Aug 01, 1992

Commission Cases #191


By Gerry Neely

The importance of the exact wording of the terms of a listing contract from which an agent expects to obtain a commission are illustrated in recent decisions of the B.C. Court of Appeal and the Manitoba case which follows. An agreement between a broker retained to obtain financing for land developers contained four clauses, any one of which depending upon the facts, would entitle the broker to a commission. The first clause stated that commission would be payable:

(a) upon a commitment to loan being given either to you or us on the above terms or on other terms acceptable to us during the term of this exclusive agency. The "above terms" referred to the security for the loan, the loan amount, term, interest rate, funding and processing fee. Letters of commitment were received within the term of the listing contract as extended, although the borrowers acceptance took place after the term ended. The accepted terms differed from the "above terms".

The borrower forwarded the lender the cheque requested and instructed its lawyer to authorize the lender to pay the broker's commission from the proceeds of the first mortgage advance. The borrower signed the formal loan agreement, but it was never signed by the lender. According to the borrower, the lender unilaterally imposed new conditions which the borrower could not meet.

The borrower sued for its commission, but lost at trial because the trial judge held that a commitment meant a binding contract. In his opinion, the letters of commitment gave the lender too many unilateral escape hatches for the letters to constitute a contract.

The B.C. Court of Appeal stated that Clause (a) of the listing contract meant that the agent need only bring about a commitment, not a binding contract. The words and actions of both the borrower and the lender confirmed that the parties understood that a commitment to the borrower had been made.

The borrower argued that the listing expired on September 19, 1988 and the commitment was not accepted by the borrower until September 20, 1988. The court dealt with this argument by saying that although the agreement specified the time in which the commitment to loan had to be given, if the broker's claim to commission was to succeed, it did not set any time limit for acceptance. The court said that it would be patently unfair, unless specifically provided for, that payment of commission would be dependent upon the date of acceptance of the offer. The broker was successful because of the court's conclusion that it earned its commission upon the presentation of the commitment within time and upon terms acceptable to the borrower.1


A Manitoba agent was also successful in obtaining commission based upon a listing contract which provided that commission was to be payable on any sale contracted during the currency of the agreement from any and all sources whatsoever. The contract also required the vendor to refer all inquiries or offers to the agent. During the listing period the vendor centered into an agreement directly with a purchaser who had agreed to buy the property a year earlier, but who was not able to complete because his financing arrangements failed.

The vendor's defense was that the agreement was "not contracted" during the listing period, but instead was either a revival of the earlier agreement or the culmination of the negotiations which produced the earlier agreement.

The judge was satisfied that the word "contracted" referred to the time during the listing period when the vendor entered into the agreement directly with the purchaser. He interpreted the clause requiring the vendor to forward to the agent all inquiries and offers as meaning that only the agent had the right to effect a sale during the listing period, even to the exclusion of the owners.2

 1.Citifund Financial Services Ltd. vs. Sayani et al, B.C. Court of Appeal, Vancouver Registry, May 5, 1992.
 2.Smalley Agencies Ltd. vs. Hill-Everst Holdings Ltd., 1992, [4 W.W. R233].

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