Licensee's Authority to Bind His Principal #30

Jan 01, 1983

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By Gerry Neely
B.A. LL.B.

Two recent decisions illustrate the extent to which a licensee can create a binding contract of sale by a vendor, in circumstances where the vendor argued that the licensee had acted without authority.

In the first case, a purchaser made an offer through the selling agent to purchase the vendor's house for $95,000.00. The vendors refused this offer but authorized the listing agent to make a counter-offer for $100,000.00. The listing agent made the appropriate changes in the interim agreement and the offer was delivered to the selling agent. The purchaser accepted the counter-offer but ultimately the vendors refused to proceed with the transaction. The purchaser sued the vendors for specific performance and the vendors in turn brought an action against the listing agent. The interim agreement was straight forward and the Court was prepared to order specific performance if it were satisfied that in fact an agreement had been reached between the two parties. The husband vendor denied that his discussion with the listing agent had authorized the listing agent to make the counter-offer on behalf of the husband and wife vendors. The Court accepted the listing agent's evidence over that of the vendors and concluded that the listing agent was an able and experienced salesman who would not have made the counter-offer unless he had express authority to do so. The purchaser was given his order for specific performance.1

Where, as in this case, a licensee is given oral instructions by his principal, the licensee should keep a written record of his instructions and confirm them forthwith by a letter to his principal.

In the second case, there was no doubt that the licensee acted without authority but in spite of that, the plaintiff purchaser was granted specific performance of contract for the purchase of a lot. The purchaser had made an offer to purchase a lot in a proposed subdivision. An extension of the date for completion was granted by the vendor because of delays in obtaining approval for the subdivision. When it became apparent that this date could not be met, the vendor advised his licensee that another extension would not be granted. In spite of that advice, the licensee prepared an extension agreement and delivered it to the prospective purchasers for their signature. They, throughout the course of these negotiations, had dealt only with the licensee and not with the licensee's principal, the vendor. Having regard to this circumstance, the Court held that the licensee had apparent authority to act on behalf of the vendor, and that the vendor was bound by the licensee's dealings with the purchasers. This was so, notwithstanding the misrepresentation by the licensee of the instructions given to him.

This decision gave the vendor a right of action against the licensee for damages for acting in breach of his duty to his principal. The measure of damages would include any increase in the value of the lot following its subdivision, over the price which the purchaser had agreed to pay.2

  1. Gordy v. Legal et al, S.C.B.C. 1983 B.C.D. Civil 2230-04.
  2. Quon v. North American Contractors Ltd.,QS.C.B.C. C803182 Vancouver Registry.[1993] S.C.R. 87.

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