Contract did not entitle agent to reduced share of £1.2m fee

An agreement that an agent was to receive £1.2 million if a property was sold for £6.5 million did not entitle him to a reduced fee if the property sold for a lower figure.

Laura Murphy, Paralegal in our Dispute Resolution team reports on this recent case.

That was the decision of the Supreme Court in a case involving Barton v Gwyn-Jones.

At the first court hearing, the judge found that there was no written agreement between the two parties, but that there was a binding oral agreement that the agent would be paid £1.2 million for making the introduction if the buyer bought the property for £6.5 million.

However, the property sold for only £6 million, and the judge held that, since the contract made no provision as to what would happen if the property was sold for less, there was no contractual obligation on the seller to pay any fee at all.

The Court of Appeal held that the silence of the contract as to what would happen if the sale was for less than £6.5 million did not rule out a claim because the seller would be unjustly enriched if it took the benefit of the introduction without paying the agent a reasonable fee.

It awarded the agent £435,000, which the judge at the first hearing had assessed as a reasonable fee.

The Supreme Court overturned that decision.

It held that there was no express term that the agent would be paid a fee if the property was sold for less. To imply a term that the seller was liable to pay a fee in any other circumstance went directly against what the parties had agreed.

Although a term could be implied as necessary to give the contract business efficacy so that the seller would not manipulate the sale price to deprive the agent of his fee, it was not suggested that the reduction in sale price was not for genuine reasons, and it was not necessary to imply a term that the agent was entitled to a reasonable fee on a sale at a lower price.

Furthermore, the parties must have contemplated that the property might have been sold for less but did not provide for that eventuality in their contract.

If you would like more information about the issues raised in this article or any aspect of contract law, please contact Laura on 01228 516666 or click here to send her an email.