Commission – Open Listing #73

Jun 01, 1985

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By Gerry Neely
B.A. LL.B.

An open listing given by the owner of property in the fall of 1982 to half a dozen agents - the introduction of the eventual purchaser by a licensee who is not one of the half dozen - a signed agreement by the owner to pay the licensee the commission - the deal closed but another licensee was awarded the commission. What went wrong (or right, depending upon whether you lost or gained the $23,750.00)?

The owner was an experienced developer who never gave exclusive listings or listings in writing. Instead, he dealt with a few agents, knowing according to the owner's evidence given at trial, that the agent would be entitled to a commission if the agent were "instrumental in bringing about the sale."

One of the agents with whom he had done business over the years introduced the owner to a new salesman who energetically approached the task of finding a purchaser. He prepared a brochure containing a photograph of the building, drawings, square footage, tenants lists and other pertinent information. In addition to widely distributing this brochure, he placed ads in the newspaper and printed and distributed two to three thousand flyers.

Now enter the other licensee, who kept in touch with a selective list of German clients to stimulate their interest in purchasing property in British Columbia. Knowing that some of his clients were to visit British Columbia in the spring of 1983, the licensee advertised that he had clients who were prepared to purchase property. The salesman who had prepared the brochure saw the ad and telephoned the licensee and, as a result, forwarded to him a brochure.

The licensee then prepared his own brochure which was mainly a recapitulation of information in the brochure he had received, but with a new photograph. When he presented an offer on behalf of his German client, the licensee also gave the owner a commission agreement. This raised in the owner's mind for the first time, the question as to how the licensee had heard of the property. When asked this question, the licensee said that he had driven by it and had seen the leasing signs on it. When asked if there were any other real estate agents involved, the licensee said no.

The owner signed the commission agreement and, shortly afterwards, the salesman who prepared the first brochure heard of the sale and told the owner that the licensee with the German client had first heard of the property through the salesman. Both agencies claimed a commission, the owner set aside the equivalent of one commission and everyone sued.

Why did the licensee with the German client lose? The Judge decided that,

  1. The licensee was never a true agent for the owner, but was simply a spokesman for his German client. The Judge then said that if he were wrong in reaching this conclusion, then in the alternative,

  2. If the licensee were an agent, then he was an agent for both the owner and the purchaser. As such, he had a duty to disclose to the owner all "material circumstances which would be likely to influence the conduct of his principal." Since the owner was induced to sign the commission agreement by the licensee's misrepresentation that no other real estate agents were involved, the licensee was in breach of his duty of disclosure and could not successfully claim the commission.

Why did the other agent succeed, even though it had only an open listing and hadn't directly introduced the purchaser to the owner? The Judge decided that,

  1. The actions of the energetic salesman of the other agent were instrumental, by whatever route, in introducing to the owner a purchaser who ultimately completed the purchase. He brought a willing seller and a willing buyer into relations with each other in regard to a business transaction, and a business transaction resulted.

  2. In the alternative, the Judge said that if he were wrong in his conclusion with respect to payment of the commission, he awarded the other agent an amount equal to the commission on a quantum meruit basis. In other words, even in the absence of a specific contractual right to a commission, the law implied a promise on the part of the owner to pay a reasonable amount for the work done by the salesman from which the owner benefited.

  1. Interra International Inc. v. Moray Development Ltd.; Chartwell and Associates Realty v. Moray Developments Ltd.,1985 B.C.D. Civil 3783.1-01.

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