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This article was included in the spring 2011 issue of Informer - the real estate newsletter.
A recent case shows how easy it is to make a legally binding contract by email without realising it
If you've ever sold a house, you may well have paid your estate agent's commission through gritted teeth. This was, no doubt, especially true for the defendant in the recent case of Nicholas Prestige Homes v Neal, which highlighted the care that must be taken before hitting the "reply" button on an email.
In this case, the Court of Appeal confirmed that an exchange of emails between an estate agent and the seller of a property had made a binding contract for sole agency, so the sole agent was awarded his commission even after the seller sold her property via another agent.
What happened?
The seller of a property ("S") had dealt with a number of estate agents while trying to sell her property in 2006. The marketing was slow, so S asked Nicholas Prestige Homes ("NPH") to take it on.
On 24 November 2006, NPH sent an email to S. It stated that NPH would be appointed on a multi-agency basis until 31 December, at which point S would stop dealing with other agents, and give NPH sole agency rights from 1 January 2007 onwards.
Both the sole and multiple agency terms were attached to NPH’s email. The Court of Appeal held that this was not confusing, as the terms were to operate consecutively. Both sets of terms required S to pay NPH commission if contracts were exchanged with a buyer who had been introduced by NPH. The sole agency agreement gave NPH a period of 16 weeks in which to sell the property. The exclusivity would continue until terminated by S giving NPH 21 days' written notice. During that 16 week window, S would not market the property for sale nor instruct another agent to do so.
On 28 November 2006, NPH telephoned S in order to discuss the email. However, S replied by email stating:
"Hi Mark, that's fine, look forward to viewings. Sally"
S eventually sold the property through another estate agent, to a buyer who had initially contacted both the other agent and NPH. The sale occurred after 1 January 2007, during the period that NPH claimed they had sole agency; the other estate agent had been retained by S until 20 January 2007. NPH claimed their commission of £10,883, as the buyer had been introduced by them. S argued that she had not fully read the email and the documents attached to it, and that there was therefore no sole agency agreement between her and NPH.
The first court decision
In the first instance, the judge found that a binding contract was formed between S and NPH when S accepted (in her brief reply of 28 November) the terms set out in the email from NPH dated 24 November.
However, NPH's claim for damages was dismissed, since NPH had not themselves caused the sale of the property, rather the other agent had done so. NPH lodged an appeal claiming breach of contract, arguing that S had continued to instruct other estate agents during NPH's period of sole agency.
Decision of the Court of Appeal
The Court of Appeal allowed the appeal. The judge agreed that the emails of 24 and 28 November 2006 had concluded a contract for sole agency between S and NPH after 31 December 2006. Further, S was in breach of contract by selling the property via the other agent. The lost chance of NPH’s commission was assessed at 100%, with £10,883 awarded to NPH.
A cautionary tale!
It is important to note that whilst the case went to appeal on the point of whether or not NPH had sole agency rights to market the property, both the judgment in the first instance and at the Court of Appeal held that the email reply given by S had formed a contract between the two parties. It was not enough for S to claim that she had not read the documents attached to the email.
Whilst this judgment proved expensive for S, NPH had to go through a court process which could have been avoided had they taken care to get express confirmation from S that she had accepted the terms of the contract.
For further information please contact Andrew Chester.