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Implied terms can’t save a contract that doesn’t exist

25 November 2016 #Dispute Resolution #Commercial


The Court is frequently asked to determine whether an estate agent is entitled to commission.  Most commonly, such cases involve a dispute over who introduced the buyer.  The Court of Appeal in the case of Wells -v- Devani had to consider a different issue, namely whether there was a contract between the seller and agent at all. 

Mr Wells was a property developer who had seven unsold flats.  He exchanged emails with Mr Devani (an estate agent) and subsequently spoke to him by phone.  The exact contents of the conversation were disputed but Mr Devani acknowledged that (a) he quoted a fee of 2% plus VAT but (b) did not specify the circumstances in which the fee would become payable. 

Mr Devani then introduced a potential buyer, who subsequently agreed to buy the flats.  Only after this did Mr Devani send to Mr Wells his terms of business.  It was acknowledged in Court that his failure to do so earlier breached the Estate Agents Act 1979.

The sale of the flats completed and Mr Devani claimed commission of £42,000 plus VAT.  Mr Wells refused to pay. 

Mr Devani sued and was successful at trial.  The Judge found that the contract was incomplete in that it did not provide for the circumstances in which payment fell due.  However, he overcame this difficulty by implying a term on the least onerous basis, namely when completion took place.  Mr Devani appealed. 

By a 2:1 majority Mr Wells succeeded (although the dissenting judgment would have found in Mr Devani’s favour for a different reason to the trial Judge).   The Court of Appeal noted that there were various possibilities as to when commission could have fallen due.  This might have been when an offer was received for an agreed minimum price, on exchange of contracts or on completion.  The failure to specify such a fundamental term meant that no contract existed at all.  It is not permissible for the Court to imply a term to fill such a gap in a contract that is otherwise incomplete.  As there was no concluded contract between Mr Wells and Mr Devani, the appeal was allowed and the claim failed. 

This case has potential wider application than the field of estate agency and is a helpful reminder to specify all the contractual terms at the outset.  Failure to do so could mean that no contract exists at all. 

Clarkslegal, specialist Dispute Resolution lawyers in London, Reading and throughout the Thames Valley.
For further information about this or any other Dispute Resolution matter please contact Clarkslegal's dispute resolution team by email at disputeresolution@clarkslegal.com by telephone 020 7539 8000 (London office), 0118 958 5321 (Reading office) or by completing the form on this page.

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Stephen James

Stephen James
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