An Agent's Duty of Care - Commission Cases Continued #360

Jun 01, 2003

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By Gerry Neely
B.A., LL.B.

Legally Speaking 359 considered a licensee's successful claim for commission when his principals argued that he breached the standard of care and fiduciary duty owed to them by failing to act upon and disclose information that might have benefited them. The judge decided that the licensee owed no duty to call other agents who had expressed an interest in the property to advise them of a substantial price reduction.

In reaching this decision, the judge relied upon the evidence of an expert in real estate practice and conduct who testified that there is no industry standard or accepted practice to contact other agents following a price reduction. This decision depends upon the particular facts of the case and should be used cautiously as a guide to a licensee's conduct following a price reduction.

The expert witness also said that each situation is governed by market conditions relating to the property and the specific needs and interests of the sellers. This is consistent with the general rule of law with respect to disclosure: namely, that an agent must disclose "everything concerning the contract that a reasonable man with the information known to the agent would consider likely to influence the conduct of the principal." The judge agreed there may be circumstances relating to a price reduction which would create a duty, but they were not present in this case.1

***

In another commission case, the sellers acknowledged that the agent was the effective cause of sale, but argued he was disentitled to a commission because the relationship he created had "not merely been dislocated or postponed, but broken."

The sellers signed a standard Multiple Listing Contract and a Property Disclosure Statement Residential (PDS Residential) prepared by the buyers' agent on October 5, 2000. The PDS Residential contained a comment about a septic field problem and a contractor's solution for it. The sellers accepted a conditional offer, dated November 23, 2000, for the full price of $249,900. The important conditions were the resolution of the septic field problem by December 4, 2000 and to the sale of the buyers' home by January 1, 2001.

The sale collapsed when the sellers refused the buyers' request to hold back $10,000, pending repair to the septic field. The listing salesperson continued to show the residence, but no offers were received before the listing expired on February 20, 2001. The sellers later remedied the septic field problem.

The buyers looked at other properties but made no offers. They were still interested in the residence; however, they did not contact the sellers again until June 1, 2001, following an agreement for the sale of their home. They made an offer to purchase the residence at the same price, on the same forms, with essentially identical terms as those prepared by their agent for the original offer. This offer was accepted by the sellers and the parties gave no thought to the possibility of a commission claim.

The critical factors favouring the agent in this case were:

  • the buyers' knowledge of the property, which enabled them to make an offer directly to the sellers;
  • the similarity of terms of the two offers, which were due to the efforts of the agents;
  • the buyers' continued interest in the residence; and
  • the lack of any serious attempt by the sellers to sell it.

The judge decided that the chain of relationship had been dislocated, as that term is commonly known as being put out of order, disturbed or upset. However, the arrangements between the buyers and sellers were not completely broken, so commission was ordered to be paid to the claimants.2

For other effective cause cases, see columns 233, 271, 275 and 314. Since not all commission cases are reported, I would welcome hearing about your experiences. Please e-mail your comments to [email protected].

  1. Central Realty v. Holmes and others, S.C.B.C., Vancouver Registry, Reasons for Judgement, March 24, 2003.
  2. Re/Max v. Friesen et al., B.C.P.C., Prince George Registry, Reasons for Judgment, June 19, 2002.

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