In some contracts, a property’s seller agrees to pay a fee to an agent for introducing a buyer who pays a particular price. However, is anything payable if the target price is not achieved? The Court of Appeal addressed that difficult issue in the context of a £6 million commercial property deal.
The seller orally agreed to pay the agent a fee of £1.2 million if he introduced a buyer who purchased the property for £6.5 million or more. He duly introduced the eventual buyer of the property, but the sale price was only £6 million. On that basis, the seller refused to pay anything to the agent.
After the agent launched proceedings, a judge found that he was entitled to nothing. As the final price was less than £6.5 million, his contractual claim had failed. The judge accepted that the seller had been enriched at the agent’s expense. But, he also found that the agent had shouldered the risk of the property selling for less than £6.5 million. The seller’s enrichment was thus not unjust.
In upholding the agent’s challenge to the judge’s ruling, the Court noted that it would have been bizarre had he agreed that he would only receive a fee if the target price were achieved. The contract did not state whether he would be entitled to payment if he introduced a purchaser who paid less than £6.5 million.
The seller and the agent had not contemplated the possibility of a sale at less than £6.5 million. It could not be said that the risk of that outcome had been contractually allocated exclusively to the agent. The seller’s enrichment was thus unjust and the agent was entitled to a fair fee for having made the introduction. The Court assessed that fee at £435,000, a sum equivalent to 7.25 per cent of the £6 million sale price.