Estate agents commission

Estate agents commission

Estate agents commission

Lady Manor Ltd v. Fat Cat Café Bars [2001] 23 EG 156 (CS)

This case illustrates that familiar practice carried out in everyday commercial transactions may not have a sound legal basis and thus may result in unenforceable claims in the event of a dispute.

The case concerned an unsolicited letter sent by a London commercial agent to the defendant containing details of a property that the agent thought would be of interest to the defendant. The letter stated: "As discussed I would also like to take this opportunity to confirm my company's fees which would become payable in the event that the above introduction leads to a successful transaction. Our fees would be …". In fact during proceedings in the County Court the claimant admitted that no discussions as to fees or anything else had, at this time, ever taken place between the claimant and the defendant.

In response to the letter the defendant requested its own agent to contact the claimant to arrange a viewing. The claimant explained that he was not the vendor's agent and gave the name of that firm to the defendant's agent. The defendant's agent arranged a viewing with the vendor's agent which resulted in a completed transaction. The claimant then sent a demand for commission alleged to be due under the terms of its letter. The defendant denied that any such liability existed.

Colwell J held that although colloquially described as "the introducing agent" the claimant had in fact acted as agent for no one since he had not entered into a contract with anyone. He went on to analyse the rules of contract governing "cold mail" letters and this is where the basic rules of contract come into play. It is fundamental that for a valid simple contract to come into being it must be supported by consideration. Since a "cold mail" letter such as the one in this case provides unrequested information to the recipient, he or she is free to use that information in any way that they choose without obligation. Any information contained in it would amount only to past consideration (Re McArdle [1951] Ch669) This does not mean that an unretained agent can never secure a fee but to do so they will need to offer some additional service or information for which a fee would be payable. The recipient is then free to accept or reject that offer. The additional service or information will thus constitute good consideration sufficient to found a contract even though it may be of little value or lesser value than the information contained in the "cold mail" letter. The court will not enquire into the commercial value of consideration (Chappell v. Nestle [1960] AC87).

In this case the claimant had put the defendant in touch with the vendor's agent and had therefore provided further information that would have been of sufficient value in the eyes of the law. Unfortunately, however, the terms of the claimant's letter neither expressly nor impliedly suggested that the further information would be provided in return for a fee.

Thus since there is no obligation to pay for unrequested information the agent writing a "cold mail" letter needs to provide enough information to convince the prospective client that the property is just what they need, but also make a clear offer to provide for a fee some vital additional piece of information without which the client cannot act.