Contract Terms Decide Commission Entitlement

27 January 2012

When an agent finds a buyer for a property, the vendor must pay the estate agent’s fee. That would seem to be a straightforward enough proposition, but a recent case shows how important it is to make sure that the wording of any legal agreement is precise.

It concerned a property that was owned by a company. The company contracted with a property agent to pay a commission if the agent introduced a purchaser for the property.

The agent duly introduced a prospective buyer, after which the company was sold as part of a corporate restructuring. This left the ownership of the property unchanged, with the company now owned by another company. The agent claimed its commission, but the new owner refused to pay. When the matter ended up in court, the decision was a simple one.

The contract with the agent contained no reference to a commission being payable when shares in the company were sold, only on the sale of the property. The commission was not payable because the property had not been sold.

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