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No Sale No Fee?

Thursday 05 December 2013

Is a seller liable for damages if they refuse to conclude a sale with a buyer found by their estate agent?

As occurs in most other countries, estate agents in France are remunerated on the basis of a commission payable on the sale of a property; if they do not find a buyer, then no fee is payable.

Indeed, in France the regulatory framework is arguably tighter, for only agents authorised by the local prefecture are entitled to conclude a sale contract, and commission is only payable where there exists a written contract in a specified form between seller and agent

This written contract is called a mandat de vente.

However, whether or not a fee is payable can become less clear where an estate agent finds a buyer at the price sought by the seller, but the seller is then unwilling to proceed with the sale.

This issue was considered recently in a case before the French Court of Appeal sitting in Aix-en-Provence.

The case concerned a seller who had engaged an estate agent in Nice to sell her apartment, which was placed on the market for €170,000. The commission payable to the agent was 6%, to be paid by the buyer.

The agent later introduced a buyer to the seller, who agreed to buy at the asking price and to accept payment of the commission.

However, the seller refused to sign the sale contract, giving no convincing or reasonable reasons for not doing so, although they later produced a valuation from another estate agent who estimated the value of the property to be €200,000.

The Appeal Court judges stated that, although under statute law the agent was not due their commission, damages were payable by the seller as they had failed to act in good faith in relation to the contract they had with their agent.

This was not the view taken by the Cour de Cassation, the French Supreme Court, when the case went to them on appeal. They concluded that, in the absence of express terms in the mandat de vente, the seller could not be obliged to sign the sale contract.

They also similarly considered that,in the absence of a penalty clause in the mandat, neither was the agent entitled to damages.

Accordingly, in such circumstances, whether or not a commission is payable will depend on the terms of the contract between the agent and the seller.

In the absence of express terms the agent is not entitled to damages, but where these do form part of the mandat, the seller could well be obliged to pay damages should they unreasonably refuse to proceed with the sale.

Many agents do indeed include a penalty clause of this nature in their contracts, which could well have made a difference had that been so in this case, although a court would wish to examine the circumstances of a case before affirming it did apply.

Where the offer received by the agent was less than the price stated in the mandat with their client this clause could not be invoked.

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