Commissions #181

Feb 01, 1992

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By Gerry Neely
B.A., LL.B.

The following cases illustrate the often expressed statement that in considering an agent's claim for commission, no general rule can be laid down and each case must be decided on the terms of the contract in question and the facts.

In a Saskatchewan case an agent without a listing introduced to an owner a prospective purchaser who made two offers in August which were rejected. On September I st the agent obtained a 90 day exclusive listing in which the owner agreed to pay a 6% commission if an accepted offer was entered into during the term of the exclusive listing. Discussions of which the agent was unaware took place between the prospective purchaser and the owner about the purchase of the property and a price was agreed upon.

The owner moved out on October lst, giving possession to the prospective purchaser as a tenant on a month to month basis. The owner was unaware that the purchaser/tenant required bank financing which was not applied for until late November. The application was approved on December 2nd and the sale closed December 7th, after the expiration of the listing. The judge suspected that the late application for financing was an attempt to avoid commission. The judge concluded that the agreement entered into within the 90 day period was sufficient to entitle the agent to the commission.1

***

An owner signed a Calgary MLS listing contract which provided for payment of a commission to an agent if "the property is sold by me or anyone on my behalf to anyone who has been aware of this property through the marketing activities of you or your co-agents or sub-agents during the term of authority." The listing was dated August 18, 1987 and expired November 3, 1987.

A couple who had noticed the agent's sign on the property in late August entered negotiations conducted through the agent over the next three or four weeks. Two offers made by them were rejected by the owner and the couple abandoned their attempts to purchase the property.

At no time had the owner met the prospective purchasers. They did nothing further until February of 1988 when driving past the house they noticed a private For Sale sign. They disclosed to the owner that they were the persons who had been negotiating for the purchase of the property in September, 1987. An agreement was entered into which resulted in the transfer of title to the purchasers in November, 1988. The owner argued that he was not liable for commission because no sale had taken place during the period of the listing, negotiations had ceased, the agent was not the effective cause of the sale and the terms of the contract were unduly harsh and unfair.

The judge said that it was not the responsibility of the court to extricate people from what may be an improvident contract entered into by them or to impose the court's idea of fairness. Upon the plain wording of the contract, the agent was entitled to a commission because its marketing activities in erecting the sign which attracted the couple and his showing of the property to them fell within the terms of the listing.2

***

Cases concerning an agent's claim for commission for obtaining a financing commitment for a real estate developer by the agent's principal rarely reach the Court of Appeal. The facts in a case heard by the British Columbia Court of Appeal concerned a contract by which the developer agreed to pay a service commission to the agent if a lender was introduced to the property who was ready, willing and able to lend on terms and conditions acceptable to the developer.

In this case, the agent obtained commitments acceptable to the developer for both first and second mortgage financing. When the developer found that cost estimates had increased, his inconclusive negotiations with the lenders resulted in his going elsewhere to successfully obtain financing.

The developer declined to pay the commission of $130,000, arguing that for the agent to succeed the agent had to prove that the lender would have been ready, willing and able to lend on the date referred to in the commitment letter. This argument was rejected because the developer repudiated the commitment and the wording of the listing contract provided that the commission was earned when the commitment was made and accepted by the developer.3

  1. Pleckman v. Looker, 1990 Sask. Review 309.
  2. Royal LePage Real Estate Services Ltd. v. Church, 80 Alta. L.R. (2d) 122.
  3. Realtech Realty Corporation v. Dancorp Developments Ltd., B.C.C.A., Vancouver Registry CA013239, October 18, 1991.

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