Commission Cases #189

By Gerry Neely
B.A. LL.B

The right of an agent to a commission arose in a case where the vendor refused to complete a sale because just two days prior to closing, the purchaser substituted a nominee company for himself as the purchaser of the vendor's property. The vendor on the afternoon of the day set for closing refused to accept the change. Although the purchaser agreed to alter the documents and complete the next day, the vendor refused to extend the time for completion.

The purchaser sued unsuccessfully for specific performance and the vendor sued successfully for the deposit. The agent then sued for commission based upon a listing contract in which the vendor agreed to pay a commission if a binding contract of sale was entered into during the terms of the listing. The vendor's argument was that the strict terms of the listing contract should be enforced only if the agent had advised the vendor of his liability for commission even if a sale failed because of the purchaser's default, and the vendor, armed with that knowledge, had signed the listing.

The sympathies of the judge were clearly with the agent who had found a purchaser for the vendor within the time and according to the terms of the listing contract. The vendor could have completed the sale if it had not been to the vendor's economic advantage to refuse to close. Judgement for the agent.¹

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A listing contract in the Prince George area provided for the more or less usual three circumstances under which an agent would be entitled to commission. A proviso in the listing contract negated any obligation to pay commission if the listing contract had expired and the property had then been re-listed with another licensed real estate agent. This occurred and following the re-listing the second agent earned a commission upon obtaining an offer from a purchaser who had been introduced to the property by the first agent before that agent's listing had expired.

The first agent sued, arguing that it was entitled to a commission because the sale took place during the holdover period or was made to a person introduced to the property during the term of the MLS contract. The agent's lawyer tried to find an ambiguity in the listing contract which the judge declined to agree was there. The proviso was clearly intended to avoid an owner becoming obligated to pay commission to two separate listing agents and defeated the first agent's claim for commission.²

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A purchaser who had signed a binding contract of sale through the Multiple Listing Service of the Real Estate Board of Greater Vancouver paid a $50,000 deposit, but was unable to close. A binding contract of sale had been entered into which entitled the listing agent to a commission. The listing agent agreed to waive its entitlement to commission if the vendor would re-list the property with the listing agent who would receive a commission upon the resale of the property. The vendor did, the property was sold and the vendor paid to the listing agent a commission upon the sale. In the meantime the vendor and the first purchaser negotiated a division of the deposit and when requested to do so the selling agent who held the deposit returned it less a sum which it claimed as commission on the collapsed sale. The vendor sued the selling agent to recover this sum.

The listing agreement created a contract between the listing agent and the vendor. The question for the selling agent was whether the vendor's authority to the listing agent to delegate his duties to a sub-agent created a contract between the sub-agent and the vendor.

The judge concluded that there was no general rule that privity of contract exists between a selling agent and a vendor in all MLS contracts. His conclusion was based upon the wording of the MLS contract in which all obligations to pay commission were obligations owed by the vendor to the listing agent. Any agreement to pay a portion of the commission to the selling agent is only an obligation between the two agents and not between the vendor and the selling agent. The vendor was entitled to damages in the amount of the commission withheld by the selling agent.³

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