Robert Jones and Joseph Marsden, who work within the insurance and reinsurance group at CMS, comment on the decision handed down in the matter of Wells v Devani [2019] UKSC 4.

The Supreme Court has held that a binding oral agreement was reached between an estate agent and property developer, with the result that the estate agent was entitled to payment of commission. Unanimously overturning the Court of Appeal’s decision, the Supreme Court applied a contextual approach to its assessment and held that an oral contract had been agreed between the property developer and the estate agent without the need to imply a term into the contract. The agent was therefore entitled to payment of their fees subject to a one-third reduction for breach of section 18 of the Estate Agents Act 1979 (EAA).

The decision underlines the importance of ensuring written terms are agreed and provided prior to proceeding with the marketing of the property by an estate agent. The courts have significant discretion to dismiss entirely or reduce an estate agent’s commission where there is a breach of section 18 of the EAA due to a lack of written notice of the circumstances in which the client becomes responsible for the agent’s fees.


Mr Wells developed a block of flats in Hackney. By early 2008 Mr Wells had sold six flats via another estate agent but seven remained on the market. At this point Mr Wells was introduced to Mr Devani, an estate agent. On 29 January 2008, Mr Devani contacted Mr Wells via e-mail and telephone as he could assist with the remaining properties. During that telephone call Mr Devani offered his services on his standard terms in return for payment of 2% plus VAT. Mr Wells disputed the content of the telephone call alleging that during the call Mr Devani had not mentioned commission and that he was looking to buy the properties for himself. Crucially, the court preferred Mr Devani’s version of events.

Shortly after the telephone call Mr Devani found a buyer for the remaining flats. On 5 February 2008, the buyer, agreed to pay £2.1 million for the flats. Later that day Mr Devani sent an e-mail setting out his terms and conditions in writing and explaining that a sale had been agreed and payment of the commission was due upon exchange of contracts but payable from the proceeds of sale.

The transaction proceeded to completion and Mr Devani claimed his commission. Mr Wells refused to pay so Mr Devani issued proceedings for his unpaid commission.

The Dispute

Mr Wells disputed Mr Devani’s entitlement to commission on two grounds:

  1. Mr Wells did not intend to enter into a binding contract with Mr Devani because of the lack of a term specifying what event triggered payment of the commission; and
  2. Mr Devani failed to comply with section 18 of the EAA.

At first instance, the judge ruled that because the written terms were sent after Mr Devani had introduced the buyer the claim turned upon what was agreed during the telephone call. The judge accepted Mr Devani’s account of the telephone call but concluded that neither party had agreed what event triggered payment.

In the absence of an agreement, the law would imply the minimum term necessary to give business efficacy to the parties’ intention. The judge implied a term that the payment of the commission was due on completion.

Section 18(2) EEA requires estate agents to provide particulars of the circumstances in which the client will become responsible for the estate agent’s fees. Section 18(2) states that this must be done in writing and must be provided before the client is committed to any liability to the estate agent. If an estate agent fails to comply with the Act then under section 18(6)(a) the court has the power to dismiss the estate agent’s claim for fees if the breach is serious enough or reduce the fees to reflect the level of prejudice suffered.

The courts will consider the issues of the prejudice suffered and culpability in the round. The key issue for the court under section 18(6)(a) is whether it would be just to dismiss the estate agent’s claim for fees. If the fees are allowed, then under section 18(6)(b) the court only needs to consider the prejudice suffered by the client because of the failure to provide written terms of business.

Mr Wells argued that the failure to provide written terms prejudiced him because he was unable to consult with his business partner and his solicitors before agreeing to them. He was also open to an uncertainty with regards to the time for payment of the fees and it could have caused problems with Mr Well’s other estate agents. The judge held that the prejudice caused to Mr Wells was not so bad that the court should disallow the claim for commission but, instead, reduced the claim by one-third.

Mr Wells successfully appealed. The Court of Appeal held that the agreement was too vague to be remedied by implying a term. The Court of Appeal held that the power to imply a term into a contract only arose once a contract had been concluded. As the trigger event for payment of commission had not been agreed and this was of fundamental importance there was no such concluded agreement. The Court of Appeal held that they could not imply a term into a defective contract in order to make it legally binding. Therefore, no commission was owed.

The Court of Appeal disagreed also with the judge’s reasoning behind the reduction following section 18 EAA but they could not say the reduction itself was wrong. The Court of Appeal disagreed that the potential from the co-retained estate agent was not an issue and could be prejudicial. Lord Justice Lewison thought that the effect of speed of the transaction was an aggravating factor, not a mitigating one, and there was some merit to Mr Wells’ argument that Mr Devani could not avoid his responsibilities under the Act simply because he had found a buyer.

Decision of the Supreme Court

The Supreme Court disagreed with the Court of Appeal and unanimously allowed the appeal in favour of Mr Devani.

The Court had no doubt that the parties intended to create legal relations and that Mr Wells understood that Mr Devani would be entitled to commission at 2% plus VAT. Although there was no express agreement on the precise event that would trigger payment of the commission, the Supreme Court considered the nature of such transactions and held that it was usual and the parties’ intentions for the commission to be paid upon completion.

The Supreme Court then considered the issues arising from section 18 EAA. The Court recognised that Mr Devani should have provided his written terms at the start albeit the period of delay was less than one week. The fact that he had found a buyer quickly was not a mitigating factor but an aggravating one. The EAA is a form of consumer protection and even though the delay was relatively minor the Court upheld the reduction. The Supreme Court agreed with the Court of Appeal’s criticisms of the reasoning behind the decision to reduce the fees by one-third but could not say the trial judge exercised their discretion on this matter so wrongly that it could be overturned.


The case serves as a reminder of the circumstances in which a court can imply terms into a contract as well as demonstrating the consequences for an estate agent for failing to comply with section 18 of the Estate Agents Act 1979 and agree terms in writing before acting for a client. In practical terms it reminds estate agents that fee claims can rapidly morph into accusations concerning breaches of duty.

Whilst the judgment is welcome in recognising the self-evident presence in an oral contract to pay commission in circumstances where the claimant has identified themselves as an estate agent, it does highlight the importance of complying with the Act. The sanctions under section 18 EAA are commercially hazardous for the estate agent. This case underlines the importance of ensuring that written terms are agreed with clients, not least to ensure each party is aware of its duties and obligations. The decision therefore reinforces the importance of an estate agent sending terms and conditions to the client as soon as possible or their fees might be reduced or disallowed.

Indeed, the decision shows the sorts of issues the courts will consider when considering section18 EAA and the default position is likely to be dismissal of the claim for payment.