By: Luke Patel of Blacks Solicitors
Readers of Asian Express may recall the case of Wells v Devani back in 2016 when the Court of Appeal refused to imply terms into an agreement to transform an incomplete bargain into a legally binding contract.
Briefly, that case concerned a property developer, Mr Wells, who instructed an estate agent, Mr Devani, to sell a number of flats and it was agreed that Mr Devani would receive a commission of 2% plus VAT for each sale. However, Mr Devani failed to specify the circumstances in which his commission would become payable (for example, when a willing buyer was introduced or when the sale was actually completed).
Mr Devani subsequently found a buyer for the flats and they were sold. He then sought payment of his commission from Mr Wells but Mr Wells refused to pay on grounds that no binding contact had been concluded between the parties. In particular, he argued that there was no specific trigger event giving rise to Mr Devani’s entitlement to commission.
At trial, Mr Devani was successful but that decision was overturned by the Court of Appeal which found that the agreement was incomplete because of the failure to agree an essential term, namely the circumstances in which the commission would become payable to Mr Devani.
The Court of Appeal held that such an omission was fatal as the Court could not imply such a term into the contract.
However, the Supreme Court has now reversed the Court of Appeal’s decision and has held that a binding agreement had been reached between Mr Wells and Mr Devani.
The Supreme Court found that the only sensible interpretation of the parties’ words and conduct was that the commission would be payable upon the completion of a sale to a buyer that had been introduced by Mr Devani and it was not necessary to imply such a term into the contract. If that had been necessary, the Supreme Court said it would have done so.
The Supreme Court also did not agree with the Court of Appeal that there is a general rule preventing the Court from implying a term into the contract which would render an agreement sufficiently certain or complete to constitute a binding contract.
This decision demonstrates that the Court will, where necessary, imply a term into a contract to give business efficacy to an agreement and it will prevent a party from relying upon the imprecise nature of words in an agreement to evade their contractual obligations. In this case, the Supreme Court looked at the conduct of the parties and concluded that a sufficiently certain and complete contract had been formed.
Blacks Solicitors can assist in all aspects of contractual matters from the preparation of contracts to dealing with any disputes arising from them. Please contact Luke Patel on 0113 227 9316 or by email at “LPatel@LawBlacks.com”.