Wells v Devani

Supreme Court

Citations: [2019] UKSC 4; [2020] AC 129; [2019] 2 WLR 617; [2019] 3 All ER 379; [2019] 2 All ER (Comm) 373; [2019] BLR 221; [2019] CLY 44.

Facts

The claimant was an estate agent. They contacted the defendant about some properties the defendant was looking to sell. The claimant offered to act as the defendant’s agent in the sales, stating that his commission was 2% plus VAT. The parties agreed that the claimant would act as the claimant’s agent, but did not agree on what event would entitle the claimant to commission.

The claimant found the defendant a buyer and the defendant sold a property to that buyer. The claimant then e-mailed the defendant explaining his contract terms and what what commission would be due when the buyer exchanged contracts with him. The defendant refused to pay, arguing that a contract had never arisen between them.

The claimant sued for their commission. In addition to arguing that there was no contract, the defendant argued that any agreement was unenforceable under s.18 of the Estate Agents Act 1979. That provision required estate agents to provide potential clients with certain information, including what acts will entitle the agent to commission. s.18(6) of the Act states that where these obligations are not complied with,

(a) the court shall dismiss the application [by the agent] if, but only if, it considers it just to do so having regard to prejudice caused to the client by the agent’s failure to comply with his obligation and the degree of culpability for the failure; and

(b) where the court does not dismiss the application, it may nevertheless order that any sum payable by the client under the contract or, as the case may be, under the contract as varied shall be reduced or discharged so as to compensate the client for prejudice suffered as a result of the agent’s failure to comply with his obligation.

Issue(s)

1. Had the parties reached a contractual agreement?
2. Was any contract unenforceable for breach of s.18 of the Estate Agents Act 1979?

Decision

The Supreme Court held in favour of the claimant. The fact that the parties had not expressly specified when commission would become due was not necessarily fatal to the existence of a contract. On a proper interpretation of the parties’ interactions, they had implicitly agreed that the claimant would be entitled to commission when the defendant completed a sale with a buyer introduced to him by the agent. This was the most natural interpretation of the parties’ interactions and their relationship, and was the usual term applicable to this kind of relationship.

This Case is Authority For…

The failure to expressly agree on every key term does not necessarily mean that the contract is void for uncertainty. If the parties have implicitly agreed on those terms, this will suffice.

When determining whether a contract should not be enforced under s.18(6)(a) of the Estate Agents Act 1979, the agent’s culpability and the prejudice caused to the client are key factors. The agent’s culpability is not relevant to the court’s discretion to reduce the sum payable under the contract under s.18(6)(b), by contrast.

There may be cases where the agent’s culpability is so great that the contract should be discharged even though the client has suffered no prejudice. However, this will be very rare.

Other

Where the parties intend to create a contract and have begun performing as if there is a contract, it is permissible for the court to imply any term into the agreement which is necessary to give it business efficacy. It is also permissible for the courts to imply a term where an reasonable bystander would think it obvious from the circumstances that the parties must have intended that term.

Lord Kitchen in this case thought that even if the parties had not already implicitly agreed to pay commission on completion of the sale, it would have been acceptable for the court to imply the same term into the contract.

Lord Kitchin discussed the dicta of Lewison LJ in Little v Courage Ltd (1994) 70 P & CR 469 that terms cannot be implied into a unilateral contract. Lewinson LJ’s concern was that implying terms into a unilateral contract ‘would be to impose, by implication, a contractual obligation on a person who ex hypothesi is not yet a party to any contract and therefore not yet subject to any contractual obligations at all.’

Lord Kitchin disagreed with this analysis. He thought that there will be cases in which the unilateral offer itself obviously implies a particular term. As such, if the offer is accepted, the parties have agreed to be bound by that contractual obligation.