An estate agent has won a marathon case which will allow him to claim commission after terms were set out in an informal – disputed – phone call.

The Supreme Court has overturned an earlier decision of the Court of Appeal in the case of Wells v Devani.

The landmark judgement has implications for other agents who are pursuing claims for payment where terms may have been concluded informally. One law firm says such claims by agents are common – and ‘numerous’.

The Wells v Devani case dates back to what had or had not been agreed on January 29, 2008.

In the courts it revolved around whether an oral estate agency contract was binding or complete, and where the two parties had not expressly agreed the specific commission.

The Court of Appeal ruled that the contract was insufficiently complete – but the Supreme Court has now ruled that the agent is entitled to commission.

This is even though the agent did not comply with his obligations under part of the Estate Agents Act 1979, and even though the contract was handled over the telephone – with even that single telephone conversation being disputed.

In the case the seller, Edward Wells, had developed some flats but had difficulty selling all of them through agent Shaw & Co.

By the beginning of 2008 six flats were sold, one was under offer and the remaining seven were still on the market.

An acquaintance introduced Mr Wells to Mehul Devani, an estate agent in Kilburn, north London.

During a phone conversation, Mr Wells asked Mr Devani what he charged, and, Mr Devani claimed, was told 2% plus VAT.

Mr Wells disputed this, maintaining that Mr Devani made no mention of any commission and gave the impression he was an investor who might himself be interested in the flats.

Mr Devani, however, went on to introduce a buyer who met Mr Wells and agreed to buy all the unsold flats.

Mr Devani then submitted an invoice for payment – 2% plus VAT as a multiple agency fee – to Mr Wells who refused to pay it.

At the first court case, the judge rejected Mr Wells’ argument that the terms of the agreement were too uncertain and said that commission should be payable.

The Court of Appeal overturned that by a majority. The dissenting judge said that Mr Devani had agreed to find a purchaser, even if those exact words had not been used.

The Supreme Court has now ruled that both the initial judge and the dissenting judge at the Court of Appeal were correct.

The parties had plainly intended that Mr Devani would find a purchaser for the flats.

The Supreme Court concluded that a binding contract had been entered into during the telephone conversation, as both parties had understood that Mr Devani’s terms were that he would be entitled to a commission of 2% plus VAT if he introduced a buyer to Mr Wells.

The Supreme Court also upheld the trial judge’s finding that Mr Devani’s commission should be reduced by one third by reason of his failure to comply with the Estate Agency Act 1979 by not providing his terms of business before liability arose.

However, although Mr Devani failed to comply with his obligation under the Estate Agents Act 1979, Section 18, because he did not expressly tell Mr Wells of the event which would trigger his entitlement to commission, the Supreme Court said Mr Devani did not deserve his application to be dismissed.

Lawyers at 1 Chancery Lane welcomed the Supreme Court decision, saying it “gives welcome clarification to the law concerning contractual certainty. It also provides a useful reminder that at common law, contracts may be formed not just by reason of words spoken but also by conduct.”

Among the other lawyers dissecting this week’s ruling is Douglas Rhodes, property litigation partner at Trowers & Hamlin.

Yesterday he said: “It is very common for estate agents to claim commission following informal discussions between agent and principal and we continue to see numerous claims of this nature.

“This case is unlikely to stem the flow of claims and, if anything, may encourage estate agents to take a more cavalier attitude towards their statutory obligations to provide details of their terms of business under the Estate Agency Act 1979.

“A single disputed telephone conversation may be considered to be a low bar for concluding an estate agency contract, particularly given the high level of statutory regulation of estate agents.

“However, Lord Kitchin’s leading judgment ruled that if, as here, “the bargain is in substance ‘find me a purchaser’ and the agent introduces a prospective purchaser to whom the property is sold, then a reasonable person would understand that the parties intended the commission to be payable on completion and from the proceeds of sale”.

The judgement is here:

http://supremecourt.uk/decided-cases/index.html