Andrews, Wished to Sell His Home and Contacted Theo, One

Essay

Andrews, wished to sell his home and contacted Theo, one of the real estate agents associated with a busy local brokerage. Theo came to the home in order to prepare a specification sheet of the home's features, to take some photographs and to enter into a listing agreement with Andrews. The listing agreement provided that:
"In consideration of your listing and agreeing to offer my property for sale, I hereby give you sole and exclusive authority to sell my said property at the price of $189,000 and upon the terms particularly set out below or at such other price or terms to which I may agree. I further agree to pay you a commission of 6% of the sale price."
Theo held numerous open houses at Andrews' home and generated considerable interest among prospective buyers. Within a short period of time an acceptable agreement of purchase and sale for the home was entered into by Andrews with a purchaser. That agreement contained the following provision:
"THE UNDERSIGNED (Andrews) accepts the above offer and agrees with the Agent above named (Theo) in consideration for his services in procuring the said Offer, to pay him on completion of the sale, a commission of 6% of the sale price which commission may be deducted from the deposit. I hereby irrevocably instruct my solicitor to pay direct to the Agent any unpaid balance of commission from the proceeds."
On the day of closing, Andrews' solicitor received a certified cheque in the full amount from the purchaser. Before the solicitor disbursed the funds, Andrews instructed him not to honour the direction in the agreement of purchase and sale to pay directly to the agent any unpaid commission from the proceeds. The solicitor complied with Andrews' instructions and did not pay the funds to the agent.
What legal issues are raised in this situation and what are the rights and liabilities, if any, of the parties involved?
D.L.R. (4^th) 762, this case deals with the rights of third-party beneficiaries to a contract. The agreement of purchase and sale in which the vendor directed his solicitor to pay the agent's commission directly may not be enforced by the agent. The vendor and solicitor are protected against any action taken by the agent to enforce the provision under the concept of privity of contract. The agent is merely a third party to that agreement upon whom a benefit is purportedly conferred. Thus, the agent who is not a party to the contract may not enforce its performance. Moreover, the promise or benefit to the agent under this agreement is merely gratuitous. There was no new or additional consideration flowing from the agent to the vendor for the inclusion of the irrevocable direction to the solicitor. In addition, the provisions of the purchase and sale agreement add nothing to the already existing obligation of the vendor to pay the agent's commission under the separate listing agreement, which is the governing agreement between vendor and agent. Thus, any argument by the agent that the terms of the agreement of purchase and sale essentially constitute a constructive trust for his benefit may be refuted by the vendor on the grounds that the agent is already entitled to the commission. On this basis the vendor is free at law to withdraw his direction to the solicitor without incurring further liability to the agent. He is still liable for payment of the commission but cannot be compelled to effect direct payment by his solicitor from the proceeds.