Securing exclusive appointments

Fleurets

The first of these cases is Fleurets v Dashwood [2007] All ER 67. Fleurets had sole selling rights initially for 18 weeks and continuing until terminated by the parties. The contract stated that Fleurets were entitled to commission in two circumstances:

1. If unconditional contracts were exchanged during the initial 18 week period, even if the buyer was not originally found by Fleurets
2. If unconditional contracts were exchanged after the period of the sole agency, but to a purchaser originally introduced by Fleurets during that period.

Fleurets introduced a potential purchaser to the property but for various reasons, the property was not purchased at that time. After Fleurets' appointment was terminated by Mrs Dashwood (the owner) another agent was instructed. The potential purchaser contacted the new agent and purchased the property through them. News of this purchase was discovered by Fleurets who then sued for commission.

Mrs Dashwood claimed that she was not liable to pay commission to Fleurets because it was an implied term of the contract that Fleurets had to show itself to be an "effective cause" of the transaction. Mrs Dashwood claimed that Fleurets had not been an "effective cause" and was therefore entitled to no commission.

The judge in the case decided that the requirement for "effective cause" was not implied into Fleurets' appointment and therefore Fleurets were entitled to commission. The judge went on to state that even if the requirement for effective cause was included, Fleurets had done enough work to justify their claim to commission.

This shows that Fleurets got the drafting of their appointment right to secure commission.

County Homesearch

The case of County Homesearch Co (Thames & Chilterns) Ltd v Cowham [2008] All ER 281 related to a buying agent, County Homesearch. County Homesearch had been instructed to find a suitable house for Mr and Mrs Cowham to buy. County Homesearch introduced the Cowhams to a property, but the decision was made not to buy it. Some time later, after County Homesearch's appointment was terminated, the Cowhams were re-introduced to the property by another party and on this occasion, they purchased it.

County Homesearch claimed commission. Again, the court found that the drafting of the County Homesearch agency agreement was sufficiently clear. The court did not accept that a requirement for an "effective cause" was implied. Furthermore, it was found that such a clause would have been inconsistent with the express terms of the contract. Accordingly, County Homesearch was entitled to recover commission.

County Homesearch had got their drafting right.

Foxtons

Fleurets and County Homesearch are good news for those being paid commission as part of an exclusive arrangement. But very recently, the Court of Appeal has disallowed an agent's claim for commission. This was in the case of Foxtons Ltd v Pelkey Bicknell [2008] All ER D 328.

Foxtons were originally engaged as sole selling agents. Foxtons were unable to secure a purchaser and so they were re-engaged under a multiple agency agreement. A potential purchaser originally introduced by Foxtons (when they were sole selling agents) came back later and purchased the property through another agency. Unlike Fleurets and County Homesearch, the court decided that Foxtons were unable to claim their commission.

What makes this decision perhaps surprising is that Foxtons had based the wording of their Agency Agreement almost entirely on the prescribed provisions contained in the Estate Agents (Provision of Information) Regulations 1991 (NB: these regulations apply to commercial agents as well as residential agents). This wording states that commission is payable if unconditional contracts are exchanged with "a purchaser introduced by us during the period of our sole agency." The court considered that this phrase meant "a person who becomes a purchaser as a result of [Foxtons'] introduction". The Court went even further and said that it was "by no means apparent why [the agent] should be entitled to commission on a purchase for which he had no responsibility, and which effectively originated after the sole agency had terminated."

Therefore unlike Fleurets and County Homesearch, the court decided to require "effective cause". In other words Foxtons' drafting was not good enough.

Conclusion

These cases demonstrate two points:

1. the importance of getting the drafting right. If you get the drafting right you are more likely to secure payment. Do not rely on the wording in the Estate Agency Regulations. You can adjust the wording suggested in these regulations to make the position clearer.
2. there is an inherent risk to claiming commission where there is no "effective cause". If you have not been an "effective cause" then the contract wording and your conduct will be carefully scrutinised.