Wells v Devani [2019]

Wells v Devani [2019] UKSC 4, an English contract law matter was brought before the Supreme Court, primarily addressing agreements to agree.

The facts of the case involved Devani, an estate agent, claiming a commission from Wells, a flat seller, for completing flat sales after introducing a buyer. The dispute arose when Devani, after being informed by Wells' neighbour about unsold flats, contacted Wells, claiming a 2% plus VAT commission for the sale of the flats. Wells contended that there was no discussion about commission. Eventually, Newlon Housing Trust agreed to buy the flats, and Devani claimed a commission, which Wells refused to pay.

At the trial level, Judge Moloney QC held that there was a binding contract, but due to the absence of written terms, the contract was subject to a one-third reduction under the Estate Agents Act 1979 section 18. However, the Court of Appeal took a different stance, asserting that there was no contract.

The Supreme Court held that there was indeed a binding contract, and its terms were clear, even though the Estate Agents Act 1979 section 18 was not complied with. The Court emphasised the intention of the parties to be contractually bound and their actions based on that agreement.

Lord Kitchin outlined the principles governing agreements to agree. He stated that the courts are reluctant to find an agreement too vague or uncertain to be enforced if the parties intended to be contractually bound and acted on their agreement. Lord Kitchin highlighted that the judge in the trial had no doubt about the parties' intention to create legal relations and that Mr Devani was entitled to a commission of 2% plus VAT.

The judgment further clarified that, in the absence of a provision to the contrary, it would be naturally understood that the payment of commission would become due on completion. The court held that Mr Devani and Mr Wells agreed that if Mr Devani found a purchaser for the flats, he would be paid his commission, and since he found Newlon, which completed the purchase, Mr Devani was entitled to his commission.

The decision supported the interpretation that commission is payable out of the proceeds of sale and is due on completion. The court also discussed the principles of implying terms into contracts, emphasising that a term will only be implied if necessary for business efficacy or if it is so obvious that it goes without saying.

Regarding the reduction of fees under the Estate Agents Act 1979 Section 18, the court acknowledged it as a form of consumer protection but noted that the degree of culpability needed careful consideration. The court ultimately agreed with the trial judge's decision to allow Mr Devani to pursue his claim with a significant fee reduction, as his culpability was not so great as to warrant dismissal of the application.

In conclusion, this case clarified the principles surrounding agreements to agree, emphasising the intention of the parties and the necessity of clear terms. The judgment also addressed the implications of the Estate Agents Act 1979 Section 18 and highlighted the importance of considering the degree of culpability in reducing fees.