Commission - Licensees Sign the Effective Cause of Sale #314

Dec 01, 1999

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By Gerry Neely
B.A., LL.B

A Port Alberni agent successfully collected a commission because of his prominently displayed sign on his principal’s property. It, and the dog run that could be seen from the road, resulted in drive-by buyers turning in and speaking to the owner’s son. When the owner advised the agent of this interest, the agent gave the prospective buyers an appraisal of their house but failed to obtain a listing. They listed the property with another agent and told the Port Alberni agent that the house that they had viewed was out of their price range.

The agent’s listing expired on August 31st, and the owner advertised it for three days, commencing September 2nd in a publication that appeared late in the day. On September 3rd an unconditional offer was made and signed between the agent’s principals and the buyers who had said that the property was out of their price range. The purchase price had been reduced by the amount of the commission and $10,000.00, which was the cost of repairs the buyers had indicated they thought needed to be done.

In finding that the agent was entitled to a commission because he was the effective cause of the sale, the judge said that to decide otherwise would mean that everyone would make a sham of the real estate industry. They would list their homes, have signs put up on their properties, and then advise the prospective buyers to wait until the listing expired, when the price would be reduced the commission.1

* * *

A Manitoba agency successfully found a buyer for a hotel owned by a company. The buyer had to sell a house to complete the purchase so it was agreed that the buyer would take a lease on the hotel for a year and then start payments against the purchase price. The house did not sell, the asset sale was changed to a share sale and the buyer continued to carry on the business until it failed. All of the negotiations had been conducted for the shareholders by a family member, who was not a shareholder.

The agency contract with the company entitled the agent to a commission if the hotel was sold. The agency sued both the company and the shareholders. The action against the shareholders was based upon the argument that they were undisclosed principals of the family member who had negotiated the contract. The defenses were that the company could not be liable since shares and not the asset were sold; and the shareholder could not be liable, because they had no contract with the agent.

The action against the shareholders failed because there was no privity of contract between the agent and the shareholders. The action against the company succeeded because of the judge’s finding that the agent had fulfilled its obligations when it introduced a purchaser, and it was immaterial whether the assets or the shares were sold. Unfortunately, the company’s bankruptcy made the win a loss.2

  1. Coast Realty Group (Parksville) Ltd. v. Mee, Provincial Court of British Columbia (Small Claims Division), Port Alberni Registry, Reasons for Judgment, March 23, 1999.
  2. Smalley Agencies Ltd. v. Tetrault, Manitoba Court of Queens Bench (1999), M.J. No. 395, Reasons for Judgment, September 21, 1999.

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