May 6th - 2012

Legal Beat: Telephone Discussion not an agreement, judge rules

In this case, a REALTOR® sued for $1.25 million for commission related to undeveloped land sold for $29 million following the death of a farmer and landowner.

In this case, a REALTOR® sued for $1.25 million for commission related to undeveloped land sold for $29 million following the death of a farmer and landowner.

Various parties approached the estate’s executors about the land following their relative’s death in 2005. The parcel of land was offered for sale on an open listing basis, without a listing agreement.

The REALTOR® plaintiff argued that one of the executors had reached an agreement with him during a telephone conversation to pay the former a commission if he brought in a buyer. No written listing agreement or commission agreement was entered into evidence, so the case required a reliance on the-then section 23 of REBBA.

The judge examined the facts and referred to other court precedents. A key issue was whether agreement was reached on a commission amount during the phone call. The plaintiff argued that it had, but the defendants opposed this conclusion.

The judge noted that “the percentage or commission amount is an essential element of the alleged oral contract, and it had not been agreed to. It was clearly to be the subject of further negotiations between [the REALTOR® and one of the executors.”] He therefore ruled against the plaintiff.

“I find that there was no agreement reached in the telephone discussion … that the defendants would pay the plaintiff a commission. Even where the parties have identified the terms upon which a later contract may be based, there is no enforceable agreement where the most essential term -- which goes to the heart of the contract -- has not been agreed upon."

The rights of the plaintiff under section 23 (b) of the code will depend on whether it can be established that the plaintiff was instrumental in anything more than the pre-contractual stage of negotiations between the parties, and whether an acceptable offer was obtained and eventually executed as a direct consequence of events in which he was involved, states the judgement. The mere introduction of a buyer to a seller is not enough to entitle a REALTOR® to be paid, the ruling states. The plaintiff must have been the effective cause of the sale of the property.

The judge ruled that the REALTOR® did not introduce the buyer to the property nor arouse the buyer’s interest in it. The REALTOR® also argued a claim based on Quantum meruit, a Latin phrase for “what one has earned”, which refers to a reasonable value of services when a contract is modified or not completed, implying a promise that the work will be compensated.

In this case, the judge ruled that “no claim can be advanced by an agent unless it falls within the ambit of section 23. In the absence of a contract, the plaintiff is not entitled to be paid the equivalent of a commission on the basis of the doctrine of unjust enrichment.”

Briardown v Peters 2010 ONSC 1040

If you are working without a written agreement and expect to be paid a commission, there must be clear compliance with any provincial law dealing with your claim for commission. Prove that you did the deal. Get involved, stay involved and document everything. 

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Ontario Real Estate Association

Jean-Adrien Delicano

Manager, Media Relations

416-445-9910 ext. 246