2 January 2008

An agent's right to commission

An agent will have a claim for commission on a sale agreement if he introduced the parties to one another, thereby being the effective cause of the sale.

This becomes a difficult issue to determine where the sale fell through and after the lapse of some time the parties, initially introduced by an agent, enter into a sale agreement directly with one another. The lapse of some time does not in itself mean that the agent is not the effective cause and even if the sale goes through long after the introduction of the parties by the agent, or long after his active efforts have ceased, the agent may still be the effective cause of the sale. This is the case even if the sale is eventually concluded on different terms and conditions and between the parties directly.

In order for a principal to avoid the agent’s commission on a sale, he must prove that there was a new intervening cause of the agreement, which cause is distinct from that which had occurred before the agreement was concluded. In the recent Supreme Court of Appeal judgment of Mano et Mano v Nationwide & others, the court held that the issue to be determined is whether the new cause or factor outweighs the effect of the first cause, being the introduction of the parties by the agent, to bring about the sale.

In the abovementioned case, Nationwide intended on purchasing new aircraft, and was introduced to a willing seller by an agent who it had appointed. This first sale agreement fell through and Nationwide bought aircraft from another seller. Some time later, and due to a change in aviation regulations, Nationwide was forced to replace these aircraft with ones that complied with the new regulations. Nationwide noticed an advertisement for the sale of aircraft in a trade journal placed by the initial seller it had met through the agent previously. Nationwide then negotiated the new sale directly with the seller.

This transaction took place several months after the first introduction of the parties by the agent, Mano et Mano. The question was therefore whether Mano et Mano was also the effective cause of the second sale.

The court concluded that Nationwide's decision to purchase the aircraft arose from unforeseen developments in the aviation regulations, which is a sufficiently weighty intervening cause separating the second sale from the agent’s efforts.

The court held further that a lapse of time is an important factor to consider in determining whether the chain of causation between the introduction and the sale had been broken, but it isn’t a decisive factor. It is also important to note that the court distinguished between a sale of an aircraft and that of immovable property, holding that the value of immovable property increases with time, whilst an aircraft's value diminishes. The Court therefore found that the lapse of time was given more weight in these circumstances but might be afforded less significance where immovable property was concerned.

Owen Barrow and Annemarie Potgieter

The information and material published on this website is provided for general purposes only and does not constitute legal advice.

We make every effort to ensure that the content is updated regularly and to offer the most current and accurate information. Please consult one of our lawyers on any specific legal problem or matter.

We accept no responsibility for any loss or damage, whether direct or consequential, which may arise from reliance on the information contained in these pages.

Please refer to the full terms and conditions on the website.

Copyright © 2022 Cliffe Dekker Hofmeyr. All rights reserved. For permission to reproduce an article or publication, please contact us cliffedekkerhofmeyr@cdhlegal.com