No Duty of Loyalty Owed Agent by Independent Contractor Salespersons #217
CATEGORY: Legally Speaking
TAGS: Collecting Commission Real Estate Act Strata Properties
By Gerry Neely
A licensed salesperson found a parcel of land for purchasers, who as joint venturers intended to build residential strata units upon it. One of the joint venturers was a company whose principal shareholder was also the agent with whom the licensee was employed. The licensee was given the right to market the units and over a few months spent considerable time furthering the development.
The licensee moved to another agency as a result of a dispute with the agent over an unrelated matter. The agent's policy manual required the manager to determine whether the vendors wished to leave the listing with the agency, or have it follow the sales associate. The vendor elected to stay with the agent.
The licensee sued for the listing salesperson's portion of the commission, when the agent took the position that the contract for payment of commission applied only while she was employed with the agent. The licensee lost the action in Small Claims Court and appealed to the Supreme Court where the judge awarded the licensee $10,000, the maximum amount for which a claim can bc made in Small Claims Court.
He concluded it would be unreasonable to imply a term in the listing contract that ended when the licensee left the agency, since that possibility had not been discussed at the time the contract was made. The time and effort the licensee put into the development was also a factor in his decision.1
When business relationships between a licensee d a principal sour and lead to a severance of those ations, it may pay the licensee to tidy up loose ends. the commencement of a working relationship tween a licensee and a residential builder, the ensee said that if the builder wanted to take back a ting given to the licensee, the licensee would cancel unconditionally. Specific reference was made to the 0 day" clause, commonly included in the board LS contract, that obligates the prncipal to pay a mmission if the property is sold within that period.
When the two parted company the builder agreed pay a $5,000 commission to the licensee for obtaining a building contract on a lot. The licensee agreed to cancel two listings and signed the board's cancellation forms, deleting "60 days" from the clause. The builder relisted the properties with another agent, but the board refused to accept the new listings, until it had clarification of the attempted cancellation of the obligation to pay commission in the 60 day period. The licensee did not provide such clarification, with the result that the properties remained off MLS until the expiration of the 60 day period.
The agent sued for the $5,000 and the builder counter-claimed for damages on the basis that one of the properties would have sold earlier if the problem of the cancellations had been dealt with immediately. While acknowledging the difficulty of assessing the builder's counter-claim, the judge concluded that indeed there was a slight chance of an earlier sale and gave judgment for $1,500 as an offset against the agent's successful claim.2
In another case, an agent sued former salespersons, charging they conspired to recruit other salespersons employed by the agent to join with them in the formation of a new agency. Under the contract between the agent and a salesperson, the salesperson received 100% of commission and paid a desk fee and shared certain office expenses. The agreement could be terminated by a salesperson on 60 days notice. The former salespersons terminated the agreement in order to start the competing agency.
The agent's claim was that the former salespersons were employees under the Real Estate Act, and as employees they had breached their fiduciary duty of loyalty to the agent. However, in an agreement between the agent and a third party, the salespersons had been referred to as independent contractors. The judge agreed that the salespersons were independent contractors and as such, did not have the duty of loyalty to the agent an employee might have had. Similarly, the salespersons recruited by those who had left also owed no duty to the agent, fiduciary or otherwise.3
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