Agency; duties of the principal; payment of agreed commission.
Facts: Salamon Nominees engaged Moneywood as an agent, to find a purchaser for a large parcel of land Salamon wished to sell. Salamon promised to pay Moneywood commission at a rate of 2% of the sale price. Moneywood found a purchaser, BMD Constructions, that signed a contract to buy the entire piece of land. That contract was not completed, but a short time later the same buyer signed another contract to buy about two-thirds of the land at a lower price. The remainder of the land was sold to the local shire council. Although Moneywood was not mentioned as the agent in the second contract signed by BMD Constructions, Moneywood claimed to be entitled to 2% commission on the purchase price of the second sale on the basis of its original agreement with Salamon.
Issue: Was Moneywood entitled to the commission claimed?
Decision: Moneywood's introduction of BMD Constructions was the effective cause of the second sale and Moneywood was entitled to commission at the agreed rate of 2% of the purchase price paid by BMD Constructions. However Moneywood was not the effective cause of the purchase of the remainder of the land to the shire council and was not entitled to commission on that sale.
Reason: Even if a principal has agreed to pay a commission to an estate agent for 'introducing' or 'finding' a buyer, the agent is entitled to commission only if and when a contract of sale is actually completed. Finding a willing buyer does not in itself entitle the agent to commission. In addition, the agent must prove that their introduction of the buyer was the effective cause of the sale. If these facts are proved, the agent is entitled to the agreed commission, pro rata, even if the final sale is on substantially different terms from those originally envisaged.