb00184.x |
| Date | 01 October 1950 |
| Published date | 01 October 1950 |
NOTES
OF
CASES
ESTATE
AOENTB'
COMMISSION
THE
legal relationship between
a
potential vendor of house property
and the estate agent whom he instructs has unusual features entail-
ing risk of hardship to both,
'
When a house-owner puts his house
into the hands of an estate agent, the ordinary understanding is that
the agent is only to receive
a
commission if he succeeds in effecting
a
sale, but if not he is entitled to nothing.
.
. .
The agent in
practice takes what
is
a
business risk. He takes on himself the
expense of preparing particulars and advertising the property
in
return for the substantial remuneration-reckoned by
a
percentage
of
the price-which he will receive if he succeeds in finding a pur-
chaser
'.I
Unlike an ordinary agent, therefore, he is n,ormally not
entitled to any indemnity in respect of his expenses incurred on the
principal's behalf. Hence he has a genuine complaint if, after he
has gone to considerable trouble and incurred substantial expense
in finding a potential purchaser, his principal capriciously with-
draws from the negotiations. On the other hand if his position is
safeguarded
so
as to entitle
him
to
a
commission once
he
has
effected an introduction of
a
willing purchaser hardship may be
caused to the house-owner who has instructed more than one agent
each of whom introduces a willing purchaser and thus becomes
entitled to
a
commission rightly described as
'
substantial
'.z
The spate of recent cases
on
this subject is an interesting illustra-
tion of the way in which the courts strive
to
preserve a proper
balance between competing interests, but
a
disheartening example
of
their occasional lack of success. For the purposes of a
brief
survey
of
the recent cases we may start in 1934 when
Trollope
Q
Sons
V.
Martyn
Bras.=
held that
if
the principal unreasonably
refused to sell
to
a
willing purchaser introduced by the agent he
was
liable to the agent either
on
a
quantum meruit
or in damages for
having wrongfully deprived
him
of the opportunity of earning his
commission. This decision was followed in
Trollop
Sons
v.
Caplan'
and stood until-1041 when it was overruled by the House
of
Lords in the leading case of
Lwor
(Eastbourne), Ltd.
v.
Coope~.~
It
was there held that the agent's rights depended solely on the
express terms of the engagement and that it was not possible to
1
Per
Denning
L.J.
in
Dennis
Recd
v.
Goody
[1950]
1
All
E.R.
91'3
at
p.
923.
2
The
scale agreed by
the
professional bodies and
expressly
or
irnpliedly
incor-
pornted into
the
agreemcnt is
6
per
cent. on
the
first
fW.
24
per
cent.
of
the
iiext
64,700
and
14
per cent. thereafter.
3
119341
a
K.B.
346.
4
~19361
a
K.B.
%a.
.-,
[i94i]
A.C.
108.
491
492
THE MODERN
LAW
REVIEW
VOL.
13
imply a term that the principal would not withdraw from the
negotiations prior to the fulfilment of the condition upon which
commission was to be payable. Until a lcgally binding agreement
of sale was entered into the principal was entitled to withdraw
;
by
so
doing he did not act wrongfully and hence the agent was not
entitled to claim commission,
or
damages, or on a
quantum
merw't.
In
the
Luxor
Case
the agreement expressly provided that commis-
sion should
be
payable on completion
of
the sale, but it was con-
ceded in the judgments" that once a binding contract was entered
into the principal could not deprive his agent of commission (or
damages in lieu) by refusing to complete. Later cases established
that the same rule applied if the terms
of
appointment provided
for
payment
of
commission
'
upon introducing
a
purchaser
'
;
in
such circumstances it seems to have been assumed that the agent
hnd
a
vested right to his commission once a binding contract was
entered into,' although this right was liable to defeasance
if
the
purchaser refused to complete.R
But the judgments of the House of Lords in the
Luxor
Case
recognised that the contract between the principal and agent might
be
so
framed
as
to
entitle the agent to commission upon the intro-
duction
of
an applicant who mnde an offer even although it was
never a~cepted.~
Ir
Giddys
v.
Hars/dl
the formula used was that cornmission would
become paynble
'
in
the event of our being rnstrumental in intro-
ducing a party prepared to purchase on the terms of your instruc-
tions
'.
The agents introduced'someone who made an offer
'
subject
to contract' at the price required but the owner refused to sell.
Lewis
J.
held that the agent was nevertheless entitled to his com-
mission
as
the condition on which it was payable had been fulfilled.
It
wili be observed that in the
Giddys
Case
the technical word
'
purchaser
'
had not been used. Later cases, however, established
that this was not essential provided that the words used showed
an intention that the agent should be entitled upon introducing
someone able and willing
to
become a purchaser whether
or
not he
actually did
so.ll
This line of cases removed the hardship
to
the
agent and in practice restored
him
to his position under
Trollope
v.
Martyn
(supra),
provided that he took care to use the right formula
Estate agents were swift. to take the hint.
Sce
especially pp.
l2G
and
149.
Jones
v.
Lowe
"451
1
All
E.R.
194;
Fowler
V.
Bratl
[I9501
1
All
E.R.
662.
This view prevailed until
aa
recently
a6
McCalluni
V.
Hicks
[1050] 1
All
E.R.
864.
The judgment8
of
the House
of
Lords
in
the
Luzor
Casc
!eave
this point
olscure.
Poolc
v.
Clarke
[1945] 2
All
E.11.
445
following
Marlin
v.
Perry
d
Dam
[I9311
2
K.B.
310
and
James
v.
Syitk,
ib.
317
n.
A8
Bnnkea
L.J.
said in the latter
cnae.
at
p.
318,
'purchaser
mews
a
purchaser
able
to purchase
nnd
nble
to.
complete
as
wcll
'.
See espccinllv
Lord
Simon
at
p.
1.20
and
Lord
Riissell
at
p.
124.
Drnnir Hccvi
s,
X;lchol/s
rl'J.IRI
2
All
1C.R.
914
ant1
Bennctl
11
Partners
Y.
Millell
[1043]
1
K.B.
362.
[iw]
1
AII"E.R.
460.
OCT.
1950
NOTES
OF CASES
493
when setting out the terms of his engagement. On the other hand
it left the owner in
n
highly vulnerable position, for if he had
engaged more than one agent on these terms he might find himself
legally liable to pny commission to all of them. This situation
actually arose in
Nelson
5.
Co.
v.
Rolf~,’~
a Court of Appeal decision
which represents the furthest point
of
advance made by the agents.
In that case the plaintiffs had been engaged on the terms of the
Giddys’
formula,
i.e.,
that they should be entitled to commission
upon introducing
a
person able, ready nnd willing to purchase at
a
particular price. They introduced a
Mr.
Payne, who, it was con-
ceded, was willing and nble to buy at that price, but the owner
refused to sell as he hnd previously granted an option to an
applicant introduced by another agent, nn option which was in fact
subsequently exercised, thus rcndering the owner liable to pay
commission to the second agent.
It
was argued on behalf of the
owner that the contract with the plaintiffs was subject to two
implied terms-(1) that the commission was payable only in respect
of
the first introduction by any agent, and
(2)
that if the principal
should take the property
off
the market
‘
justifiably
’
in
a
business
or
moral sense, he should not be liable for commission in respect of
any subsequent introduction. The court held, rightly it is respect-
fully submitted, that neither term could be implied. As emphnsised
in the
Lmor
Case,
the court could only imply such terms as were
necessary in
a
business sense to give efficacy
to
the contract.
It
was conceded by the plaintiffs’ counsel that some limitation had
to
be implied and he suggested, and the court apparently agreed,IJ
that the agent would not be entitled to commission
if
the introduc-
tion was effected (i) after the agent’s instructions had been with-
drawn; (ii) the property had been sold;
or
(iii) a binding contract
of
sale had been entered into.
It
is a little difficult to see why it
is
necessary to imply limitations (ii)
or
(iii) in order
to
give business
efficacy to the contract; from the agent’s point
of
view
it
is not
unreasonable that he should insist that his authority should be
expressly withdrawn and that he should not be damnified by
a
sale
or
contract of which he
is
ignorant. Perhaps, however, these
limitations may be best explained by saying that after
a
binding
contract has been entered into
no
other applicant can be regarded
as
fulfilling the condition that he should be
‘
able
’
(as opposed
to
‘
willing
’)
to purchase, the vendor being
no
longer able
to
sell
to
him.
It
was Roxburgh
J.
a
few months later,
in
the case of
Gmham
Si.
Scott
v.
Oxlmie,l‘
who started the pendulum swinging back
in the opposite direction. Here again the agents had
been
em-
ployed on the same terms as those in the
Giddys
v.
Horsfall
line
of
cases. They introduced an applicant who offered
to
buy
‘
subject
12
[1950] 1
K.B.
139.
13
Per
Cohen
L.J.
at
p.
146.
14
[1950]
1
All
E.R.
91.
To continue reading
Request your trial