The recent case of Wells v Devani has highlighted the perils of failing to agree the terms of a contract fully before performing that contract.
Mr Wells was property developer who had a number of unsold flats in London. Following an exchange of emails and a telephone conversation, Mr Devani (an estate agent) agreed to sell the flats for a commission of 2% plus VAT per transaction.
Crucially, however, Mr Devani did not specify the circumstances in which his commission would become payable. Mr Devani subsequently introduced a buyer who agreed to buy all of the flats. It was only at this point that he sent out his terms of business to Mr Wells.
Following the sale of the flats Mr Devani sought commission of £42,000 plus VAT for introducing the buyer. Mr Wells refused to pay with the result that Mr Devani issued proceedings.
At trial, Mr Devani was successful. The trial judge found that, although the contract was incomplete in that it did not specify the circumstances in which Mr Devani’s commission would become payable, a term should be implied into the contract whereby payment would become due upon the sale of the flats. Mr Wells appealed.
The Court of Appeal overturned the decision and dismissed Mr Devani’s claim. It found that although there were a number of possibilities as to when the commission could have fallen due (for example, upon the exchange of contracts or when the transaction was completed) the failure to specify such a fundamental term in the contract meant that no agreement existed between the parties.
The Court of Appeal took the view that the courts cannot imply terms into an agreement where to do so would transform an incomplete bargain into a legally binding contract.
Although this case relates to the commission payable to estate agents, the ruling by the Court of Appeal will apply to all contracts. The lesson from it is that parties need to specify all of the contractual terms upon which they intend to rely at the outset as the failure to do so could result in there being no contract at all.
Blacks Solicitors can assist with all aspects of contractual matters from drawing up a contract to dealing with any contractual disputes. Please contact Luke Patel on 0113 227 9316 or at “LPatel@LawBlacks.com”