In the case of Wells v Devani 2016 – the Court was asked to consider whether a verbal agreement amounted to a legally binding contract and therefore one which would be enforceable.
Mr Wells who had undertaken a development of flats was contacted by Mr Devani, who stated that he was an estate agent and could help find a buyer. Mr Devani also informed Mr Wells that that his commission for the transaction would be 2% plus VAT. However Mr Devani failed to define the commission entitling event during the initial conversation. Although Mr Devani did eventually put this into writing, it was after he had introduced a purchaser to the properties, and that purchaser had put in an offer. This purchaser went on to buy the remaining properties.
The Court of Appeal held that no binding agreement was reached between Mr Wells and Mr Devani and therefore Mr Devani was not entitled to commission when the properties were sold.
The Court considered general principles regarding verbal agreements and given the type of contract in this particular case (an estate agency contract), also had regard to the additional regulation set out by the Estate Agents (Provision of Information) Regulations 1991, and the Estate Agents Act 1979.
Note – A Court can imply terms into a contract but firstly it must be found that a binding contract existed between the parties. The Court will not imply terms into a contract to make it an enforceable contract.
As Mr Devani failed to provide Mr Wells with written particulars of the circumstances when he would be obligated to pay remuneration to him as agent in a timely manner, the Court of Appeal held that, if there had been a binding contract, then reducing the commission payable by one third would be an appropriate reduction.
In light of the above, ideally ensure that contracts are properly drafted and in writing. Additionally, estate agents must ensure they are conducting themselves within the Estate Agents (Provision of Information) Regulations 1991 as well as the Estate Agents Act 1979.