Contracts for Commission Should be in Writing

Commissions In Writing

Question:

If you have no contract signed with the seller re your commission amount and you draft a Letter of intent or even an offer and you include ABC 123 Realty represented by Mr. X will receive $x for his service on the date of transaction, that you might be paid.

I heard the seller even after signing the offer drafted on behalf of the buyer, seller can refuse the payment to the agency, claiming he never signed any agreement with the agency or agreed to anything with the agency. Is this correct?

Answer:

Getting paid is tough enough when there is an agreement in writing. Years ago, there was a commission statement on the back of the two page Agreement of Purchase and Sale. There was no provision for the Brokerage to sign. This was enforceable in most cases by the Brokerage as a “third party beneficiary” to the contract.

However, that was 30 to 40 years ago. Things have changed. Courts have in large measure restricted third party beneficiaries to the use of a “disclaimer clause”. That would rule out, suing for a commission.

New legislation requires the commission agreement to be in writing. But, what if it’s not? There could be discipline proceedings, but what about the commission, could it still be recovered?

There are two theories that would still support that:

1) a verbal agreement, and

2) a quantum meruit claim.

The verbal agreement would represent a challenge, first because it is non-compliant and second because it lacks certainty. However, such a claim would still be based in contract.

A different field of law (not contracts at all) is the law of restitution. Here, the work was done, it was not free, it was not undertaken on a voluntary basis, there was an expectation of payment but the issue of compensation just was never actually agreed upon. In this type of a case, the Courts will apply the doctrine of quantum meruit to consider the matter and set forth what they believe is fair and reasonable in the circumstances.

No question better to use the correct Forms, but there may still be some hope out there. In many cases, there is a listing agreement signed, but it has expired or there was some non-compliance with its terms. The Courts will apply the contract. That arrangement governs, and will only award a quantum meruit claim for services and time periods not covered in the contract.

Brian Madigan LL.B., Broker

www.OntarioRealEstateSource.com

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