Estate agents –– Cold-calling letter –– Entitlement to fees –– Transaction resulting from information in cold-calling letter –– Whether estate agent entitled to fee
The claimant estate agent sent a letter to the defendant, with information about a property that the claimant thought the defendant might be interested in acquiring. There was no pre-existing contract between the parties and the letter was sent by way of a cold-calling exercise. The letter stated the fees payable to the claimant in the event that the introduction led to a successful transaction. Upon receipt of the letter, Mr S, of the defendant company, who believed that the claimant was the vendor’s agent, asked the defendant’s agent to make an appointment to view the property. Mr S viewed the property, an offer was made and a transaction was entered into. The district judge dismissed the claimant’s claim for fees. The claimant appealed contending that, upon its true construction, the letter constituted an offer to provide the defendant with further information in return for a fee upon a successful acquisition.
Held: The appeal was dismissed.
If an estate agent, in the absence of any agreement, tells another of a property that may suit that other, the estate agent is not entitled, at the same time or thereafter, to require that other to pay any fee for the information. A contract may be made after the receipt of the information. The information provided in the cold-calling letter is past consideration that cannot support a contract; it is the further information provided, which may be of very little value, that is capable of amounting to consideration supporting a contract. Upon its literal construction, the letter cannot be read as an offer to provide information in return for a fee upon acquisition. There was no sufficiently clear offer that could be accepted. No agreement was made; the claimant was not entitled to any fee.
The following case is referred to in this report.
Falcke v Scottish Imperial Insurance Co [1887] 34 Ch 234
This was an appeal by the claimant, Lady Manor Ltd, in proceedings seeking estate agent’s fees from the defendant, Fat Cat Café Bars Ltd, from a decision of District Judge Hasan at Central London County Court.
Stuart Hornett (instructed by Dechert) appeared for the claimant; Anwar Nashashibi (instructed by Fraser Brown, of Nottingham) represented the defendant.
Giving judgment, JUDGE COWELL said:
Introduction
1.The result of this case, decided by District Judge Hasan on 28 September 2000, has occasioned debate among estate agents and lawyers, and articles and letters in Estates Gazette. This is the appeal from her decision, and some general observations about the law are called for, as well as a careful consideration of the facts of this case.
2. The word “agent” can itself give rise to confusion. For the purposes of this case, it should be noted that it is not used in the strict sense of denoting the person with power to change the legal relations of another (see Chitty on Contracts (28th ed) paras 32-001); in that sense, it is debatable to what extent, if any, estate agents are agents (see Chitty paras 32-002 and 32-015) and it is unnecessary to consider the matter further. For the purposes of this case, if the word does anything more than describe the work an estate agent does, it should do no more than indicate, in appropriate circumstances, in the colloquial sense intended by saying, “I sold my house through an estate agent”, that a contract exists between the estate agent and another for the payment of a fee in return for an introduction that results in a transaction. This case is about whether any contract ever came into existence in October 1998 between the claimant, a company in the business of estate agency, and the defendant, an intending purchaser seeking a suitable property for its restaurant business.
3. In the most common case, the estate agent makes an agreement with one intent upon selling or letting his property to the effect that if he, the estate agent, introduces another who eventually purchases or rents the property, the one will pay a fee. It is convenient to call the estate agent in that case “the vendor’s retained agent”, because it is with the intending vendor that the contract for the fee is made.
4. In another case, perhaps less common, one intent upon purchasing or renting property of some kind makes an agreement with an estate agent to the effect that if he, the estate agent, introduces another who eventually sells or lets the property, the one will pay a fee. It is convenient to call the estate agent in that case “the purchaser’s retained agent”, because it is with the intending purchaser that the contract for the fee is made.
5. This case is different because the claimant, in business as an estate agent, was not retained either as the vendor’s retained agent or as the purchaser’s retained agent. On 15 October 1998 when no contact at all existed between the claimant and the defendant, the claimant, by Miss Hayes, sent information in a letter of that date to Mr Saunders, of the defendant company, telling him that 1 Hoxton Square was a property that might be of interest to him. To provide such information in the absence of any pre-existing contract is called, in the business, “cold-calling”. I doubt if that appellation assists in any analysis, but that is, at any rate, roughly what is meant by that expression. The law on the matter can conveniently be considered in three stages.
Law
6. First, there is what I shall call the general principle. If I (or an estate agent), in the absence of any agreement, tell another of a property that may suit that other, I am not entitled, at the same time or thereafter, to require that other to pay any fee for the information. The basic principle of the law (to which the maritime law of salvage is an exception, as are some statutory provisions relating to the improvement of goods) is that if I confer an unrequested benefit upon another,
Were it otherwise, the provider would effectively impose a contract upon the recipient, and that would be wholly inconsistent with the notion that a contract is made by the willing assent freely given by each party to it: “Liabilities are not to be forced upon people behind their backs any more than you can confer a benefit upon a man against his will” (see Falcke v Scottish Imperial Insurance Co [1887] 34 Ch 234 at p248). The law of restitution (see Chitty chapter 30) may be said to be another and a wider exception to the general principle, based upon the notion of unjust enrichment, but it was not argued that it has any application to this case. That is, in my judgment, quite correct, because information provided by an estate agent is not self-evidently enriching in its quality.
7. Second, a contract may be made after the receipt of the information, if the sender and the recipient agree, for proper consideration, to something more. The sender of information may, for instance, in the letter providing it, make an offer by stating that if the recipient wishes to obtain further information from him, then that further information will be provided only in return for a specified fee payable in a certain event (for instance, in the event of acquisition of the property resulting). In such a case, the recipient may accept that offer by requesting the further information, and the receipt of that further information will, in the event mentioned, oblige the recipient to pay the sender’s fee. In such a case, the recipient of the letter has the choice of whether to request any further information, and, if he does so request, he assents to the making of a contract. The vital question in this case is whether, upon the facts of this case, such a contract was made.
8. Third, there are two points to be noticed on the subject of consideration. The further information provided, after the recipient has chosen to request it, provides the consideration for his promise to pay, whereas the information contained in the cold-mail letter can only be “past consideration”, which cannot in law constitute any consideration at all for any later contract made: see Chitty para 3-025. (The latter point is probably the corollary of the general principle). The further information mentioned in the last paragraph is not “past” consideration, but a proper consideration. The other point is that the further information may be of little value, or of much lesser value, than the information in the cold-mail letter, or of minor causative significance in the transaction resulting, but the law does not inquire into the value of it. The consideration is said to be sufficient, even if, on some view of the matter, it might be said to be inadequate to support so large a fee: see Chitty at para 3-013. The law does not inquire into such a matter because it is for the party presented with the offer to decide whether the offer is worth accepting, and even he cannot know its exact value. If there is a race among many to acquire the property, the further information may assist him to get in first. If there is nobody else interested, it may, in retrospect, appear that the further information was not worth having. That is not a matter for the court to value; it was a matter of choice for the recipient of the offer.
9. The last three paragraphs do, I hope, sufficiently set out the law relating to cold-calling. The more clearly the terms of the cold-mail letter express a proper offer, which must be to do or provide in return for a fee something in addition to the information already given, the more clearly will it appear whether the recipient of the letter has, by his subsequent acts, accepted the offer. The consideration is the provision, not of the information already given, but of the additional something, and (assuming acquisition results) the exact value of it, or the extent of its causative potency, is not for the court to assess.
Law in its application to this case
10. After stating much detail about 1 Hoxton Square, the vital paragraph in the letter of 15 October 1998 sent by the claimant to Mr Saunders stated:
As discussed I would also like to take this opportunity to confirm my company’s fees which would become payable in the event that the above introduction leads to a successful transaction. Our fees would be [then they were set out].
11. In this case, the defendant could, in my judgment, by reason of the basic principle, have gone to 1 Hoxton Square, or otherwise used the information contained in the letter in any way he chose, without further reference to the claimant or without being or coming under any obligation to pay anything to the claimant. It seems that the general principle was overlooked in the initial formulation of the case, as I shall explain, but it may be that the words, “As discussed” and “confirm” in the letter led to confusion. At the trial, the writer of the letter explained that the matter had not been discussed, nor was there, for that reason, anything to confirm. The writer had simply taken those words from another draft that was wholly inappropriate to this case. Had there been an agreement made before the letter was written, that the information would be provided in return for a fee payable upon acquisition of the property, the case would have been clear. In the light of that erroneously expressed paragraph, it is understandable that the district judge should find that there had been no such prior agreement. It is important to appreciate that the decision reached could not have applied to such a paragraph correctly recording such a discussion and confirmation.
12. It is to be noticed that in para 7 of the particulars of claim, the claimant pleads that the letter constituted:
an offer… to the effect that, if the Defendant used the information in the… letter and the claimant thereby effected an introduction of the [property] which led to the defendant acquiring the same, the defendant would be liable to pay…
In my judgment, by reason of the general principle, the defendant could have used the information as he wished without coming under any obligation to the claimant. It may be that the words “and the claimant thereby effected an introduction” are potentially ambiguous. I do not think they are, and I do not read them as averring that anything further was or would be done by the claimant, but that the defendant’s use of the information, with nothing more, is to be regarded, if acquisition results, as an introduction effected by the claimant. The defendant’s use of the information could indeed be so regarded, but it does not follow that the defendant would, by reason of the effective introduction, become bound to pay a fee. If that is how the words are to be understood, the provision of information in the letter could not constitute an offer at all because the defendant was, upon receipt of the letter, free to use the information without paying any fee.
13. If, on the other hand, the words are intended to aver that something further was, or might be, done by the claimant for the defendant, then there is scope for regarding the letter as containing an offer, and that is what this case is essentially about. What I have called the potential ambiguity perhaps arises only from knowing how the argument was eventually put by Mr Homett on behalf of the claimant. The argument depended, in its final formulation, upon the defendant having made use of further information from the claimant. No offer could have been made to the defendant, in the sense (as I read it) of para 7, that if he used the information in the letter (and it resulted in acquisition), he would pay a fee. That is because if he were not freely able to use the information, it would mean that an obligation would be imposed upon him without his assent. For so long as para 7 (as I construe it) averred that the user, by the recipient of information contained in a cold-mail letter, obliged the recipient (if acquisition resulted) to pay the fee demanded in it, the district judge was entirely correct in refuting it and finding as she did in para 2 and in the first three lines of para 3 near the end of her judgment. The receipt of the letter without more imposed no obligation at all upon the defendant, whatever use he made of the information in it. Furthermore, the information contained in the letter could not amount to the consideration for any apparent agreement, on the defendant’s part, made after receipt of the letter to pay a fee, because that consideration would be “past” consideration.
14. The question in this case is what more was there? The particulars of claim continue after para 7 to set out the facts relied upon. The
Essence of the issues in this case
15. The essence of the claimant’s case is that: (i) upon its true construction, the letter of 15 October constituted an offer to provide the defendant with further information in return for the fee specified (upon successful acquisition); (ii) the defendant accepted that offer by inquiring (by Miss Knight) how the property might be viewed; (iii) the further information provided was (or included) that the viewing had to be arranged by asking the vendor’s retained agent, and that it was Messrs Shelley Sandzer; and (iv) acquisition then resulted, the condition making the fee payable under the agreement made by the defendant’s acceptance.
16. The essence of the defendant’s case is that he did not understand that the claimant was making an offer that involved him in any obligation to pay a fee. He understood the claimant to be the vendor’s retained agent, in which case it would be, as is invariably the case, the vendor who would be paying the claimant any fee; the letter did not state that the claimant was not the vendor’s retained agent. He did not, by seeking further information, accept any offer because he did not believe there was any offer to accept.
17. The claimant’s reply to that was that the matter had to be looked at objectively, and that, upon that basis, the defendant could not reasonably have ignored the reference in the letter to the payment of a fee, and could not reasonably have understood the claimant to have mentioned its fee simply so as to satisfy the defendant’s as yet unexpressed curiosity over what fee the claimant was charging the vendor.
Before the district judge
18. An appellate court ought always to be ready to appreciate what matters were in issue in the court of first instance. Proper legal argument exposes the essential issues, rather as an archaeological excavation reveals the real plan of the ancient building. Just as the plan cannot be fully known before the rubble is removed, so the parties’ notions of what is going to matter are not as focused at the outset as they later become. It is to be noticed that by the defence there is a denial of the para 7 that I have mentioned. When the facts alleged by the claimant are dealt with, there is no focus by the claimant, because no offer other than that in para 7 is propounded, or by the defendant, upon the facts that go to the question of whether an offer to provide more was made or accepted. The particular point taken by the defendant is that the claimant provided nothing of value (see para 10 of the defence) because the defendant would have been made aware of the availability of 1 Hoxton Square regardless of receipt of the letter of 15 October. That led to much evidence about the value of what the claimant did, and, for want of proper focus, the subsequent debate became largely about the value rather than the nature of the consideration. Given an offer to provide further information and its acceptance, it could not seriously have been disputed that the further information, which put the defendant ahead in the race to see and bid for the property, was of value. The essential issues would appear not to have been so clearly focused before the district judge as they were before me.
Facts and evidence
19. The vendor of Hoxton Square had contracted in the usual way with estate agent, Messrs Shelley Sandzer, and, thus, it was, to use the term mentioned above, the vendor’s retained agent. Messrs Lambeth Smith Hampton was the purchaser’s (the defendant’s) retained agent. The claimant has been described as the introducing agent, but that is an unhelpful description, because it had entered into no contract with anybody involved and so was nobody’s agent, even in the colloquial sense mentioned above. It is therefore appropriate to refer to the claimant simply as the introducer. Upon receipt of the letter of 15 October, Mr Saunders, of the defendant company, by telephone asked Mrs Knight, of Messrs Lambert Smith Hampton (its retained agent, although the contract of retainer is immaterial because, in complying with his request, she was simply acting on his behalf in that respect), to telephone the claimant to arrange a view of the property. She did so, believing the claimant to be the vendor’s retained agent (for she had not seen the letter of 15 October), and was told by Miss Hayes that the vendor’s retained agent was, not the claimant, but Messrs Shelley Sandzer. Viewing was then arranged with Mr Weir of that firm. Mrs Knight’s belief was of no consequence. What matters is that Mr Saunders obtained, through her, the further information that led to the acquisition.
20. The evidence of Mr Weir, of the vendor’s retained agent, was to prove that the defendant’s further information about the property, discovered at Mr Saunders’ request by Mrs Knight telephoning the claimant, did indeed come as a result of the letter of 15 October, having caused Mr Saunders to make that request, and not by reason of anything he had sent to Mrs Knight or Mr Saunders (for he had sent nothing until after Mr Saunders had seen the property and made an offer). The district judge misread para 3 of Mr Weir’s statement to mean that Mr Weir sent particulars to Mrs Knight on 20 October. Mrs Knight received them on about 24 October. The important point is, nevertheless, that the further information was obtained as a result of steps taken by Mr Saunders after receipt of the letter of 15 October. Hence, it was of causative significance and of some value. Mr Saunders viewed the property on 21 October, and he made a formal offer on 22 October. Mr Weir’s evidence was of no further significance.
21. Mr Davis’s evidence was largely unnecessary, being (in para 2) either hearsay of what was contained in Miss Hayes’ statement, or (in paras 3 and 4) akin to rather unhelpful expert evidence, and so, for these reasons, not really evidence at all. It did not help to be told that a purchaser’s retained agent may make an agreement with an introducer. So he may, but it is because that was not done in this case that the problem arose. That the early receipt of information can be a very valuable commodity is not disputed, but the question is whether it was given pursuant to an agreement. To say that the defendant “clearly [my emphasis] accepted our terms by instructing its agent to contact us” begs the very question that arises in this case. It may be correct, but it is not clear, precisely because of the confusing terms of the vital paragraph in the letter of 15 October. The references to the honour of the agent and to accepted practice, presumably intended to apply to Mrs Knight and her firm, seem to me to be out of place, when it is the conduct of the defendant, which is not an estate agent, that is in point. It could only have been the recipient of the letter of 15 October, Mr Saunders, who could have accepted whatever offer was contained in it, whether he were to do that by asking for the further information himself or by asking Mrs Knight to obtain it for him.
22. Much evidence was given about the discussion between Mrs Knight and Miss Hayes on 16 October upon the matter of fees, and during which telephone call it occurred. Mrs Knight had not seen the letter of 15 October; she had been asked by Mr Saunders to find out more, and was not authorised by him or in a position to agree anything upon the subject of fees. At most, mention of the matter by Miss Hayes might have indicated some uncertainty as to whether an agreement was in place, but, in my judgment, that was a matter that must stand or fall upon the letter she had written, and not upon anything said over the telephone. However inconsequential or unnecessarily confusing that evidence was at the trial, as I think it was, this is the stage to mention a point made by Mr Anwar Nashasbibi on behalf of the defendant.
23. His argument was that Miss Hayes made a “mistake” (as he called it) when speaking to Mrs Knight over the telephone, in that she gave the further information before ensuring that the claimant’s fees would be paid. Had she appreciated that her letter had imposed no obligation upon Mr Saunders or the defendant, and that Mrs Knight had no authority to agree to pay a fee, she might have declined to give any information until after she had spoken to Mr Saunders and obtained from him his agreement to pay her fees before giving it. In that case, there would have been a clear offer and acceptance. Mr Nashashibi’s argument does no more, in my judgment, than make the point that if no
Crucial evidence
24. There was much evidence given at the trial, and though what I have already mentioned was not in my judgment of crucial importance, it is understandable that the district judge made findings of fact in relation to it. The crucial evidence, given the essential issues as they were put before me on appeal (paras 15-17 above), now appear to centre upon these points. The letter of 15 October erroneously suggested that the introduction effected by it was being given pursuant to an agreement that a fee would be paid if acquisition resulted. That error now being evident, can the letter now be understood (or was it understood by Mr Saunders?) as an offer to provide further information in return for a fee payable upon acquisition? The letter is far from clear: in so far as it suggests that a fee is payable for the information provided, it offends what I have called the general principle. Although further information was likely to be forthcoming upon inquiry of the writer of the letter, it did not clearly and expressly state that that was what would involve the payment of a fee, given consequent acquisition. It did not state that the claimant was not the vendor’s retained agent.
25. The evidence of Mr Saunders was that he thought the letter came from the vendor’s retained agent, the letting agent. Mrs Knight says in relation to his request that, “He thought that [the claimant was] the letting agent”, but it appears from her examination-in-chief that she assumed that, rather than that she was told. Mr Saunders’ understanding was disputed by the claimant, particularly by reference to para 7 of the defendant’s defence, which originally, before amendment, averred that Mrs Knight’s telephone call was made “in order to determine whether the claimant was in fact the letting agent”, and then, by amendment, added, “and thereafter if appropriate to arrange a view”. Also it was argued that Mr Saunders must have understood the reference to fees as fees that the claimant would be seeking from the defendant, for otherwise there would be no purpose in mentioning them in a letter to him. Any man of business would know that a vendor’s retained agent is paid by the vendor and does not mention his fees to the purchaser.
26. The district judge recited Mr Saunders’ evidence, about skimming the letter, that he thought the mention of fee’s was standard, and the like, but she made no particular finding as to whether she accepted his evidence. The whole paragraph beginning, “The last witness to give evidence…” should be read carefully. It would appear that she was disposed to accept all that Mr Saunders said, although none of it appeared to lead to any of the conclusions of fact she made. The conclusion she drew, in para 4 at the end of her judgment, that the fact that the offer was put through the vendor’s retained agent meant that the claimant was not entitled to a fee, was, in my judgment, based upon a misunderstanding of Mr Davis’s evidence, unhelpful though it was for the reasons I have given. The conclusion she drew took no account of the means by which the offer came to be put through the vendor’s retained agent, that is, by the provision of the further information. It seems from what she said about Mr Saunders’ evidence that if she had decided whether Mr Saunders understood that he was agreeing to pay a fee for the provision of that further information she would have decided that he did not. How far can an appellate court go in disturbing what only appears to be a finding of fact? In my judgment, I can ignore the subjective beliefs that Mr Saunders entertained about the letter, which could not have been held upon a fair reading of it, and of which the writer could not have been aware.
27. The first matter to heed is that Mr Saunders cannot properly contend that any part of the letter was not noticed by him or “skimmed”, and so cannot have the effect that it would have had had he taken notice of all its contents. If an offer was made by it, whether expressly or impliedly, he is not at liberty to pick and choose the benefit of more information and ignore the burden of any requirement of payment, for, upon issues of contractual intention, the courts apply an objective test (Chitty para 2-148), so that Mr Saunders is prevented from relying upon any uncommunicated belief about the meaning of the letter, such as that nothing was stated in it about fees. Something was stated on the subject, and cannot be ignored as if not there. Failure to notice some part of the letter cannot be relied upon. He acted upon the letter, and so must, provided an offer was made in it and if he accepted it, be bound by its terms. The crucial paragraph cannot be ignored and treated as if absent.
28. The next matter to heed is only that the crucial paragraph was incorrect, in that nothing had been discussed, and there could be nothing to confirm but that, in contrast to the matter mentioned in the last paragraph, it was incorrect to the knowledge of both parties. Those errors are not only very apt to confuse the recipient, but, when corrected, leave the paragraph suggesting that “the above introduction” effected by the letter would attract a fee upon acquisition, which, in view of the general principle, it cannot do. Can it be implied that the offer being made is the provision of further information in return for a fee?
29. The points relating to the extent of Mr Saunders’ knowledge of the estate agency business seem to me to cancel each other out. The greater his awareness that it is the vendor who pays the fees of his retained agent, the greater must have been his realisation, had he read all the letter –– which he must be taken to have done –– that the paragraph about fees was out of place and tantamount to a statement that the writer of the letter was not the vendor’s retained agent. The claimant was clearly expecting a fee from the defendant in the event of acquisition. In law, the claimant could not require one for “the above introduction”.
30. In the final analysis, the case depends upon whether the letter can be read as an offer to provide further information in return for a fee upon acquisition. Upon its literal construction, it does not say so. The civil burden of establishing, on a balance of probabilities, that such an offer was made rests upon the claimant, and it was for the claimant, when sending the letter, not the recipient of it, to choose how to express its offer with reasonable clarity. The obligation to pay a fee was expressly attributed to the “above introduction”, which was no obligation at all because of the general principle, and was not expressly attributed to anything else. Had it been clearly attributed to the provision of further information, Mr Saunders might have chosen, rather than incur the fee intended to reward the claimant for the information already given, to find out more by other means, such as by going to or sending Mrs Knight to the property. Had Miss Hayes understood what offer she could effectively make, she might have specified a lower fee for the further information, knowing that Mr Saunders would then have that choice. It is, in my judgment, going too far to say, in all the circumstances, that what the claimant chose not to express should be implied or was what Mr Saunders, on a careful reading of the letter, ought to have appreciated. It must be for the offering fee earner to explain for what service he is to earn it. My decision must therefore be that there was no sufficiently clear offer (other than the one expressed) that could be accepted.
31. I have reached that final conclusion after some hesitation, but much thought. Had the true meaning of the letter been to the effect that further information was available in return for a fee, whether by express terms or proper implication, Mr Hornett’s correct analysis of the situation, shorn of the heresy in para 7 of the claim, would have resulted in the appeal being allowed. The provision of the further information was of some value: it led to acquisition. It was immaterial whether Mr Saunders noticed the paragraph about fees; the real question (once the error about prior discussion in the letter had become
Appeal dismissed.
