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28 Oct 2019

Contracts, certainty and implied terms for business efficacy

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Wells v Devani [2019] UKSC 4 (13 February 2019)

This Supreme Court decision concerned the enforceability of an agreement between an estate agent and a vendor.

The vendor, Mr Wells, contended that the terms of any agreement he had with Mr Devani were too uncertain to constitute a binding contract and that commission was therefore not payable.

In overturning the Court of Appeal's decision, the Supreme Court stated as follows:

  • 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.
  • In answer to Mr Wells' claim that there was no defined 'trigger event' for the payment of commission, the Court found that case law on this issue meant an agent would be entitled to its commission on completion, if no other event was provided for. It also held that in the event it had been necessary to imply a term into the agreement to that effect, it would have had 'no hesitation' in doing so. The obligation to make payment on completion would have been required to give the agreement business efficacy.
  • There is no general rule that an incomplete bargain cannot be turned into an agreement by implying a term into it. Where the parties intended to create legal relations, it was possible to imply a term into an agreement to give it business efficacy.

Stephenson Harwood comment

Where an agreement has been reached in principle but not fully reduced to paper, this decision may be helpful. It indicates that the Courts may, in the right circumstances, remedy a lack of certainty over the terms of an agreement by implying a term to create the necessary certainty. Plainly, in all cases the preferred approach is to ensure the agreement is complete in the first place.

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