Abdulla Ahmed vs Animendra Kissen Mitter

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. XLIV of 1949

Decision Date: 14 March 1950

Coram: Hiralal J. Kania, Saiyid Fazal Ali, Mehr Chand Mahajan

In the matter of Abdulla Ahmed versus Animendra Kissen Mitter, the Supreme Court delivered its judgment on 14 March 1950. The case was reported as 1950 AIR 15 and 1950 SCR 30, and has subsequently been cited in several later decisions. The bench that heard the petition comprised Chief Justice Hiralal J. Kania, Justice Saiyid Fazal Ali and Justice Mehr Chand Mahajan, with additional participation from Justices S. Das, Sudhi Ranjan, and M. Patanjali. The petition was filed by Abdulla Ahmed, herein the appellant, against Animendra Kissen Mitter, the respondent. The crux of the dispute related to the authority given to an estate broker to negotiate and secure a sale of a specific property, and the consequent entitlement to commission under the terms set out in a written commission note.

The appellant, who acted as an estate broker, was engaged by the respondent on 5 May 1943 through a letter that authorized him to negotiate the sale of the respondent’s property situated at 27 Amratolla Street, free from all encumbrances. The commission note stipulated that the broker should obtain a buyer willing to pay not less than one lakh rupees; on achieving this price the broker would receive a thousand rupees as remuneration. If the sale price exceeded one lakh five thousand rupees but did not exceed one lakh ten thousand rupees, the broker would be entitled to the entire excess over one lakh five thousand rupees in addition to the fixed remuneration. For a price above one lakh ten thousand rupees, the broker would receive twenty-five percent of the excess over that amount together with six thousand rupees. The authority was to remain effective for one month from the date of the letter. Acting under this authority, the appellant identified two prospective purchasers who were ready to buy the property for one lakh ten thousand rupees on 2 June. By exchanging letters with these buyers, the appellant purported to conclude a contract of sale and communicated this to the respondent on 3 June. However, the respondent revoked the appellant’s authority on 9 June and on the same day entered into an agreement with a nominee of the aforementioned purchasers to sell the property for one lakh five thousand rupees, subsequently executing a conveyance in their favour for that amount. The appellant instituted a suit seeking six thousand rupees as commission. The Court held, through the observations of Chief Justice Kania, Justice Fazal Ali, Justice Patanjali, and Justice Das, that an estate agent occupies a different position from a stock-exchange broker because of the unique nature of immovable property transactions, and that, in the absence of explicit language granting authority to conclude a sale, the owner must not be deemed to have conferred such power. Nevertheless, the Court further held that the commission note, even if interpreted as making payment conditional upon completion of the transaction, conferred upon the appellant the right to commission once he had negotiated the sale and secured buyers offering the stipulated price, provided the buyers later completed the purchase. Since the buyers ultimately purchased the property, the appellant’s right to commission became absolute and could not be negated by the respondent’s subsequent sale at a lower price. Justice Mahajan, in his separate observation, reiterated that under the terms of the commission note the appellant’s entitlement to commission was earned by his successful negotiation and the eventual completion of the sale by the buyers.

In the first part of the judgment, the Court explained that an estate agent does not automatically acquire the authority to conclude a sale contract on behalf of the owner unless the contract expressly confers such power. However, this lack of express authority does not conflict with an implied understanding that the agent’s commission is payable only when both the owner and the purchaser introduced by the agent successfully complete the transaction. The Court then considered two alternative interpretations. First, it held that even if the commission note were read as making the payment of commission conditional upon the final completion of the sale, the appellant had “negotiated the sale” and had “secured buyers” who had presented a firm offer of one lakh ten thousand rupees. By virtue of having obtained that offer, the appellant acquired the right to commission based on the price offered, subject only to the condition that the buyers actually complete the purchase. The Court observed that the condition was satisfied when the buyers ultimately purchased the property in question, and therefore the appellant’s entitlement to commission became absolute. Consequently, the lower price at which the respondent later sold the property could not affect the appellant’s right to the commission.

In a separate opinion, Justice Mahajan addressed the same commission note and concluded that, under its terms, the appellant possessed authority to enter into a binding contract on behalf of the respondent. Because the appellant had indeed entered into such a contract, the Court held that he was entitled to the commission of six thousand rupees as stipulated in the commission note. Justice Mahajan further explained that, even if the appellant’s authority to bind the respondent were denied, the commission note nonetheless provided that the agent was entitled to remuneration as soon as he introduced a buyer who was ready and willing to purchase at the price fixed by the owner, regardless of whether the owner ultimately completed the transaction. This reasoning reinforced the principle that the agent’s right to commission could arise independently of the owner’s final performance.

The Court also referred to several precedents to illustrate the legal principles governing agency and commission. It distinguished the case of Luxor (Eastbourne) Ltd. v. Cooper [1941] A.C. 108, and cited Chadburn v. Moore (67 L.T. 257), Rosenbaum v. Belson [1900] 2 Ch. 267, Durga Charan Mitra v. Rajendra Nararain Sinha (36 C.L.J. 467), and Wragg v. Lovett ([1948] 2 All E.R. 969). These authorities were used to support the view that an agent’s entitlement to commission depends on the specific terms of the agreement and the occurrence of the conditions stipulated therein.

The judgment arose from a civil appeal (No. 44 of 1949) filed by special leave from a decree of the High Court of Judicature at Calcutta dated 5 January 1948. That decree had varied a prior judgment and decree issued by a single judge on 11 June 1945 on the Original Side of the same High Court. The appeal was argued before the Supreme Court on 14 March 1950. Counsel for the appellant was represented by a senior advocate accompanied by an assistant, while counsel for the respondent appeared on the opposite side. The opinion of Chief Justice Kania, Justice Fazl Ali, Justice Patanjali Sastri and Justice Das was delivered by Justice Patanjali Sastri, and Justice Mahajan delivered a separate judgment addressing the same issues. The Court’s final order affirmed the appellant’s right to the commission as outlined above.

In this case the appellant, who operated as an estate broker in Calcutta, was employed by the respondent pursuant to a commission letter dated 5 May 1943. The letter instructed the appellant to negotiate the sale of the property situated at No 27, Amratolla Street, Calcutta, which belonged to the respondent. Acting under this contract the appellant identified two individuals who expressed readiness and willingness to purchase the premises for a price of Rs 1,10,000. By exchanging letters with those individuals on 2 June 1943, the appellant purported to conclude a contract for the sale of the property and communicated the purported agreement to the respondent in a letter of the same date. Despite the appellant’s alleged contract, the respondent entered into a separate agreement on 9 June 1943 with a nominee of the identified purchasers for a reduced price of Rs 1,05,000, and subsequently executed a conveyance in favor of the nominee on 8 December 1943. The appellant then instituted suit alleging that the contract he had supposedly concluded on 2 June 1943 for Rs 1,10,000 was binding on the respondent and that, having performed his obligations, he was entitled to remuneration of Rs 6,000 according to the terms of his employment. In alternative, the appellant claimed the same amount as damages for breach of contract.

The respondent, in defence, asserted among other points that the appellant lacked authority to bind the respondent by a contract of sale, that the purchasers later refused to complete the transaction alleging fraudulent misrepresentation by the appellant to secure the higher price, and that the subsequent sale was effected independently of the appellant, thereby precluding any claim for remuneration or damages. Gentle J., who tried the suit, found that the terms of the appellant’s employment did not empower him to conclude a binding contract of sale and that the letters dated 2 June 1943 did not create a contract enforceable against the respondent. Nevertheless, the learned Judge rejected the respondent’s contention that the purchasers’ refusal was based on any fraudulent misrepresentation and that negotiations were thereafter resumed directly between the respondent and the purchasers. He concluded that the agreement dated 9 June 1943 and the conveyance dated 8 December 1943 were attributable solely to the appellant’s efforts in bringing together the prospective buyers and the seller. The Judge also refused to accept the suggestion that the sale had been completed for Rs 1,10,000, noting the absence of any supporting evidence, and observed that the reduction of the price by Rs 5,000 appeared intended to deprive the appellant of his legitimate remuneration of Rs 6,000. He accordingly held that

The Court observed that the appellant had fulfilled his contractual obligation by locating two individuals who were ready, able, and willing to purchase the property for the stipulated sum of Rs 1,10,000, and therefore he was entitled to the commission he claimed. The Division Bench, consisting of Chief Justice Harries and Justice Mukherjea, which heard the respondent’s appeal, concurred with the trial Judge that the appellant’s authority did not extend to the execution of a binding sale contract for the property. However, the Bench differed from the trial Judge on the scope of the appellant’s duties. The trial Judge had held that the appellant’s sole responsibility was to introduce a purchaser who was prepared to buy for Rs 1,10,000 and that the appellant was entitled to his commission regardless of whether the sale was completed at that price or at all. The Division Bench, relying on observations of Lord Russell of Killowen and Lord Romer in the cited authority, held that the appellant, having undertaken to “negotiate the sale” and to “secure a buyer,” could not be said to have fulfilled those duties unless a sale actually occurred or at least a contract had been executed. Since a sale did indeed occur between the parties identified by the plaintiff and the defendant, and because the learned Judges considered that sale to be the direct result of the plaintiff’s negotiations, they concluded that the appellant was entitled to commission, but only on the price recorded in the sale deed, namely Rs 1,05,000, which was the amount actually received by the respondent. Regarding the reduction of the purchase price, Chief Justice Harries, who delivered the judgment, remarked that the only known fact was that individuals who had firmly offered Rs 1,10,000 eventually purchased the property for Rs 5,000 less, and he expressed a strong suspicion that the reduction was effected at the defendant’s behest, though he could not establish this as a factual finding. To support the view that the appellant could not claim commission above that payable on the Rs 1,05,000 purchase price, the Bench relied on the House of Lords decision in Luxor (Eastbourne) Ltd. v. Cooper, which held that in a commission contract payable on the completion of a transaction the agent was not entitled to an implied term preventing the principal from lawfully terminating negotiations or refusing to sell, even after the agent had presented a ready and willing buyer on the principal’s terms. Applying this principle, the Appellate Bench modified the trial Judge’s decree, reducing the sum payable to the appellant to Rs 1,000. The commission letter cited in the proceedings began: “I, Animendra Kissen Mitter of No. 20-B, Nilmoni Mitter Street, Calcutta,”

In this case, the commission letter authorised the broker to negotiate the sale of the plaintiff’s property situated at 27 Amratolla Street, provided the property was free from all encumbrances and the sale price was not less than one hundred thousand rupees, with the seller promising to prepare a good title to the property. The letter further stipulated that if the broker secured a buyer for exactly one hundred thousand rupees, the broker would receive a remuneration of one thousand rupees. The letter added that if the sale price exceeded one hundred five thousand rupees but did not exceed one hundred ten thousand rupees, the broker would receive the whole amount of the excess over one hundred five thousand rupees in addition to the one thousand rupees already mentioned. Finally, the letter provided that if the broker obtained a buyer willing to pay more than one hundred ten thousand rupees, the broker would receive twenty-five per cent of the excess over one hundred ten thousand rupees together with six thousand rupees as previously stated. The authority conferred by the letter was limited to a period of one month from the date of the letter.

The court identified that, in the absence of unequivocal wording expressing the parties’ intention, the terms of the commission note could be interpreted in three distinct ways that correspond to the three general patterns of commission contracts with real-estate brokers. The first possible construction treats the letter as authorising the broker not only to locate a ready and willing purchaser at the stipulated price but also to conclude a legally binding sale contract on behalf of the seller. The second construction views the agreement as rewarding the broker solely for introducing a potential buyer who is prepared, able, and willing to purchase at or above the stated price, regardless of whether the transaction is ultimately completed. The third construction perceives the commission note as requiring the broker merely to find such a purchaser without granting authority to execute a binding sale contract, with the broker’s commission becoming payable only upon the consummation of the sale. The trial judge and the appellate bench both rejected the first construction, although counsel for the appellant pressed this view before the supreme court.

The court could not accept the first interpretation because the commission note specified only the price required by the seller and omitted essential terms such as the method of price payment, the investigation and approval of title, the execution of the conveyance, the parties who must join in the conveyance, and the allocation of incidental costs. By contrast, the sale agreement dated 9 June 1943, concluded between the seller and the purchasers, contained detailed provisions covering all of these matters. Counsel for the appellant emphasized the clause in the commission note stating that the sale must be free from encumbrances and that a “good title” would be made out. The court held that this phrasing merely indicated the general nature of the proposed bargain and was fully consistent with an understanding that further detailed terms would be negotiated between the seller and the purchaser after a suitable buyer was found.

In this case, the Court observed that, as pointed out by Justice Kekewich in Chadburn v. Moore (1) 67 L.T. 257, a house-or-estate agent occupies a position different from that of a broker on a stock exchange because the property involved is transferred only after a detailed investigation of title, and the resulting contract may need to contain special stipulations that are of particular concern to the owner. Consequently, the parties do not ordinarily expect the agent to have the authority to complete the transaction. The Court therefore noted that both English and Indian jurisprudence have held that when a broker is authorized merely to negotiate a sale and to find a purchaser, without being given all the terms of the sale, the authority amounts only to “finding a man willing to become a purchaser and not to find him and make him a purchaser”. This principle was affirmed in Rosenbaum v. Belson (2) [1900] 2 Oh. 267 and in Durga Charan Mitra v. Rajendra Narayan Sinha (3) 86 C.L.J. 467.

Mr Setalvad, counsel for the appellant, then proposed, as an alternative, that the second interpretation favoured by the trial Judge should be adopted. He argued that, under that view, the appellant had performed his duty by introducing two prospective buyers who were ready and willing to purchase the premises for Rs 1,10,000, and therefore the appellant was entitled to commission on that basis. The learned counsel for the respondent criticised the Appellate Bench's adoption of a third construction, calling it illogical and inconsistent. He contended that if “authority to secure a buyer” were understood to mean authority to find a person who is not only ready and willing but also ultimately becomes the buyer, then such authority must necessarily extend to the execution of a sale contract; otherwise the agent could not fulfill the task assigned to him.

The Court indicated that it did not find the criticism particularly persuasive. It reiterated that there are sound reasons why an owner who employs an estate agent to obtain a purchaser does not, in the absence of explicit words, intend to give the agent authority to conclude the sale contract. The lack of such authority, the Court held, is not inconsistent with an understanding that the agent is not entitled to commission unless the owner and the purchaser introduced by the agent complete the transaction. In the present case, however, the Court noted that it was unnecessary to determine whether the commission note itself implied such an understanding, because a sale had indeed been concluded with the purchasers introduced by the appellant, who thereby fulfilled the role of the effective cause of the sale.

In the facts of the case, the parties agreed that the agent had unquestionably earned his commission because both the trial judge and the appellate bench concluded that the appellant’s actions were the decisive cause of the sale. The remaining issue before the Court was whether the commission should be measured on the basis of the firm offer of Rs 1,10,000 that the appellant secured from the purchasers, or on the basis of the lower sum of Rs 1,05,000 that appeared in the final conveyance. The appellate bench had earlier explained that its decision relied upon the authority set out in the Luxor case. The judges in that case observed that the principal had refused to sell despite there being no reasonable excuse, and that the House of Lords, overturning the Court of Appeal, had held that no commission was payable. The appellate judges therefore applied that principle to the present facts, stating that although the agent had introduced a purchaser ready to pay Rs 1,10,000, the eventual transaction was concluded at a lower price. They added that even if the defendant had unreasonably or without justification declined to complete the sale at the higher price, the plaintiff would still have no entitlement to a commission based on that higher figure. The present Court could not accept this line of reasoning. In Luxor, the decision was founded on the notion that where commission is contingent upon the completion of a transaction, the agent’s right is a purely conditional right that arises only when the purchase actually materialises, as Lord Simon explained: “The agent is promised a reward in return for an event and the event has not happened.” However, the situation differs when the principal, having benefited from the agent’s efforts, finalises a contract with the purchaser introduced by the agent, as occurred here. Lord Russell of Killowen, in the same judgment, clarified that once a contract is concluded with the purchaser, the event on which the commission depends has occurred, and the agent’s right to commission becomes vested and cannot be defeated by any subsequent act or omission of the principal. Applying that principle, even if the commission note in the present dispute were interpreted as making payment conditional upon the transaction’s completion, the appellant had negotiated the sale, secured buyers who made a firm offer of Rs 1,10,000, and therefore fulfilled every obligation imposed by the respondent. Consequently, the appellant acquired an enforceable right to receive commission based on the price he successfully negotiated, subject only to the condition that the buyers complete the purchase. That condition was satisfied when the buyers ultimately bought the property, rendering the appellant’s entitlement to commission absolute and immune from any later circumstance, including the respondent’s decision to sell the property at a lower price.

The Court held that the appellant was entitled to receive the full commission of rupees six thousand. Accordingly, the appeal was allowed, the decree that had been passed on appeal by the lower court was set aside, and the decree originally made by the trial judge was restored. The appellant was also awarded the costs of this appeal, together with the costs he had incurred in the lower court and the costs of the appeal in that court. The judgment was delivered by Mahajan J.

This case arose on special leave from a judgment and decree of the High Court at Calcutta dated 5 January 1948. That judgment had varied an earlier judgment and decree of Gentle J dated 11 June 1945, which had been issued in exercise of his original jurisdiction and had decreed the plaintiff’s suit for recovery of a sum of rupees six thousand. The appellant was a broker by profession, residing at No 81/1 Phear Lane, Calcutta, and engaged in the business of a house agent. The respondent, Animendra Kissen Mitter, resided at No 20B, Nilmoni Mitter Street, Calcutta. The appellant had been employed by the respondent to negotiate the sale of the respondent’s premises situated at No 27, Amratolla Street, Calcutta, on certain terms and conditions relating to commission. The central issue on appeal was whether the appellant was entitled to his commission under the circumstances described below. The material facts were substantially admitted. By a letter dated 5 May 1943, the respondent employed the appellant to arrange a sale of the said premises. The letter contained the following terms: “I, Animendra Kissen Mitter of No 20B, Nilmoni Mitter Street, Calcutta, do hereby authorize you to negotiate the sale of my above property free from all encumbrances at a price not less than rupees one lakh. I shall make out a good title to the property. If you succeed in securing a buyer for rupees one lakh I shall pay you rupees one thousand as your remuneration. If the price exceeds rupees one lakh five thousand and does not exceed rupees one lakh ten thousand I shall pay you the whole of the excess over rupees one lakh five thousand in addition to your remuneration of rupees one thousand as stated above. In case you can secure a buyer at a price exceeding rupees one lakh ten thousand, I shall pay you twenty-five per cent of the excess amount over rupees one lakh ten thousand in addition to rupees six thousand as stated above. This authority will remain in force for one month from the date.” The authority was therefore limited to one month from 5 May 1943. Three days before the authority expired, on 2 June 1943, the appellant obtained an offer from two persons, Kishorilal Mahawar and Ramkumar Mahor, for the purchase of the premises. The offer was communicated in a letter stating: “We are willing to purchase the above house, land and premises at and for the price of rupees one lakh ten thousand only.”

The purchaser sent a letter stating that the premises were to be transferred free from all encumbrances and that the buyer was authorised to accept the offer for sale of the premises from Mr A K Mitter for a price of Rs 1,10,000, and to send confirmation of the acceptance to the vendor, Mr A K Mitter, on the purchaser’s behalf. On the same day the plaintiff replied, acknowledging receipt of the purchaser’s letter and, under authority from the owner Mr A K Mitter, confirming the purchase offer for the premises at the same price of Rs 1,10,000, also free from all encumbrances. In the same communication the plaintiff informed the respondent that, pursuant to the authority given by the respondent, he had made an offer to sell the premises to Messrs Kishorilal Mahawar and Ram Kumar Mahor of No 27, Amratolla Street, Calcutta, for exactly one lakh and ten thousand rupees. The plaintiff stated that the buyers had accepted this offer, had authorised him to forward a confirmation to the respondent, and that he was now confirming the respondent’s offer for the sale of the premises for the same amount. He added that a draft agreement for sale would be sent in the usual course and enclosed a copy of the buyers’ letter accepting the offer. The respondent received this letter on 3 June 1943, two days before the plaintiff’s authority was to expire. The respondent gave no reply and remained silent; he did not challenge the agent’s authority to create a binding sale contract with the buyers, nor did he repudiate or expressly ratify the transaction. The plaintiff contended that he had accepted the buyers’ offer only after receiving explicit instructions from the respondent, a contention that was rejected by the two lower courts. On 3 June 1943 the purchasers’ solicitor wrote to the agent’s solicitor, stating that the offer for the purchase of 27 Amratolla Street had already been accepted and that the title deeds should be dispatched so that a conveyance could be prepared. At the purchasers’ solicitor’s request, the plaintiff offered to produce the original authority letter for inspection and sent a copy of that letter by post. Upon receiving the copy, the purchasers’ solicitor expressed surprise, observing that the commission terms in the copy differed from those in the original authority shown to his client. Consequently, the plaintiff was accused of making a secret illegal gain. Despite these allegations, it was asserted that the contract had been concluded and, as a result, the plaintiff was obligated to refund to the purchasers any monies he might receive from the vendor. It appears that the purchasers’ attorney did not like the

In this case, the purchasers were dissatisfied with the possibility that the broker might have retained a sum of Rs 6,000 from the purchase price, and that displeasure contributed to the dispute that later became litigation. On 9 June 1943, the solicitor representing the purchasers wrote to the broker’s solicitor informing that his client had cancelled the purchase agreement. The broker’s solicitor responded immediately, expressing surprise at the cancellation and accusing the purchasers of having changed their position for an ulterior motive. The broker’s solicitor stated that further instructions would be given after consulting Mitter, to whom the letters had been forwarded. It appeared that the broker was unaware, when he wrote the 9 June letter, of the parallel negotiations occurring directly between the purchasers and the vendor, who had remained silent throughout. On that same day, the date on which the alleged cancellation was claimed, an agreement was executed between the vendor, Animendra Kissen Mitter, and Makkanlal, a benamidar of Kishorilal Mahawar and Ramkumar Mahor, the purchasers, for the sale of the premises at a price of Rs 1,05,000. The sale deed pursuant to this agreement was actually executed on 8 December 1943, in favour of the original purchasers and not in favour of the benamidar. The learned Chief Justice, delivering the appellate bench’s judgment, observed that it was likely that an arrangement had been made whereby both the vendor and the purchasers benefited from the insertion of a lower price in the contract of sale and the transfer deed. It seemed clear that the vendor, having received a firm offer of Rs 1,10,000 for the property, could not have agreed to sell for Rs 5,000 less unless there was an understanding between him and the purchasers to share the commission rather than paying it to the broker, which would advantage both parties. On 14 August 1943, the broker filed the suit that is the subject of this appeal, seeking recovery of the Rs 6,000 brokerage indicated in the commission note and alternatively claiming damages. The vendor denied the claim. Gentle J., who tried the suit, gave judgment in favour of the broker and decreed that Rs 6,000, together with interest and costs, should be paid to him. He held that, on a proper construction of the commission note, the broker’s authority was to find a purchaser—a person ready, able and willing to buy at a price acceptable to the vendor—and that the broker had fulfilled this duty by introducing the purchasers to the vendor. He further held that the broker had no authority to conclude a contract of sale and that no binding contract of sale had been made on 2 June and 3 June 1943.

The Court observed that the transaction recorded nominally in the name of Makkanlal and completed on 8 December 1943 in favour of Kishorilal Mahawar and Ramkumar Mahor had been carried out solely through the appellant’s intervention. The appellant had introduced the parties and acted at least as a potential buyer and seller. The Court further noted that the purchase price had been lowered by Rs 5,000 from Rs 1,10,000, a reduction the Court described as unusual and undertaken for the sole purpose of depriving the plaintiff of his commission. The respondent filed an appeal against the decree entered in favour of the plaintiff. This appeal was partially allowed by the learned Chief Justice and by Justice Mukherjea, who made several factual findings. They held that on 2 June 1943 the appellant procured two individuals, namely Kishorilal Mahawar and Ramkumar Mahor, who were ready to purchase the property for Rs 1,10,000. The Court further held that, according to a proper construction of the agency contract, no commission became payable until a binding contract had been concluded between the appellant and the respondent. The Court explained that the agent could be said to have negotiated the sale only if he introduced a willing buyer who subsequently completed the purchase. The sale, according to the Court, occurred between the persons introduced by the appellant and the respondent and was a direct result of the appellant’s agency. The commission note, the Court found, did not give the appellant authority to conclude a sale contract. Moreover, Makkanlal, with whom the sale agreement dated 9 June was executed, was merely a benamidar for Kishorilal Mahawar and Ramkumar Mahor.

The Court further concluded that the appellant had no right to claim commission on a price higher than the actual consideration of the sale, which was Rs 1,05,000; consequently his remuneration could not exceed Rs 1,000. Based on these findings the appeal was allowed, the decree of Justice Gentle was modified, and the plaintiff’s suit was reduced to a decree for Rs 1,000, with costs awarded in the appeal. In the present appeal, counsel for the plaintiff, Mr Setalvad, raised three principal contentions. First, he argued that the lower court’s finding – that a proper construction of the commission note showed the plaintiff had no authority to make a binding contract with the purchasers – was erroneous. Second, he contended that even if that finding were correct, the plaintiff was still entitled to a decree for Rs 6,000 because he had fulfilled his promise to the respondent by securing a purchaser willing to buy for Rs 1,10,000, and that the respondent’s decision, whether by caprice or collusion with the purchasers, to accept Rs 1,05,000 should not prejudice the plaintiff. Third, he submitted that the evidence warranted a finding that the sale had actually been made for Rs 1,10,000 and that the amount recorded in the sale deed was fictitious. He further urged that the trial court should have recognized the higher price as the true consideration and adjusted the commission accordingly.

The record showed that the amount entered in the sale deed was fictitious. The first matter to determine was what the parties had expressed in the commission note and what the true effect of the language employed therein was when read in the light of the material facts. As Viscount Simon, Lord Chancellor, had observed in Luxor (Eastbourne) Ltd v. Cooper, contracts with commission agents do not follow a single pattern and the primary necessity in each case is to ascertain with precision the express terms of the particular contract under discussion. The judge carefully considered the terms of the contract in view of the surrounding circumstances and, with great respect for the judges who had decided the matter in the High Court, expressed the view that the authority given by the principal to the agent authorized the agent to enter into a binding contract for sale on the principal’s behalf. The authority was therefore not a mere power to locate a purchaser who was willing, able and ready to buy the premises at the price mentioned in the document. The note, to begin with, conferred authority on the plaintiff to negotiate a sale that was free from all encumbrances at a price not less than rupees one lakh. It then proceeded to provide that the principal undertook to produce a good title to the property. Further, the note provided that if the agent succeeded in securing a buyer for rupees one lakh, the agent would be paid a sum of rupees one thousand as remuneration. In the concluding part of the note a scale of commission proportionate to the price was promised in case a price higher than rupees one lakh was secured. In express words the note stipulated that if the price exceeded rupees one lakh five thousand but did not exceed rupees one lakh ten thousand, the principal would pay the whole of the excess over rupees one lakh five thousand in addition to the remuneration of rupees one thousand. It further provided that if a buyer was secured at a price exceeding rupees one lakh ten thousand, the agent would be paid twenty-five per cent of the excess amount over rupees one lakh ten thousand in addition to rupees six thousand. The authority of the agent was limited to a period of one month. In the judge’s opinion, the terms of the note relating to the property being free from encumbrances and the guarantee concerning title indicated that the agent was given authority to make a binding contract. In a bare authority that merely conferred power on a broker to introduce a customer, such stipulations would ordinarily not appear. The words “to negotiate a sale”, standing alone, might not authorize an agent to conclude a contract of sale, but here they were immediately followed by two important conditions previously noted. The agreement further laid down that if the broker succeeded in securing a buyer, the broker would receive a specified remuneration. Gentle J. had observed that the word “securing” in this context meant “obtaining a buyer”. I

The learned judge consulted the same dictionary as the earlier judge and found that the expression “securing a buyer” means “to obtain a buyer firmly”. In a commercial context a buyer cannot be said to be secured firmly unless the buyer is bound by an offer that has been accepted. If the offer has not been accepted, the buyer remains free to withdraw it at any time, and therefore the buyer cannot be regarded as secured in the strict sense. The word “secure” does not carry the same meaning as “find” or “procure”; it conveys a sense of safety and certainty. A buyer is “secured” only when he is bound by his offer, and such binding occurs only upon acceptance. Consequently, an agent could secure a buyer in the strict sense of the term only if the agent possessed authority to enter into a binding contract of sale. Moreover, when the term “buyer” is used strictly it denotes a person who has actually completed the purchase. Thus, the authority granted to an agent to “secure a buyer” necessarily includes the power to execute a binding sale contract with that buyer. Without such authority, it would be impossible to secure a buyer in this sense.

The judge further supported this interpretation by examining the language of the commission clause in the agreement. The clause stipulated that when the secured price exceeded Rs 1,10,000, the broker was entitled to twenty-five per cent of the excess amount. The concept of an “excess” over a price for the purpose of calculating commission presupposes that the agent has been given authority to consummate a sale contract; otherwise, there would be no excess to calculate. If the agent’s authority were limited merely to introducing a ready, able, and willing customer, with the principal retaining the option to accept or reject the offer, the agreement would have been drafted in different terms. The subsequent conduct of both parties strongly corroborated the view that the agent was expected to secure a buyer in the strict sense. The evidence of conduct is relevant because, as observed by Viscount Simon in a previously cited case, the phrase “finding a purchaser” is itself ambiguous, and the phrase “securing a purchaser” is similarly ambiguous. The parties’ actions, taken shortly after the agreement, indicate how they understood the words and therefore help determine the true effect of the contract. Extrinsic evidence may be admitted to resolve doubts about the instrument’s meaning, and the acts performed under it serve as a guide to the parties’ intention, as noted in the cited authority.

Regarding the conduct of the agent, the record showed that he had accepted the offer and, using his own signature, had dispatched a letter of acceptance to the purchasers. In a separate letter addressed to his principal, the agent expressly referred to the authority that had been vested in him. The correspondence cited above demonstrated that both the purchasers and the agent were of the opinion that a contract had been concluded. This understanding was communicated to the vendor, who, although he remained silent, did not object to the contract that the agent had purportedly created. The vendor’s silence, given the circumstances, was treated as having the same effect as an explicit affirmation. The vendor never repudiated the contract that the agent had concluded, but thereafter, without the vendor’s knowledge, entered into a new contract with the same individuals who had been secured by the agent, doing so in a manner that was clearly superjacent to the earlier agreement. In the trial, the vendor’s demeanor in the witness box was described as dishonest and untruthful, and the learned trial judge pronounced him a liar, a finding that the judge considered to be correct.

The vendor asserted that he knew nothing of the subsequent contract of sale and placed the entire blame upon his son. When questioned about the sale price stated in the contract dated 9 June 1943, he replied that he was unaware of the amount and that he had only signed the deed because his son had asked him to do so, and that was the extent of his knowledge. Confronted with the sale deed, he claimed ignorance of what his son had told him regarding its contents, and he also stated that he did not know what consideration, if any, had been paid to him for the sale. He further professed that he could not say whether the sale price had been deposited in his bank account or recorded in his account books. After extensive pre-varication, he was compelled to accept the document dated 5 May 1948 and its terms. He admitted that on 3 June he had a conversation with the purchasers, during which they informed him that they had reached an agreement with a broker, and that the broker had misled them concerning the commission, leading them to decide not to purchase the house. He acknowledged receiving the letter sent by the plaintiff but offered no explanation for his failure to reply. With considerable difficulty, he accepted that his signature appeared on the postal acknowledgment confirming receipt of a letter from the broker that informed him of the concluded bargain with the purchasers, and he admitted that the letter had indeed come from the broker. He also acknowledged that he had raised no objection to the broker’s letter before Kishoribabu informed him about a two percent commission. In subsequent cross-examination, he conceded that the statements made by the broker in the letter dated 2 June were correct. The entirety of the defendant’s testimony consisted of evasive statements, and his final recourse was to invoke lapses of memory. The deposition made clear that his evidence was unreliable and lacking in substance.

The respondent had accepted the contract that the agent prepared and was firmly convinced that the agent had not acted beyond the authority granted to him in concluding a binding agreement with the purchasers. Accordingly, the Court held that the authority conferred on the agent in the present matter expressly included the power to execute a binding sale contract, and because the agent exercised that power, he was rightfully entitled to receive his commission of Rs 6,000. By contrast, the learned single judge and the learned judges of the Court of Appeal had reached a different conclusion on this point, relying on several English decisions and on a decision of a division bench of the Calcutta High Court. The Court expressed the view that none of those authorities were applicable to the facts of the present case, emphasizing that an interpretation based on one document cannot be imposed on another document unless the wording of the two documents is identical. In support of this approach, the Court referred to the decision in Hamer v. Sharp, where Sir Charles Hall, V.C., examined the nature of an agent’s authority when appointed by the owner of an estate. The document in that case read as follows: “I request you to procure a purchaser for the following free-hold property, and to insert particulars of the same in your Monthly Estate Circular till further notice, viz., my beer house and shop No 4 and No 6 Manchester Road, Tenant No 4, William Galloway, gilder, and No 6, Albert Vaults, Henry Holmes, beer retailer, and work rooms above. Present net rent, pound 150, price pound 2,800, when I will pay you a commission and expenses of fifty pounds. About six years’ lease unexpired.” The Vice-Chancellor observed that the crucial question was whether an estate owner, by handing the property to an estate agent for sale, providing a price and property particulars but giving no explicit instructions concerning the absolute disposal, the title of the property, or any special conditions to be inserted in the contract, had supplied sufficient authority for the agent to sign a sale contract at the stipulated price without addressing title provisions. He further expressed the opinion that granting such an authority would be highly imprudent, because the purchaser would, on completion, be entitled to demand attested copies of all title documents, and the cost of obtaining those documents could substantially erode the purchase price. The Vice-Chancellor noted that a prudent agent should have recognised that, had the property been offered for sale by public auction, appropriate safeguards would have been required to protect the vendor from expenses and from a contract failing due to the purchaser’s demand for a strictly marketable title.

In that earlier case the court observed that there were conditions intended to protect the vendor from certain expenses and to stop the contract from failing because a purchaser might demand a strictly marketable title. The court questioned whether the agent could assume that he possessed authority to execute a contract without first considering what the contract should contain regarding title. It held that an intelligent and well-informed agent could not claim to be properly fulfilling his duty to his principal by signing such a document, because the contract signed was not within the scope of the authority granted to him. Consequently, the decision rested on the interpretation of the document itself, and the court remarked that, given the circumstances, it was unnecessary to determine precisely which words would convey such authority. Nonetheless, the learned Vice-Chancellor expressed his view that when a principal instructs an agent merely to locate a purchaser of land, and does not give instructions about the conditions to be incorporated in the contract concerning title, the agent lacks authority to sign a contract on the vendor’s behalf. The court further noted that the earlier case could not be treated as a binding authority for construing the agreement under consideration, emphasizing that the prior decision highlighted the absence of any instructions regarding title-related conditions. By contrast, in the present matter the agent received explicit directions that the principal guaranteed a marketable title and that the sale must be free of encumbrances; thus all material conditions of the sale were incorporated in the agreement. The judgment then turned to another precedent heavily relied upon by the lower courts, namely Chadburn v. Moore. In that case an advertisement appeared in the Daily Telegraph stating: “Forced sale by order of the mortgagees—thirty-four well-built houses, situated at Grays, close to the station on the London, Tilbury, and Southend Railway, within easy reach of the docks, all let to respectable tenants at rents amounting to pound 620 per annum. Held for about ninety-five years at ground rents amounting to pound 146; price pound 3500, of which pound 3000 can remain on mortgage. For further particulars apply to Messrs. Pinder, Simpson and Newman, 33 and 34, Savilerow, London, W.” The plaintiff, James Chadburn, responded to this advertisement by contacting the firm of Messrs. Pinder, Simpson and Newman, a group of surveyors and estate agents, to obtain additional information. After inspecting the houses, he returned and made a written offer to purchase them. Evidence showed that the offer was to be transmitted by Mr. Newman to his client, the defendant, and that the plaintiff was to await an answer the following day. Mr. Newman then met with the defendant, who provided him with further instructions.

In the course of the proceedings it was established that the defendant had instructed the agents to withdraw five of the houses and had fixed a price for the remaining property, but, according to the evidence adduced at trial, the defendant had not given Newman any instruction to enter into a legally binding contract. Subsequently the plaintiff visited Messrs Pinder, Simpson and Newman, and a pair of letters was exchanged between the plaintiff and the agents. Those letters constituted an offer and an acceptance concerning the twenty-nine houses situated at Grays. The defendant then forwarded the offer and the acceptance to the estate agents. Upon receipt of the offer the defendant wrote a letter, part of which read: “I think you were, as you usually are, a little premature in actually entering into what might be a binding contract. It is always best to have an offer and acceptance subject to a formal contract being entered into…”. In reply Newman wrote: “The offer for the above was accepted under your definite instructions and is a very good get out for you.” The case was decided by Justice Kekewich, whose judgment began by stating that, after hearing Mr Newman—who had been called without the plaintiff knowing what he would say—and after reviewing the correspondence, he was convinced that the matter before him was a simple transaction between a principal and his agent. He noted that although the cross-examination of Mr Moore might have coloured the issues, such examination had not been undertaken, and therefore judgment could be entered on the point of law. Justice Kekewich observed that Mr Moore had unquestionably authorised Newman to locate a purchaser for the houses, even though that specific phrase did not appear in the written correspondence. On the second occasion Newman appeared to have been instructed to negotiate a sale, but the judge held that Moore had not, in express terms, authorised Newman to bind the principal by entering into a contract. The function assigned to Newman was to find a purchaser and to negotiate the terms of sale. The judge asked whether that limited authority was sufficient. He found that no evidence was offered to demonstrate any customary practice that would permit an estate agent to conclude a contract on behalf of the principal, nor was any evidence presented to show that a house or estate agent occupies the same position as a broker on a stock exchange or any other market. He explained that a house or estate agent occupies a different position because the property dealt with is unique; unlike shares, it cannot be transferred by a simple instrument but requires a detailed investigation of title and compliance with strict statutory formalities. Consequently, an agent engaged for the sale of real estate must be constituted more formally than an agent dealing in securities of a comparable nature. The judgment observed that there is no definitive authority on the precise scope of an estate agent’s power. While Hamer v Sharp, reported in 19 Eq. 108, noted that an estate agent is not precluded from entering any contract, that case does not resolve the question of authority but merely expresses the court’s opinion. Justice Kekewich therefore referred to Prior v Moore, in which he had previously expressed the view that an instruction to a house agent to procure a purchaser and to negotiate a sale does not, by itself, confer authority to bind the principal by contract.

In the judgment it was observed that a mere sale does not automatically give an agent the authority to bind the principal by a contract. The Court emphasized that one must not overlook the circumstance in the cited case of Moore, where, on a second occasion, Moore informed Newman of the price he was prepared to accept for twenty-nine houses. Newman immediately assumed that he possessed the power to enter into a contract at that price. The Court held that such an assumption was insufficient; unless the principal grants express authority to the agent to sell and to enter into a binding contract for that purpose, the principal retains the ultimate right to accept or reject any proposed sale. The Court further noted that in the present matter there was no written agreement between the principal and the agent. From the correspondence it was inferred that the principal had instructed the agent merely to “find a purchaser” or to “negotiate a sale.” The Court found that, within those words, an authority to sell could not be derived. Moreover, the language of the document under consideration differed, and the evidence concerning the parties’ conduct was materially different from the earlier case. Consequently, the observations of the learned Judge were to be confined to the facts he had found. While the expressions “find a purchaser,” “procure a purchaser,” and “negotiate a sale” by themselves may not be enough to confer authority on an agent to execute a binding contract on behalf of the principal, the Court concluded that, in the present case, the words used implied such authority by necessary implication.

The Court then turned to the decision in Durga Charan Mitra v. Rajendra Narain Sinha, a Bench decision of the Calcutta High Court, noting the considerable similarity between the document in that case and the document in the present case. The earlier document read in part: “I hereby authorize you to negotiate the sale of the lands at Tolligunge which I have recently purchased from Messrs Martin and Co. If you can secure a purchaser to purchase the same at the gross value of Rs. 16,000, I shall pay you Rs. 200 as your remuneration. If you are able to raise the price above Rs. 16,000, you will be entitled to the excess amount fully and I shall be bound to mention the whole amount in the conveyance. Please note that this letter of authority will remain in force for a fortnight only to complete the transaction; after that this letter will stand cancelled.” Acting under this authority, the agent sold the property. Upon receipt of the letter, the vendor informed the agent that he would not sell the land, yet the agent’s acceptance led to a suit for specific performance. Sir Asutosh Mookerjee, delivering the judgment of that Bench, referred to the authorities Hamer v. Sharp, Prior v. Moore, Chadburn v. Moore, and also Rosenbaum v. Belson, and indicated the relevance of those cases to the question of whether an estate or house agent, even when authorized to procure a purchaser, possesses implied authority to conclude a binding contract of sale.

It was observed that the law is well settled that an estate or house-agent who is authorised merely to procure a purchaser does not possess an implied power to conclude an open contract of sale, because the transaction contemplated by the letter of authority is limited to the act of negotiating a sale after a purchaser has been secured. Although the wording used in the present letter of authority resembles the language of the earlier letter discussed, the two documents, when read in their entirety, were drafted with different intentions and therefore produce distinct legal effects. The earlier letter made no reference to any guarantee by the vendor that the title would be clear, nor did it assure that the sale would be free of encumbrances, and no surrounding circumstances or conduct of the parties were placed on record. By contrast, the plaintiff, who was himself a solicitor, recognised the difficulties inherent in his position and attempted to reshape the basis of his claim. He admitted that, as a broker, he lacked authority to sell the property and that he could not have executed a conveyance of the plot. The attitude adopted by the parties in the present matter was, as already noted, wholly different from that in the earlier case. The learned judge also referred to the decision in Rosenbaum v. Belson, observing that a substantial distinction exists between the expressions “authorising a man to sell” and “authorising him to find a purchaser.” The former confers the power to conclude a sale, whereas the latter merely requires the agent to locate a willing buyer, without granting the authority to complete the purchase on the vendor’s behalf.

In the case of Saunders v. Dence, Field J distinguished the earlier authority of Hamer v. Sharp, stating that when a property owner tells an estate agent that a price and certain conditions have been fixed and instructs the agent merely to find a purchaser, such instructions are insufficient to empower the agent to make a contract that is devoid of any conditions concerning the title. No authority could be found wherein instructions given by a vendor to sell his house, together with an agreement to accept a specified purchase price, were held not to constitute an authority to execute a binding contract, including the power to sign the agreement. Accordingly, considering the terms of the instrument at issue and the relevant evidence, the proper conclusion was that the agent possessed authority to enter into a binding contract with the purchaser.

In this case the Court observed that the agent had indeed dealt with the purchaser and that, by doing so, the agent was entitled to succeed in the claim for commission. The Court referred to the authority of Wragg v. Lovett (4), in which Lord Greene, M.R., expressed the principle that the question is whether the agents were authorised, or, in legal terminology, reasonably understood to be authorised, to make the particular contract. The judgment in that case held that the proper inference from the totality of the facts was that the defendant was satisfied to permit his agents to enter into whatever contract they deemed appropriate, provided they obtained from the plaintiff a clear statement of his intention to remain in the house. The Court emphasized that the answer to the issue of authority depends on the facts relevant to each individual case. While authority to bind a principal should not be inferred lightly from vague or ambiguous language, it must be founded on substantial grounds. However, the Court clarified that this does not require the contract to contain express words stating that the agent is authorised to sell the property. The learned Chief Justice, whose judgment was under appeal, had observed that “the agent had undertaken to negotiate a sale and secure a buyer. He could not be said to have either secured a buyer or negotiated a sale unless a sale actually took place or at least a contract of sale had been entered into.” The Court interpreted this observation to mean that the note’s true implication was that the agent possessed authority to enter into a binding contract, because without such authority the agent could not have secured a buyer.

The Court further considered the learned Chief Justice’s reference to Rosenbaum v. Belson (1), where it was held that authorising a person to sell confers the authority to conclude the sale, whereas authorising a person merely to find a purchaser imposes a lesser duty – namely, to locate an individual willing to become a purchaser, without the authority to finalize the purchase on the principal’s behalf. The Court concluded that if the agent’s duty was limited to finding a purchaser, the agent had nonetheless performed that duty and was therefore entitled to his commission. Consequently, the Court was of the opinion that the plaintiff, acting as the agent, possessed authority to enter into a binding contract on behalf of the defendant, had actually entered into such a contract, and consequently earned the commission claimed in the suit. Accordingly, the plaintiff was entitled to a decree for the sum of Rs 6,000, the amount awarded by the trial Judge, together with all costs. Even assuming, for the sake of argument, that the Court’s construction of the agreement between principal and agent was erroneous, the remaining question would be whether the appellate decision could still be maintained; however, the Court found that the trial Judge’s construction was correct and that the appellate court had erred by assigning excessive weight to obiter remarks of Lord Russell of Killowen and Lord Romer in Luxor (Eastbourne) Ltd. v. Coopers (1).

The Court examined whether the appeal could be sustained and was inclined to hold that, even if the trial Judge’s construction of the commission note were accepted, the trial Judge’s view was correct and the appellate court had erred by attaching excessive weight to certain obiter observations of Lord Russell of Killowen and Lord Romer in Luxor (Eastbourne) Ltd. v. Cooper. In that earlier case Viscount Simon LC had explained that there were at least three distinct classes of cases in which a right to commission might arise. He described the first class in these terms: “There is the class in which the agent is promised a commission by his principal if he succeeds in introducing to his principal a person who makes an adequate offer, usually an offer of not less than the stipulated amount. If that is all that is needed in order to earn his reward, it is obvious that he is entitled to be paid when this has been done, whether this principal accepts the offer and carries through the bargain or not. No implied term is needed to secure this result.” The Court concluded that the present dispute fell within that first class, so that the agent’s commission became payable upon the introduction of a willing buyer to the principal.

The Court then referred to the decision in Burcheil v. Cowrie & Blockhouse Collieries Ltd., where the Privy Council observed that when an agent brings a person into relationship with his principal as an intending purchaser, the agent has performed the most effective, and possibly the most labour-intensive and costly, part of his work. If the principal later exploits that work and, without the agent’s knowledge, sells to the purchaser on terms that the agent had previously advised the principal not to accept, the agent’s act may still be the effective cause of the sale, and there is no real distinction between that situation and one in which the principal sells to the introduced purchaser at a price below the limit set for the agent. The Court further cited Inchbald v. Western Neilgherry Coffee etc. Co., where Willes J. articulated the rule that whenever money is to be paid by one person to another upon a specified event, the party obligated to pay is liable to the party entitled to receive the money if that latter party performs any act that prevents or makes it less probable that the money will be received. The Court noted that Story on Agency, page 404, expressed the principle in the following terms: “The general rule of law, as to commissions, undoubtedly is, that the whole service or duty must be performed, before the right to any commissions attaches, either ordinary or extraordinary; for an agent must complete the thing required of him, before he is entitled to charge for it.”

The Court explained that an agent became entitled to any commission, whether ordinary or extraordinary, only after completing the task assigned to him. In transactions involving real-estate brokers, it was well settled that the broker earned his commission once he had found a purchaser, even if the principal himself conducted and concluded the negotiations, and also where the sale failed to close because of a defect in title for which the brokers bore no fault. Accordingly, the Court held that Gentle J. was correct in interpreting the instrument to mean that the plaintiff had earned his full commission because he had secured a buyer who was ready, able and willing to purchase the property for one lakh ten thousand rupees. The Court further observed that if the term “buyer” were read strictly, the broker would have needed authority to secure a buyer of that exact description and would have been required to conclude a binding contract with that buyer, as noted in the citation (1) 17 C.B. (N.S.) 733. Conversely, if “buyer” were understood to denote a prospective buyer, the mere securing of such a prospective purchaser sufficed to give the agent a right to the promised commission. The Court then turned to the case of Luxor (Eastbourne) Ltd. v. Cooper, examining observations of Lord Russell of Killowen and Lord Romer that underpinned the learned Chief Justice’s decision. In that case, no written commission note was addressed to the broker and the alleged contract was not documented; the agreement was proved only by oral evidence, and its terms had to be inferred from that evidence. Viscount Simon, drawing from the materials available to reconstruct the express contract, concluded that the bargain stipulated that if a party introduced by the respondent bought the cinemas for at least £185,000, each of the two appellants would pay the respondent £5,000 upon completion of the sale. Because no such sale occurred, the Court held that nothing was owed to the respondent under the express bargain. The respondent subsequently argued that the proposed purchasers, introduced by the respondent, remained willing and able to buy the properties at the stipulated minimum price, and that the appellants’ failure to close the deal amounted to a breach of an implied term of the commission contract. The claim asserted that the implied term required the appellants “to do nothing to prevent the satisfactory completion of the transaction so as to deprive the respondent of the agreed commission.” The alleged breach, as pleaded, was the failure to

The Court observed that the appellant had failed to complete the sale contract with the respondent’s client and had disposed of the subject-matter in a different quarter. The Lord Chancellor expressed the view that inserting the alleged implied term into this agreement was unnecessary. He noted that, in contracts with commission agents, an implied term may be introduced only when it is indispensable for giving the contract the business effect intended by both parties. Citing the case reported in 1941 A.C. 108, the Court explained that such an implied term must be required to achieve the parties’ intended commercial purpose. Lord Russell of Killowen further explained that the plaintiff’s sole entitlement was to receive his commission from the purchase money when, and if, that money was actually received. This entitlement was purely contingent. He emphasized that the plaintiff stood to earn a substantial sum for relatively modest effort, while assuming the risk that either party might withdraw from negotiations before any binding contract of sale and purchase was formed, or that the contract might not be completed for any reason. In light of this analysis, the Court concluded that the action was bound to fail and there was no necessity to decide on the correctness of the Court of Appeal’s judgment in Trolope & Sons v. Martyn Brothers (1).

The Court then remarked that the extensive discussion of commission contracts allowed it to reach concise conclusions, free from any constraint of earlier decisions. It made several observations. First, it found no safe basis for imposing any such implied term because implied terms can be justified only by a compelling necessity, which was absent in the present case. The agent’s contract promised a commission if he introduced a purchaser at a specified or minimum price, while the owner merely wished to sell. The likelihood of the transaction succeeding was high once a purchaser was introduced, and the agent assumed the risk in expectation of substantial remuneration for comparatively little effort. The plaintiff’s contract dated 23 September 1935, and the client’s offer was made on 2 October 1935. A commission of £10,000—an amount comparable to a year’s remuneration for a Lord Chancellor—earned within eight or nine days represented a considerable reward and a reasonable risk. The Court held that there was no deficiency of business efficacy in such a contract, even though the principal retained the freedom to refuse to sell to the agent’s client. However, the Court noted that the situation would differ if a binding contract between the principal and the agent’s client had already been concluded; in that circumstance it would be true to say that a “purchaser” had been introduced by the agent, and the agent’s right to commission would be vested and could not be defeated by any subsequent act or omission of the principal (see 1934 2 K.B. 436).

In this matter the Court noted that once the agent has introduced a purchaser, the event that triggers the agent’s entitlement to the agreed commission has occurred, and from that moment the agent’s right to that commission is vested and cannot be taken away by any act or omission of the principal. The Court explained that the observations quoted immediately before this statement formed the foundation of the learned Chief Justice’s decision in the present case. It was further observed that those earlier comments referred specifically to cases cited by Lord Russell of Killowen and were tied to the particular facts of those cases; consequently, they could not be extended to all situations in which the terms “purchaser” or “buyer” are employed loosely or in a different context. The Court then turned to the opinion of Lord Romer, reproducing his remarks in full. Lord Romer began by supposing that a contract obliging one person to pay another a sum of money upon the performance of an unsolicited service is subject to an implied condition, similar to a contract of employment, and that such a condition generally imposes only a negative obligation on the payer. He illustrated this by saying that if he hires a man to build a house on his land, he is under an implied condition not to impede the work, but he has no positive duty to provide building materials or otherwise assist the worker in earning the reward. He qualified his view by pointing out that exceptional cases exist where the employer does have a positive obligation, for example when an artist is hired to paint a portrait and the patron must provide the necessary sittings. Lord Romer then framed the specific question for determination: when a property owner engages an agent to find a purchaser—understood to mean at least a person who will enter into a binding purchase contract—whether an implied term exists in the agency contract that obliges the principal, after the agent has introduced a ready, willing and able buyer at a price approved by the principal, to enter into a sale contract with that buyer, subject only to a qualification that the principal may refuse if he has just cause or a reasonable excuse. He emphasized that such a qualification must be expressly added, noting that the respondent does not argue, and no party could successfully argue, that the principal’s duty to contract is unconditional. Relying on this latter portion of Lord Romer’s statement, the learned Chief Justice concluded that, because the agent’s duty in the present case was to secure a purchaser, the purchaser could not be said to have been secured until a sale contract was actually concluded between the vendor and the purchaser.

In the case at hand, the vendor entered into a sale with the plaintiff for a consideration of Rs 1,05,000, and consequently the plaintiff could claim his commission only on the basis of that actual sale price and not on the basis of the higher offer that the plaintiff had earlier secured. The Court observed that when Lord Romer defined a “purchaser” in such agency contracts as at least a person who enters into a binding contract to buy, he was speaking of the contract that ultimately materialised in the transaction, rather than of any tentative or loose usage of the term in commission notes. The Court was free to consider that Lord Romer did not intend to give the word “buyer” or “purchaser” a loose, non-binding meaning. In the earlier decision of Jones v. Lowe, in which the instrument stated, “In the event of my introducing a purchaser, I shall look to you for the payment of the usual commission in accordance with the scale fixed by the Auctioneers and Estate Agents Institute,” Hilbery J. remarked that, if he were not bound by authority, he would have found strong grounds for holding that every house owner who wishes to sell expects the agent to bring the property to the attention of prospective buyers and to endeavour to persuade one of them to purchase it. The learned judge further explained that where an agent introduces a person who is fully willing to proceed with the purchase at a price acceptable to the vendor, the agent has performed the whole of what the parties contemplated; the parties did not intend that the agent should be involved in the actual completion of the transaction. The agent’s role is to locate a person who will pay the asked price, and the contract is based on the assumption that the person found will become the eventual buyer. The Court found it difficult to accept that an agent who has fully performed the task contemplated by the parties could be denied the right to say, “I have done what I contracted to do because I introduced someone willing to purchase, even though that person did not ultimately become the actual purchaser.” However, the Court also stated that it could not impose that construction on the words of the contract in the present case, because the observations of the House of Lords, particularly those of Lord Russell of Killowen and Lord Romer in Luxor (Eastbourne) Ltd. v. Cooper, clearly indicated that when an agent is employed to introduce a purchaser for a house, the agent’s entitlement to commission depends on the purchaser having entered into a binding and legal contract before the house is withdrawn from the market.

In the earlier authority, the Court observed that when a house is withdrawn from the market, an agent who has not secured a buyer cannot claim that he has earned his commission. In a subsequent decision, E.H. Bennett v. Millet (2), the same judge was called upon to interpret a contractual clause that read: “We confirm that in the event of our introducing a purchaser who is able and willing to complete the transaction, our commission will be in accordance with the recognised scale…”. The plaintiffs had introduced a prospective buyer, and the trial court found that this individual was at all times both capable of purchasing and willing to do so, although the defendant later refused to consummate the sale. The defendant contended that the term “purchaser” in the plaintiffs’ letter was redundant and that the contract required the introduction of a person who actually completed the purchase before any commission could arise. The Court rejected that argument, holding that the phrase “a purchaser who is able and willing to complete the transaction” did not demand that the person ultimately acquire the property; rather, it meant a person who was prepared to buy at the seller’s price. Because the estate agents had identified such a person, they were entitled to their commission. The judge further explained that in ordinary language the word “purchaser” is not confined to someone who ultimately closes the transaction. Consequently, the alternative construction adopted by the two lower courts, which read the word “purchaser” in a strict sense as in Luxor, was inappropriate; the term should be understood in its loose, common-law usage, and the appealed decision could not be upheld. Counsel for the appellant referred to several Indian decisions in which the expressions “buyer” and “purchaser” were given a broader meaning, and where “lender” and “borrower” were interpreted as “potential lender” and “potential borrower”. The judge deemed it unnecessary to analyse all of those authorities, noting that such discussion would not advance the matter further. Likewise, the judge found it unnecessary to address the third contention raised by counsel for the appellant. For the reasons set out above, the judgment agreed with the conclusion expressed by Patanjali Sastri in his earlier opinion, and ordered that the appeal be allowed with costs throughout. The appeal was therefore allowed. Agent for the appellant: S.P. Varma. Agent for the respondent: Sukumar Ghose. (1) [1941] A.C. 108.