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Important Court of Appeal ruling on estate agency contracts

In a significant decision on the formation of estate agency contracts, the Court of Appeal has ruled that:-

1. It is critically important for the parties to an estate agency contract to identify the event that triggers the agent's entitlement to commission; and

2. If the parties fail to do so, the Court will not imply a term providing for such a trigger event to complete the contract.

In this case, discussions took place between a developer and an agent. Whilst the method of how the commission would be calculated was "agreed", the discussions did not address what event would trigger payment. Furthermore, the agent failed at the outset to supply his terms and conditions which provided that commission was payable upon exchange of contracts.

This was an important oversight, as when the agent sought to supply his terms and conditions at a later date, these were of no contractual effect and the Court determined matters purely by reference to the oral discussions. This meant the failure to identify a trigger event in those discussions was fatal to the agent's case.

Aside from demonstrating the importance of effectively incorporating standard terms of business into contracts, the case also shows the limits of the Court's ability to imply terms into a contract if an essential term, such as a trigger event in an estate agency contract, is missing.

The case may also have a wider application to other cases where commission is payable by reference to a trigger event but this is not identified at the time the contract is discussed.

Wells v Devani [2016] EWCA Civ 1106.

For further information about this article or for further advice, please contact Simon Lockley

Please note this information is provided by way of example and may not be complete and is certainly not intended to constitute legal advice. You should take bespoke advice for your circumstances.

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