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(1950) JELR 87088 (CA)

Court of Appeal  •  14 Mar 1950  •  United Kingdom



COHEN L. J., read the following judgment, in which he stated the facts and continued: Mr. Stanley Rees, for the plaintiffs, submitted that the distinction between “subject to contract” and “subject to survey: is a distinction without a difference, since under a provision “subject to contract” an intending purchaser could refuse to sign a contract if he were dissatisfied with a survey. With this view I agree. I turn, therefore, to consider what is the state of the authorities on the subject.

I start with Luxor (Eastbourne) Ld. v. Cooper (1). As the House construed the contract in that case, commission was only payable if the introduction actually resulted in a sale. In such a contract their Lordship refused to imply a term that the principal would not dispose of the property himself or through other channels or otherwise act so as to prevent the agent from earning his commission. Some of their Lordships, however, pointed out the distinction between such a contract under which commission becomes payable on the agent’s introducing a person who makes an adequate offer.

Thus, Viscount Simon L.C., said (2): “It may be useful to point out that contracts under which am agent may be occupied in endeavouring to dispose of the property of a principal fall into several obvious classes. There is the class in which the agent is promised a commission by his principal if he succeeds in introducing to his principal a person who makes an adequate offer, usually an offer of not less than the stipulated amount. If that is all that is needed in order to earn his reward, it is obvious that he is entitled to be paid when this has been done, whether his principal accepts the offer and carries through the bargain or not”.

Lord Russell of Killowen makes the distinction clearer. Thus, he said (3): “I do not assent to the view, which I think was the view of the majority in the first Trollope case (4), that a mere promise by a property owner to an agent to pay him a commission if he introduces a purchase for the property at a specified price, or at a minimum price, ties the owner’s hands, and compels him (as between himself and the agent) to bind himself contractually to sell to the agent’s client who offers that price, with the result that if he refuses the offer he is liable to pay the agent a sum equal to or less than the amount of the commission either (a) on a quantum meruit or (b) as damages for breach of a term to be implied in the commission contract”.

Later in his speech he said (1): “I have already expressed my view as to the true meaning of a contract to pay a commission for the introduction of a purchaser at a specified or minimum price; but such a construction of the contract would in my opinion require clear and unequivocal language”. These observations in the House of Lords inspired estate agents to set about devising formulae intended to ensure that principals should not be able to escape liability by refusing to accept offers from persons willing to purchase. One such formula came under consideration by Lewis J., in Giddy and Giddy v. Horsfall (2). In that case the plaintiff’s terms of commission were set out in a letter to the principal which contains the following paragraph: “We take this opportunity of enclosing herewith a copy of our terms of commission which are on the usual scale and which would become payable by you in the event of our being instrumental in introducing a party prepared to purchase on the terms of your instructions or on terms acceptable to you”. Giddy and Giddy introduced a Mrs. Stow, who made an offer “subject to contract” at the price required by the defendant. The defendant refused to sell at that price but, when Mrs. Stow was so informed, she increased her offer to the price demanded by the defendant. After negotiation, however, the defendant refused to proceed.

Lewis J., held that Messrs. Giddy and Giddy were entitled to their commission. He cited the passages which I have read from the speech of Lord Rusell of Killowen in the Luxor case (3), and said that the question which he had to decide was whether the contract clearly showed that the commission was to be payable if Messrs. Giddy and Giddy introduced a person who willing to purchase, and he answered the question in the affirmative. He therefore gave judgment for the plaintiff estate agents.

The arguments in the case are not reported, and there is nothing in the report of the judgment to show that the judge’s attention was called to such cases as Chillingworth v. Esche (1) which establish that, as a general rule, where an offer is made and accepted “subject to contract”, neither party is bond unless and until a definite contract is executed. The point was, however, I think, present to his mind, for towards the end of his judgment he said (2): “It might be fact that, as Mrs. Stow did not in fact purchase and” (these are the material words) “did not even enter into a binding contract, the plaintiffs should be held to be wrong, but looking at that paragraph” (the paragraph I have read from the commission note) “I think it is abundantly clear that the plaintiffs were saying, ‘The scale commission – the arithmetic of it – is to be found on the printed circular which we enclose, and commission at that rate will be payable by you if we introduce a bona fide person who is prepared to pay and is capable of paying the price you are asking for Redlands’. Mrs. Stow was perfectly able and willing and capable. She was anxious to buy and I am constrained to say that the plaintiffs are entitled to the commission which they claim”. In my opinion, therefore, Giddy and Giddy v. Horsfall (2) is authority for the position that a person may be willing to purchase notwithstanding that his or her offer may have been made subject to contract.

In Bennett and Partner v. Millett (3) the contract between principal and agent was in slightly different terms from that under consideration in Giddy and Giddy v. Horsfall (2), but the court construed it as having the same effect. The agents introduced a person who signed a memorandum containing an offer of the price required by the principal, the memorandum being expressed to be “subject to contract”. It is clear from the report that no argument was addressed to the judge based on the memorandum being expressed to be “subject to contract”, and that he did not have the point in mind. That case therefore carries the matter no further than Giddy and Giddy v. Horsfall (2).

The only other case to which I need refer is the decision of this court in E.P. Nelson and Co. v. Rolfe (1). In that case the contract between principal and agent was in similar terms to that in Giddy and Giddy v. Horsfall (2) and indistinguishable in any material particular from the contract in the case before us. But in E.P. Nelson and Co. v. Rolfe (1) the person introduced by the plaintiffs never actually got to the stage of making an offer. The material facts were that a

Mrs. Payne arrived, having been sent by the plaintiffs. She liked the bungalow but said that she wished her husband to see it. He could not come until the next day, and she asked the defendant’s wife to keep it for them. The defendant’s wife said she could not do so, as it might be sold before they had reached a decision. Mrs. Payne then went away, but she returned in the afternoon with her husband. The defendant’s wife then said that the house was sold, that she had given an option on it, and that a deposit had been paid. It was admitted that at all material times Payne was able, ready and willing to purchase the premises, and the only question decided was that an obligation, binding morally or in a business sense, but not in law, to sell to someone else, did not excuse the principal from his liability to pay commission under such a contract as we are considering. It is, however, relevant to observe that both Giddy and Giddy v. Horsfall (2) and Bennett and Partners v. Millett (3) were cited, for Bucknill L.J. said (4): “As it had not been sold, I think that the contract was still in existence. Its terms are plain. It is not disputed that Mr. Payne was a man able, ready and willing to purchase the property in the afternoon of October 5. The property was not, in fact, sold at that time. That being so, I think the defendant is liable. I need not refer to the cases which have been drawn to our attention in the course of the argument except to point out that in no less than three cases” [Giddy and Giddy v. Horsfall (2), Bennett and Partners v. Millett (3), and Dennis Reed Ltd. v. Nicholls (5)] a contract in its essentials similar to this has been before the courts, and, in each case, the defendant has been held liable to pay commission, although, in fact, the person introduced has not purchased the property”.

That being the state of the law, Mr. McKinnon for the defendant invites us to say that both Giddy and Giddy v. Horsfall (2) was wrongly and that the proper view is that which obviously commended itself to Roxburgh J. in the present case, that is, that under a contract to pay a commission to an agent who introduces a person able and willing to purchase a property the agent can never recover unless he can prove that the person o introduced made an offer or was willing to make an offer which by acceptance could be turned into a firm contract.

Mr. Stanley Rees submitted that we were precluded from so holding by the decision of this court in E.P. Nelson and Co v. Rolfe (1). I do not think that this is o. the question of the effect of the words “subject to contract” does not appear to have been discussed, and the question did not arise on the facts of the case. As I read the judgments, we were in that case only relying on the decisions cited as authority for the proposition that the mere fact that the person introduced did not actually purchase the property did not preclude the agent from recovering commission.

E.P. Nelson and Co. v. Rolfe (1) carried the matter a stage further in that it established that the fact that the person introduced had not actually made an offer was not fatal to the agents’ claim. It is not, however, in my opinion, any authority for the proposition that an offer upon a condition which leaves the offeror free at his will, even if the offer is accepted, not to proceed with the purchase is evidence that the offeror is a person able and willing to purchase. The only case which supports this proposition is that of both Giddy and Giddy v. Horsfall (2), and that case is not binding on us. I am unable to agree with it.

In reaching my conclusion, I am not saying that the introduction into the preliminary arrangements of the expression “subject of contract” would necessary in all case prevent the agent from establishing that the person he introduced was willing to purchase. It clearly would not be fatal to the agent’s claim if it were introduced by the vendor in accepting an unqualified offer; but, it were introduced by the prospective purchaser, the normal inference would be that he did so with a view to reserving to himself a locus penitentiae – conduct which seems to me inconsistent with the view that he is a willing purchaser.

In reaching my conclusion, I derive some assistance from the recent decision of this court in Cunliffe v. Goodman (1). In that case we had to consider the effect of the decision of this court in Salisbury (Marquess) v. Gilmore (2), where it was held that in deciding whether a tenant had proved that premises were shortly after the termination of the tenancy to be pulled down, the test was the intention of the landlord at the termination of the tenancy.

In Cunliffe v. Goodman (1) the question was the meaning in that contract of the word “intention”. We came to the conclusion that, while the intention might be revocable, it must not be provisional or conditional. I said in that case (3): “Reading the correspondence as a whole, I have come to the conclusion that the plaintiff never reached more than a provisional decision. She would obviously not rebuild unless the proposed scheme would provide an adequate return on the capital she would have to sink in it. It was plain that she could not reach a judgment on this point until she knew (a) what conditions the authorities would impose as to rent, etc., (b) what the proposed buildings would cost, and (c) what interest she would have to pay in order to finance the scheme. The financial aspect was plainly present to her mind throughout and reading the correspondence as a whole, I find it impossible to conclude that the defendant has discharged the onus which rests on him of proving that before November 30, 1945, the plaintiff had decided to pull down the building and that intention was still existing at that date”.

Applying that case by analogy to the case before us, I think that the agent may prove that a person whom he has introduced is willing to purchase the property by showing that that person has made an unqualified offer or expressed an unqualified intention to make an offer notwithstanding that such an offer until accepted could be withdrawn. On the other hand, if the evidence shows that the offer is qualified by a condition inserted to prevent the other party’s turning the offer into a contract by acceptance, I think it impossible to say that the agent has discharged the onus which rests on him of proving that the person whom he has introduced was willing to purchase the property. In my opinion the agent only succeeded in E.P. Nelson and Co. v. Rolfe (4) because, as Bucknill L.J. said, it was not disputed that Payne was a man, able, ready and willing to purchase the property. Had the evidence indicated that, when Payne returned with his wife to inspect the bungalow, he had not expressed his willingness to buy, the decision might, I think, well have been the other way.

In the present case there was some evidence that Mrs. Smith was keen on purchasing. She had continually increased her offer to meet the rising appetite of the defendant, and she was described by her husband as anxious to purchase; but she never made an unqualified offer, and her anxiety was at all material times qualified by the condition, “subject to satisfactory survey”. Such an offer meant that she had constituted herself the arbitrator whether the survey was satisfactory, and the principal could not, by accepting her offer, constitute a binding contract. In these circumstance, I think the judge was right in his conclusion, and that the plaintiffs had not established that Mrs. Smith was a “person willing to purchase the property”. For these reasons I think that the appeal fails and should be dismissed.

ASQUITH L.J. I agree.

SINGLETON L.J. This is a case of importance from the point of view of estate agents and also from the point of view of the public. It appears that, since the decision of the House of Lords in Luxor (Eastbourne) Ld. v. Cooper, (1) estate agents have adopted a new form of contract under which one who wishes to dispose of his property and who puts it into the hands of agents is asked to sign a form or to agree to a term that the ordinary rate of commission shall become payable to the agents in the event of their being instrumental in introducing a person prepared to purchase, or willing and able to purchase, on the terms of the client’s instructions.

That kind of contract was considered by Lewis J., in Giddy and Giddy v. Horsfall (2), in which case the agents had produced a Mrs. Stow who was prepared to purchase at an agreed figure, but whose offer was “subject to contract”. The owner backed out. It was held by Lewis J., that, though the owner was not bound to sell to Mr. Stow, still the agents were entitled to their commission as against the owner. The plaintiffs here, the agents, rely on that decision and they claim that it was approved by this court in E. P. Nelson and Co. v. Rolfe (3). In that case the court decided that an owner might be liable to pay commission although the person introduced had not purchased the property. Bucknill L.J., in the course of his judgment, referred to Giddy’s (1) as one of several supporting that view. Further than this the court did not go. No question arose on the words “subject to contract” : there was no such term in the case. I do not know that there is any decision of the Court of Appeal which supports the view that commission is payable to the agents if all that they do is to produce a person who is willing to purchase “subject to contract”. It may be so, if the owner has introduced such a term himself. The question must always be determined by the terms of the contract between the owner and the agents.

In the case under appeal, commission was payable to the agents “in the event of our introducing a person or “persons willing and able to purchase”. The agents introduced a Mrs. Dinah Smith. Their letter of September 26, 1949, introduces the words “subject to contract”. It appears uncertain how the words “subject to contract” came to be introduced. It may be that they have become more or less common form with some people. But a further term or condition was introduced in the letter from the agents dated October 3 (which contains the introduction on which they rely as giving them a right to commission). The agents wrote to the owner, “Acting in accordance with your instructions we have accepted the increased offer of our applicant, Mrs. Dinah Smith, to purchase your property as above in the sum of 4,650l. freehold subject to contract, satisfactory survey .......” “subject to satisfactory survey” means either subject to the proposed purchaser’s receiving a surveyor’s report which is satisfactory to him, or subject to the report being a satisfactory one. So far as I can find, there had been no mention of this beforehand. The agents’ managing director gave evidence as to a conversation with the defendant (the owner) on the afternoon of October 3, in which the owner told him he could carry on with the sale to Mrs. Smith at 4,650l., and the defendant was not called to deny this. The witness did not say that there was any mention of “subject to survey”. There is importance in such a term: there might be dry rot in the house, the drains might be out of order, or the value when the condition of the property was seen might be far below that which was asked. These are matters of a kind which the owner might prefer not to have raised, and there is no reason why he should agree to the introduction of any such term.

It was submitted that the words “subject to satisfactory survey” add nothing to the words “subject to contract”, and that consequently this court ought to follow the decision of Lewis J.., in Giddy’s case (1) [and inferentially of this court in Nelson’s case (2)] and hold that commission is payable to the agents in the present case.

In Chillingworth v. Esche (3), the purchasers agreed to purchase certain freehold land from the vendor subject to a proper contract to be prepared by the vendor’s solicitors. It was held that the document was only conditional and did not contain a firm contract. Warrington L.J., said (4): It has been held over and over again that where you have a document relating to the sale and purchase of land framed in these terms, the object of inserting those words is to avoid binding the parties unless and until the contract referred to has been prepared and signed by both parties”; and again (5): “I am clearly of opinion that this document of July 10, 1922 was nothing more than a conditional offer and acceptance, and would only ripen into contract when a formal document was signed:. And Sargant L.J. said (6): They are words appropriate for introducing a condition, and it would require a very strong and exceptional case for this clear prima facie meaning to be displaced”.

Bearing this in mind, I cannot accept the decision of Lewis J., in Giddy and Giddy v. Horsfall (1) as correct. An owner is willing to sell his property for certain sum: if on a contract such as there was in that case the agent produces a person willing to purchase at that price, the agent may well be entitled to commission; but, if the person introduced makes his offer or acceptance “subject to contract”, I do not think that the agent is entitled to commission. In other words, the acceptance is a conditional acceptance and no more than that.

In the present case there was introduced the further term “subject to satisfactory survey”. To the mind of the trained lawyer that may add nothing beyond “subject to contract”, but it did mean something to the purchaser and to the agents, otherwise it would not have been introduced. It was said in the course of the argument that the words “subject to contract” have become more or less common form as inserted by agents. But if an owner receives an acceptance “subject to satisfactory survey”, attention is drawn to the fact that the person is keeping open questions in regard to the condition of the property. Why should it be regarded as an acceptance of the owner’s offer of the property? It is not an unconditional acceptance, nor is it an offer which the owner is bound to accept even if he were prepared to accept an offer “subject to contract”. The latter is usually taken to mean “provided that our respective lawyers can agree upon the form of contract”, though it may have a wider legal significance. The owner may well be disposed to say: “I am not going to accept an offer which re-opens the question of the condition of the property” the more so if he has an equally good (or a better) offer independent of any such term.

In my view it has not been shown that the person introduced, Mrs. Dinah Smith, was willing to purchase. The evidence of her husband shows that she required a surveyor’s report, and her offer (or acceptance) was conditional upon that. To substantiate their claim to commission the agents must show that they introduced someone willing to purchase on the owner’s terms or on terms acceptable to him, and they have not done that. No doubt Mrs. Smith was anxious to purchase the property, but her willingness to do so was dependent on the surveyor’s report, and it was so stated in the letter of October 3. Any other view would put agents in a position which to my mind is completely untenable. A property might be in the hands of half a dozen agents each of whom produced a person prepared to pay the price asked “subject to contract and subject to satisfactory survey”. Is each entitled to commission, regardless of the introduction of that term which proved a complete obstacle in each case? Or the same firm of agents might produce first one and then another person each of whom was prepared to purchase at the price asked subject to such conditions. And each might turn down the property on his surveyor’s report. Is the firm entitled to commission in respect of each introduction? Surely not, conditions in his offer.

I agree with Roxburgh J., that the agents have not proved that they are entitled to commission, and I am in favour of dismissing the appeal.

Appeal dismissed.

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