Legally Speaking - September 2008 (423)
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Legally Speaking (423, September 2008)

 

Number 423, September 2008

Buyer Agency Contract Enforced

Although only five to seven per cent of British Columbia REALTORS® consistently use written Exclusive Buyer’s Agency Contracts, their use and enforceability is growing elsewhere in Canada.

In a recent Ontario case,1 a buyer engaged a brokerage and REALTOR® to assist her in finding a residential property to purchase. A suitable property was located and, prior to submitting an offer to purchase, the buyer signed a standard buyer agency agreement appointing the brokerage as the buyer’s exclusive agent for a four-month period and agreeing to pay a commission of three per cent of the purchase price if a property was purchased by the buyer during the term of the agreement.

The offer was not accepted and the buyer advised the REALTOR® that she and her husband “needed the summer off and would resume their search in the fall.” When the REALTOR® contacted the buyer in the fall, he was advised that the buyer had purchased a new home from a builder without the assistance of the buyer’s brokerage but within the term of the buyer agency agreement. The brokerage demanded payment of its commission and the buyer refused to pay on the grounds that:

  1. The buyer agency agreement was obtained without consideration;
  2. The buyer’s brokerage and its REALTOR® failed to comply with their fiduciary duty to ensure the buyer had a clear understanding of the nature and scope of the buyer agency agreement;
  3. The buyer agency agreement applied only to the first property; and
  4. The buyer did not understand the nature and scope of the buyer agency agreement.

The court rejected all arguments. 

The court found that the efforts of the REALTOR® to find a suitable property were ample consideration to form a binding contract.

Secondly, although the buyer agency agreement contained a provision that the buyer’s brokerage had provided the buyer with written information on buyer agency, the REALTOR® had not provided such written information. However, even though the REALTOR® had not provided the buyer with written materials on agency, the court found that the REALTOR® had verbally explained the nature and scope of the buyer agency agreement to the buyer and that was sufficient to satisfy the fiduciary duty owed to the buyer. 

Thirdly, the court found that the buyer agency agreement had appointed the buyer’s brokerage as the buyer’s exclusive agent for the term of the agreement, and the obligation to pay commission applied to any property purchased by the buyer within the term of the agreement whether or not it was introduced to the buyer by the buyer’s brokerage. The court stated that the agreement “is written in plain English. Its language is not confusing and its purpose clear.”

Finally the court rejected the buyer’s fourth argument finding that, given the buyer’s education and business experience, the buyer was sophisticated and suitably knowledgeable to have a full appreciation of contractual terms and obligations.

The court dismissed the brokerage's claim for commission on the narrow ground that as the buyer agency agreement was signed only by the husband and the property was purchased in the name of the wife only the husband was technically not liable to pay commission as the husband had not entered into a binding contract of purchase and sale for property within the term of the contract.

However decisions such as these serve to remind REALTORS that written agency agreements entered into with buyers are enforceable in the same manner as written listing agreements entered into with sellers.

Brian Taylor
Bull, Housser & Tupper LLP

  1. Re/Max Rouge River Realty Ltd. v. Gallacher, [2008] O.J. N. 1933.

Note: The www.mls.ca website (changed to www.REALTOR.ca as of July 2, 2008) is an advertising vehicle provided by REALTORS® across Canada to help market properties. It is not an MLS® system.
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