A seller was liable to pay an agent’s commission

Is a bargain complete if a selling agent and his principal have agreed the percentage of commission that will be payable to the agent, but have not expressly agreed when the payment will fall due? And, if not, can the court imply such a term? Wells v Devani [2019] UKSC 4 answers both these questions. The case concerned the sale of seven flats in a development in Hackney. The developer had been unable to find buyers for them until an agent, introduced by a mutual acquaintance, contacted a housing association. The association made an offer for the flats and, following completion of the transaction, the agent raised an invoice for his commission in the sum of £42,000 plus VAT. The sum claimed was in line with the parties’ oral discussions. But the parties had never discussed or agreed what would trigger the developer’s liability to pay the commission. The Court of Appeal ruled that agreement on the event that will trigger an agent’s entitlement to be paid is essential to the formation of a legally binding contract between the parties, and refused to imply a term to make a contract for them. But the Supreme Court has overturned the decision. Lord Kitchin, who spoke for the court, ruled that there was, in fact, a binding contract between the parties. The judge at first instance had had no doubt that the parties had intended to enter into a legal relationship – and the court will be reluctant to find that an agreement is too vague or uncertain to be enforced in cases where the parties had the intention of being contractually bound and acted on their agreement. There was no discussion of the event that would trigger liability to pay the commission. But the court had no doubt that it would naturally be understood that payment would be due on completion, out of the proceeds of sale. Indeed, that was the only sensible interpretation of what the parties had said. If that were not the case, could the court imply a term into the parties’ agreement to render it sufficiently certain to constitute a binding contract? The Supreme Court agreed that it could. Each case must be considered on its own particular facts, and there will be cases where an agreement is so vague and uncertain that it cannot be enforced. But there is no general rule that it is impossible to imply a term into an agreement to render it sufficiently certain or complete to constitute a binding contract. And, in this case, the implication of a term obliging the seller to pay the commission on completion would give the agreement business efficacy, and would not go beyond what was necessary for that purpose. Finally, because the agent had concentrated on finding a buyer for the flats, which he did very quickly, he had not sent his terms of business to the developer until after the housing association’s offer was made and accepted. This presented a further problem because section 18 of the Estate Agents Act 1979 provides that agents that fail to comply with these requirements must ask the court for permission to enforce a contract. The judge at first instance had decided to allow the agent to do so – but had reduced the commission payable by a third to reflect his culpability for failing to comply with the legislation. But was this right? The Supreme Court agreed that it was.   Allyson Colby, property law consultant