CATEGORY: Legally Speaking
TAGS: Auction Collecting Commission Commission Fiduciary Duties Foreclosure Multiple Listing Contract
By Gerry Neely
There are occasions when a licencee agrees reluctantly to pay part of a purchaser's costs out of the licencee's commission, to make a deal between a cash-short purchaser and the vendor. Since this helps the vendor, the licencee might well think that the licencee's decision to help the purchaser is not a material fact which the vendor needs to know.
This was the opinion of a licencee who found herself dealing with two hard-bargaining parties. During the negotiations the purchaser told the licencee that he would discontinue negotiations for the purchase of a commercial building unless the licencee agreed to pay approximately one-half of the commission to him. Since the payment to the purchaser amounted to $46,000.00, the licencee was reluctant to agree, but did so. Following the sale, the vendor discovered this agreement and refused to pay commission. The agent sued and the trial judge allowed the claim for commission because the licencee gained no advantage at the expense of the vendor. In addition, the interests of the licencee and the vendor were the same, namely to complete the sale at the vendor's asking price.
This decision was appealed and the vendor argued in the Court of Appeal that the agent had a duty to disclose "everything known to him respecting the subject matter to the contract which would be likely to influence the conduct of his principal." The Court said that an agent cannot arbitrarily decide what information is likely to influence the conduct of his principal. If the agent is undecided as to whether a fact should be disclosed, the agent can resolve that doubt by disclosing the fact to his principal. In this case, the Court of Appeal held that the licencee's non-disclosure arose from a desire to earn at least a part of the commission, and constituted a breach of fiduciary duty. As a result, the claim for commission failed.
This decision of the Court of Appeal may be limited by its facts. The Court of Appeal looked upon the agreement insisted upon by the purchaser as raising a question as to his integrity. Since the vendor was taking back a mortgage and continuing to be involved in the management of the commercial property, the Court's opinion was that had the vendor known of the purchaser's demand, he might have decided that the purchaser was not a person with whom the vendor wished to be involved in business.1
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Two owners of property had a disagreement which led to the Court approving the sale of the property by auction. One owner had given an agent a listing on the standard MLS® contract, although the Court Order directing the sale by auction made no provision for payment of commission out of the proceeds of sale. Although the facts were somewhat more complicated than described above, the owner gave the listing to make sure that the agent was paid. He then refused to pay the commission unless it came out of the proceeds of sale. The judge held that the other owner was not liable for commission because he had not contracted to pay a commission. Since the owner who had given the listing had done so without Court approval, he was liable for 100% of the commission even though he bought his own half interest, because the standard listing contract entitled the agent to a commission on any binding contract of sale entered into during the period of the listing.2
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Where two parties are given joint conduct of sale, the agent who is offered the listing by one party, should try to have both parties agree to sign it. Otherwise the agent may have difficulty collecting the commission out of the sale proceeds. In one case where the agent took a listing from only one party, the property was sold on a sealed bid basis to the other party. His offer was accepted over another bid because it provided more net money, since no commission was payable upon the approval of that offer. The agent had a standard listing contract and may be able to use the case referred to in the preceding paragraph, as a precedent for claiming commission from the party who gave the agent the listing.3
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