Commission - Not Payable, Lack of Effort #120

By Gerry Neely
B.A. LL.B

A real estate salesman in Alberta who advertised himself as a farm and ranch specialist was given a general listing in 1982 for the sale of a ranch. The only offers received were unacceptable and in April 1983, the owner agreed to renew the listing, but only until July 1, 1983. The salesman stated that he was certain the ranch would sell by that date, but wanted the listing to run through until December 31st, 1983. This was to allow for the arrangement of any possible financing that might have to be done.

The salesman also asked for an exclusive listing, which the owner gave to him upon the salesman's promise to "work harder". The listing contract contained the following words to express the consideration given by the salesman: "In consideration of your advertising and/or using your efforts to dispose. . . "

The exclusive listing entitled the salesman to a commission if the ranch were sold by the owner or anyone else during the period of the listing.

There was more activity on the ranch than in the salesman's office, and as April showers gave way to May flowers and when the first crop of hay was cut in June without an acceptable offer having been presented, the owner in July asked the salesman to cancel the listing agreement. Silence. The owner's lawyer's request met with the same lack of response, whereupon the owner was advised by his lawyer to rescind the contract and re-list the ranch.

The owner did this, the ranch was sold in September, and the salesman ultimately sued successfully for payment of a $41,000.00 commission. The owner argued that he was entitled to rescind the contract because the salesman had breached his undertaking to advertise and use his efforts to dispose of the ranch. The evidence on behalf of the salesman of his efforts was that during April, May and June, he had made five telephone calls, advertised eleven times in the "Oyen Echo", a weekly publication of limited local circulation, and dealt with offers on June 20th and 21st. Those offers related to purchases of only parts of the ranch. The salesman had not shown the ranch or advertised it in the Medicine Hat area where his agent carried on business.

The trial judge said that while the commission was considerable, and the efforts of the salesman were not "all that great, nor were they all that expensive" they were sufficient to show consideration to support an order for payment of the commission.

The decision was appealed and the Court of Appeal reviewed the duty an agent for reward owes his principal - "the duty to exercise such skill, care and diligence as is usual or necessary in the ordinary conduct of the profession or business in which he is employed, or is reasonably necessary for the proper performance of his duties". The Court of Appeal looked at this definition, the salesman's promise to work harder, and his actual activities and concluded by a two to one majority, that his efforts fell "markedly short of establishing the degree of diligence which would support the earning of a commission". It reversed the trial judge's decision and agreed with the owner that he was justified in rescinding the listing contract because of the material default of the salesman in his primary obligation to his principal.

The dissenting judge did not discuss the agent's activities in saying that he would have dismissed the owner's appeal. Instead, his decision that the owner's appeal should be dismissed was based upon his opinion that the contract was still in effect because the owner had not advised the salesman that the owner was terminating the contract. Unfortunately for the salesman, he was the only one of the three judges who felt that the contract remained in existence for that reason.

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