Agents are routinely engaged to assist clients in obtaining business opportunities or financial backing, but what do they have to do in order to earn a commission? The Court of Appeal ruled in a guideline case that that issue does not hinge on fairness or reasonableness but on an objective assessment of what was contractually agreed.
The case concerned a company that was contracted to provide assistance to a developer of holiday resorts in obtaining loan finance. After the developer was granted eight-figure loan facilities, the company claimed a substantial commission. When the developer refused to pay, the company launched proceedings.
In rejecting the claim, a judge ruled that the company's entitlement to commission was dependent on its actions having been an effective cause of the facilities being granted. Business common sense demanded that such a requirement be included in the contract, either by way of interpretation or implication. Nothing the company had done, the judge found, was a real cause of the facilities being obtained.
Upholding the company's challenge to that ruling, the Court noted that the contract contained no express effective cause requirement. There was no sound basis on which such a requirement could be read or implied into the contract. Given that the company was engaged to assist in the execution of the facilities, there was nothing commercially absurd about the absence of such a requirement.
To the extent that the outcome of the case could be said to produce a windfall for the company, the test was not one of reasonableness or fairness but rather a question of what, objectively viewed, the parties had in fact agreed. The amount of the company's commission would be determined at a further hearing. The Court also confirmed the company's entitlement to 70,000 euros in fees for work that it had performed for the developer.
For contract advice, speak to Roy Colaba r.colaba@sydneymitchell.co.uk 08081668827
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