Commission Cases #128

Dec 01, 1988

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By Gerry Neely
B.A. LL.B

Two recent commission cases in which the judges could have as readily ruled against the licensees were instead resolved in their favour. In the first case, the owner of a small commercial property was attempting to sell it himself. When a licensee responded to an ad and asked for a listing the owner said "bring me a buyer and I'll pay a commission." It was agreed that the commission would be the standard one for the sale of such properties.

The licensee brought a number of purchasers, one of whom liked everything about the property except the price. While the licensee continued to show other properties to this prospective purchaser over the next six or seven months he continued to discuss with her the good features of the property he had first shown to her. Then the licensee went back to the owner and said that his price was too high, to which the owner responded "make me an offer, and I'll look at it."

With this encouragement the licensee returned to his prospective purchaser to tell her that the owner would look at the price. She said that she would give it some further thought. Two months later when the licensee telephoned her she said that she had purchased the property from the owner. The licensee's request for payment of commission was rebuffed by the owner who said he was unaware that the purchaser to whom he had sold was the licensee's "client."

The argument against payment of the commission was that when the purchaser first saw the property, she was only a casual observer. When she entered into negotiations eight or nine months later, she was acting on her own and the effective cause of the sale were the negotiating skills of the owner and the purchaser. Even though the licensee had only met the owner twice over an interval of eight or nine months, the judge held that the licensee was the effective cause of the sale. Not only had he introduced the purchaser to the owner and the property, but he had continued to maintain the prospective purchaser's interest in the property to such an extent that she entered into the negotiations which resulted in the sale.

The licensee's case was helped by the purchaser, who confirmed the evidence of the licensee. In addition, the judge accepted her evidence that she had discussed with the owner the commission owed to the licensee, and that the owner had told her he would take care of it.1

* * *

The second case concerns a knowledgeable vendor and purchaser dealing with property suitable for development listed with an agent who introduced the purchaser to the owner. An offer was made which was neither accepted nor rejected. When the listing expired, the owner advised the prospective purchaser that the property was withdrawn from the market. The owner tried to determine the feasibility of developing the property, and following that study, re-listed the property with another agent.

This agent obtained from the bank which had been working with the owner, a list of companies whose business activities might make them prospective purchasers. Included in this list was the company which had made the offer through the first agent. The second agent was able to solicit an offer from this company as well as one from another company. The latter offer was accepted subject to conditions and when the conditions could not be fulfilled, the offer expired. A new offer at a higher price was made by the patient prospective purchaser introduced by the first agent and this was accepted. A full commission was paid which was split between the second agent and the purchaser's real estate arm.

The owner refused to pay the commission requested by the first agent. He argued that the first agent could not have been the effective cause of sale because there were so many intervening events between the time of the introduction and the date of sale that the first agent could not claim that his introduction had been the effective cause.

The agent's lawyer argued that the interest of the purchaser had never ended, but was merely suspended during the period when the owner decided whether to develop or sell the property. The judge agreed and said further that even the intervening offer conditionally accepted by the owner, was insufficient to break the chain. The introduction by the agent was the effective cause of sale for a purchaser who knew what it wanted and who was prepared to wait. The first agent received the listing agent's portion of the commission upon evidence that it would have split the commission with the purchaser's real estate arm.2

  1. United Realty Ltd. v. Latek, CC Vancouver E865389.
  2. David Keegan v. I.L.C. Enterprises Ltd. , CC Vancouver F873661.



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