Laws of Eve | Confirm the deal before work begins
Although today’s topic concerns a self-evident fact, it is amazing how many claims go before the courts because parties disagree as to whether a contract actually existed between them or the terms of the deal in relation to which services were provided. This is as true for simple domestic arrangements, especially with tradesmen, as it is for more complex transactions between businessmen.
The judgment of the UK Supreme Court in the case of Wells (Respondent) v Devani (Appellant) UKSC 4 is a good example of how contentious matters can become when the terms of the deal were not clarified from the start.
Wells developed a block of flats in 2007, and in 2008, seven of the flats were still unsold. Devani, an estate agent, made contact with Wells after being introduced to him by Wells’ neighbour. Devani and Wells had a telephone conversation, the details of which were not agreed at trial. Specifically, Devani claimed that he mentioned a 2% commission during the conversation, while Wells denied that a commission was mentioned at all.
Thanks to Devani’s efforts, the Newton Housing Trust purchased the remaining flats. When the transaction was completed, Devani claimed his commission. Wells refused to pay, so Devani filed a claim in court. At trial, the judge ruled in favour of Devani and held that there was a binding contract between the parties. However, due to the fact that the written terms of the agreement were submitted after the transaction was completed, the judge reduced the commission by one-third in keeping with the provisions of the Estate Agents Act.
Wells succeeded on his appeal to the Court of Appeal, but that ruling was overturned by the UK Supreme Court. The following important points emerge from the Supreme Court’s unanimous judgment:
1. Determining whether a binding contract existed between Wells and Devani involved a consideration of what was communicated between them by their words and their conduct and whether that settled all the terms that the law requires as essential for that purpose.
2. The courts are reluctant to find that an agreement is too vague or uncertain to be enforced where it is found that the parties had the intention of being contractually bound and have acted on their agreement.
3. The objective of the court is to do justice between the parties, and the court will do its best, if satisfied that there was an ascertainable and determinate intention to contract, to give effect to that intention, looking at substance and not mere form. It will not be deterred by mere difficulties of interpretation.
4. There is no need to refer to implied terms if it is found that, based on a construction of the parties’ words and conduct, a sufficiently certain and complete contract had been concluded between them. In this case, however, if there was a need to imply a term to say that payment of the commission would fall due upon completion of a sale to a party introduced to the seller by the estate agent, the court would have done so.
The judgement shows that the court may take a pragmatic approach to determining whether a contract was created and, where necessary, even imply the necessary terms to give business efficacy to an arrangement between parties where their words and conduct show that an agreement had been reached. However, the flexible approach of the court is not replacement for a clearly written contract confirming the terms of an agreement.