Case 15 - promises of commissions

Summary

Case

Claude, wishing to sell his house, listed it with Homes, an agency that assists sellers in finding buyers. Homes was to receive 5 per cent of the sales price of the house if it found a buyer. Three months later, after Homes had taken various steps to do so and incurred expenses, Claude decided not to sell his house. Is he liable to the agency for 5 per cent of the sales price or for its expenses? Does it matter if the agency has found a buyer who has expressed his willingness to buy the house although no contract has been signed? Does it matter if Claude had promised that he would list the house only with Homes or whether he remained free to list it with other agencies?

Discussions

FRANCE

Under French law, the contract between Claude and Homes would be classified as one of agency (mandat). Claude grants Homes the power to do something in his name (art. 1984 of the Civil Code): to find a buyer for his house. More precisely, this contract would probably be considered to be a real estate agency contract, although some would consider it a contract for services on the ground that, traditionally, a contract of agency is deemed to be gratuitous, unlike a contract with a real estate agent, who receives compensation.

The Civil Code provides some general rules to govern an agent's remuneration. According to art. 1999, ‘the principal must reimburse the agent for advance payments and costs that the latter has incurred while performing the agency, and pay the salary promised to him’.