Commission Claim Lost, Restrictive Contract Wording #339

By Gerry Neely
B.A. LL.B.

Earning a commission is very much an all or nothing venture. It is made riskier by the court's strict interpretation of a listing contract to determine whether the acts of an agent who claims a commission, fall within the precise wording of the contract. It is important that an agent not only know the limits of the commission terms when the listing contract is signed, but as events unfold, review them to see whether they should be modified.

This would have helped an agent who was given a listing by a bank that had conduct of sale of property upon which it was foreclosing. The contract, which was prepared by the bank solicitors, was not a standard listing contract. The agent was entitled to a commission if a binding contract of sale and purchase was executed and approved by the court, the sale was completed and the sale proceeds received by the bank, all within the five-month term of the contract.

After the expiration of the term, the agent was entitled to one-half the commission if a court-approved sale was made to a buyer (named on a prospective buyers list, given to the bank) with whom the licensee was actively negotiating for the purchase of the property, and the bank received the sale proceeds within ninety days of the term expiry.

Twenty-seven days before the end of the term, a motion for court approval of a sale to a buyer brought by the agent to the bank, and which was to complete within 14 days of the court order, was adjourned for one week. At the request of the agent, the bank agreed to pay a full commission even if the sale proceeds were received after the term ended.

A better offer, which provided for a 45-day completion date, was presented to the court a week later. An order for sale was made in favour of a buyer who was not on the agent's list of prospective purchasers. The owner of the property, who was entitled to receive the balance of the sale proceeds left after creditors and commission were paid, objected to payment of a full commission.

He objected because the sale proceeds were not paid to the bank during the term. One-half of the $106,000 commission was paid to the agent who then applied to the court for an order for payment of the remaining half. At this hearing the owner said his consent to payment of one-half was given in error.

He asked the court to find that the agent was not entitled to any commission and should be ordered to repay the $53,000. He argued that no sale had been completed during the term. In addition, the buyer who completed the sale after the term ended was not one with whom the agent had actively negotiated during the term.

The agent's argument that the contract had been modified by an oral agreement was defeated by a clause in the contract that no modification of it was effective, unless it was made in writing and signed by the parties.

The judge agreed that no commission was payable and ordered repayment of the $53,000. He further said that the agent could have protected his commission by negotiating a modification to cover any completed sale. In making this comment he quoted another judge's remarks that "in the absence of an express term the courts will not come to the assistance of brokers and imply into contracts a term for their protection."

This was an unfortunate result for an agent who had done a great deal of work on behalf of a client.

1.

HSBC Bank Canada v. 356533 B.C. Ltd.,S.C.B.C., Vancouver, Reasons for Judgement, July 11, 2001.

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