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The Essential Elements of a Contract

The Essential Elements of a Contract - Failing to state trigger for payment was not fatal.

The Supreme Court has upheld the existence of a contract between an estate agent and a seller even though it was not expressly agreed between them what event would trigger payment of the commission.

The parties had a telephone call during which the seller asked the agent about his fees and the agent replied that his standard terms were 2% plus VAT. There was no discussion of the circumstances in which that commission would fall due.

The Court of Appeal had previously held that the contract was incomplete because of the failure to agree this essential term, and that the court could not imply a term in order to transform an incomplete bargain into a legally binding contract.

However, the Supreme Court unanimously allowed the appeal. The Court considered that the question was whether, objectively assessed, the parties by their words and their conduct intended to create a legally binding relationship. Courts are reluctant to find an agreement is too vague or uncertain to be enforced where it is found that the parties had the intention of being contractually bound and have acted on their agreement. The Supreme Court, therefore, held that in this case it would naturally be understood that payment would become due on completion and made from the proceeds of sale.

The Court considered it was unnecessary for a term to be implied into the agreement between the parties. However, had it been necessary, the Court considered there would be no hesitation in holding that it was an implied term of the agreement that payment would fall due on completion of the purchase of the property by a person whom the agent had introduced.

Case: Wells v Devani [2019] UKSC 4

Posted on 6 March, 2019 by Ortolan

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