Estate agents are free to set their own fees, which is why prices "including agency fees" may vary from one advertisement to another. While it is advisable to check in advance that the estate agency charges the lowest commission, it may happen that after visiting a property, the buyer discovers it is being offered at a lower price by another agency with a more attractive pricing policy.
The question is therefore whether, after viewing a house or flat with a first estate agent, the potential buyer can conclude the purchase agreement with a second agency offering lower fees.
We will see below that, in this case, the seller may have to pay compensation, even if there has been no fraudulent manoeuvre, unless there is no penalty clause in the mandate or the clause does not accurately reflect the situation in question.
We will therefore look first at the case law to see that compensation is payable to the first agency, and then at the second stage to see that compensation is payable provided that the situation is explicitly sanctioned by a penalty clause in the agency agreement.
Compensation payable to the first agency
According to the principle of free competition, this was entirely possible and without risk for the parties, provided that no fraudulent manoeuvre had been carried out with the aim of evading the rights of the first agency.
However, a ruling by the Court of Cassation on 6 October 2011 has put an end to this legal position (see the ruling of 6 October 2011).
According to this ruling, although the first agency to be ousted can no longer claim its fees, it can still receive compensation if a penalty clause provided for this in the sales mandate. In this case, the mandate stipulated that"during the term of this mandate and its renewals, as well as during the 18 months following its expiry or termination, the principal undertakes not to deal directly or through another agent with a buyer to whom the property has been presented by the agent or a substitute agent. In the event of failure to comply with this clause, the agent will be entitled to a fixed indemnity, payable by the principal, the amount of which will be equal to that of the agent's remuneration, inclusive of all taxes, provided for in this mandate".
In the absence of such a penalty clause, compensation would still be possible, but only if fraud is proven.
If the sale mandate includes a penalty clause as described above, the principal will have to compensate the agency that is ousted. In this way, the first agency will be compensated for the penalty clause and the second will keep the agency fees.
This position is based on article 1134 of the French Civil Code, which states that "legally formed agreements take the place of the law for those who have made them (...)".
In addition, in a decision dated 20 October 2011, the Cour de cassation ruled that it would not be possible to block the first agency's penalty clause on the grounds that the terms of the sale actually concluded via the second intermediary differed from those of the sale mandate, particularly in terms of the net selling price.
Need for a situation explicitly sanctioned by the penalty clause
While the case law allows the first agency to be evicted to obtain compensation under the mandate, it should also be noted that the penalty clause should not be interpreted beyond what it literally provides. For example, a penalty clause providing for compensation only in the event that the principal deals directly with a prospective buyer to whom the agency has shown the property could not apply if the negotiations were carried out by another agency. With such an incomplete clause, a potential buyer could make a second visit to another agency, which would offer the same property for sale at a more advantageous price, without the first agency being able to claim compensation (unless it could prove fraudulent manoeuvring).
The Douai Court of Appeal agrees in a ruling dated 26 November 2012:
"Whereas the mandate, which is the law of the parties, stipulates that the principal undertakes not to deal directly with a buyer who has been introduced by the agent or who has visited the premises with the agent for the duration of the mandate of three months, extended unless terminated for a maximum of twelve months, and for a period of six months following its expiry ;
Whereas it is undisputed that X sarl showed Mr Y the property on 12 February 2010, i.e. during the initial term of the mandate; whereas the principal, noting that the agent had advertised the property on 23 February 2010 at a price of 179.000, which did not correspond to the agreed price, terminated the mandate on the same day; although X sarl agreed to this termination during the initial three-month period, the fact remained that the principal was still bound by the prohibition on contracting directly with the prospective buyer to whom the intermediary had shown the property;
Whereas the contractually stipulated penalty clause provides that in the event of non-compliance with the obligations set out in paragraphs a, b or c, the principal expressly undertakes to pay the agent, pursuant to articles 1142 and 1152 of the Civil Code, a fixed compensatory indemnity equal to the amount of the remuneration;
Whereas only paragraph c of this clause is relevant to the present dispute; it reads as follows :
The principal "shall refrain, during the term of the mandate and during the period following its expiry..., from dealing directly with a purchaser who has been introduced by the agent or who has visited the premises with him";
Whereas the following paragraph relating to the obligations of the principal stipulates that after expiry of the mandate, and in cases where the property is still available for sale, the principal will once again be able to search for a buyer himself, and that during the period following expiry of the mandate, in the event of a sale made by himself or by another firm, he undertakes to inform the agent immediately ; however, this hypothesis is not included in the paragraph relating to cases of application of the penalty clause and is therefore not penalised in the event of non-compliance by the payment of compensation to the agent;".
Lastly, under the terms of article 78 of decree no. 72-678 of 20 July 1972, where an agency agreement includes a penalty clause or a clause under which a commission is payable by the principal, even if the transaction is arranged without the intermediary's involvement, this clause may only be applied if it results from an express stipulation in the agency agreement, a copy of which has been given to the principal.
The Agen Court of Appeal reiterates this principle in a ruling dated 16 May 2012:
"Whereas article 78 of the decree of 20 July 1972 specifies that when a mandate is accompanied by an exclusivity clause or a penalty clause or when it includes a clause under the terms of which a commission would be payable by the principal, even if the transaction is conceived without the care of the intermediary, this clause can only be applied if it results from an express stipulation of a mandate, a copy of which has been given to the principal.
It follows that the mandate had to be drawn up in two original copies;
That it follows from the letter that SARL X sent to husband and wife Y on 19 May 2009 in which it asked them to return the original copy of the power of attorney dated 18 May 2009 that :
* the date of the mandate is wrong,
* only one original copy was signed, as the certificate issued by Mr Z, who is an employee of SARL X, states that only one copy was provided;
It follows that the court was right to declare this clause null and void; moreover, SARL X does not prove that the offer to purchase that it subsequently sent to the notary was accepted by the vendors, especially as the net selling price was lower than the price received following the final sale;
The termination of the mandate by Mr and Mrs Y was carried out in accordance with the clauses of the contract on 03 September 2009, whereas the private deed between agency W and Mr and Mrs T was not signed until 07 October 2009;
(...)
Whereas, as a result, the nullity of the mandate does not entitle the estate agent to any remuneration or compensation on any grounds whatsoever, in particular pursuant to article 1382 of the French Civil Code; the judgment will be confirmed;".
On the application of a penalty clause prohibiting the seller from dealing directly or through another estate agent with a person who has already visited the property with the agent:
Cour de cassation
Civil Division 1
6th October 2011
On the second part of the single plea:
Having regard to article 1134 of the Civil Code ;
Whereas, according to the judgment under appeal, by deed dated 12 December 2005, SCI la Gaulette, represented by Mr X...gave a non-exclusive power of attorney to Sonabi Immobilier (Sonabi) to sell office premises in Villeneuve Loubet for the net sale price of 198,000 euros, the agent's fee, to be paid by the purchaser, being set at 12% of the price; a promise synallagmatique de vente de ce bien was entered into on 3 January 2006, through the intermediary of Giral Immobilier, between SCI la Gaulette and Mr Y.. Y., acting on behalf of SCI Lioric, which was in the process of being formed, the remuneration owed by the purchaser to the estate agent being set at 5,000 euros; referring to a visit that it had arranged for Mr Y. to make on 12 December 2005, of which it had informed its principal on 14 December, Sonabi summoned SCI la Gaulette and SCI Lioric, Mr Y., Mr X., Ms Danièle X. and Ms Florence X. (the X. and X. consorts) to appear before the court. (the consorts X...), former partners in SCI la Gaulette, which was wound up out of court, seeking an order that they pay the sum of 23,760 euros; the Court of Appeal dismissed his claims;
Whereas, in rejecting Sanobi's claim based on the penalty clause inserted in the mandate it had been given, the judgment states that Sanobi cannot, by virtue of the clause it invokes, prohibit its principal from contracting with one or more competing agencies during the term of the mandate, This would be contrary to the definition of a mandate without exclusivity, and the company could not therefore claim remuneration simply for having shown the property offered for sale, without showing that it was through its intermediary that the transaction was actually concluded within the meaning of article 6 of the law of 2 January 1970, and that it would have been deprived of this remuneration by a fault of the seller;
That in so ruling, by adding conditions to which the parties had not subjected the implementation of the disputed penalty clause, worded as follows: "During the term of this mandate and its renewals, as well as during the 18 months following its expiry or termination, the principal undertakes not to deal directly or through another agent with a buyer to whom the property has been presented by the agent or a substitute agent. In the event of failure to comply with this clause, the agent would be entitled to a fixed indemnity, payable by the principal, the amount of which would be equal to that of the agent's remuneration, inclusive of all taxes, provided for in this mandate", the Court of Appeal distorted the clear and precise terms of the clause;
And whereas the annulment of the second part relating to the seller's obligations consequently entails the annulment of the provisions of the judgment excluding the liability of the purchaser whose complicity was alleged;
FOR THESE REASONS
and there is no need to rule on the other complaints:
REVERSES AND ANNULS, in its entirety, the judgment of the Aix-en-Provence Court of Appeal of 7 January 2010 between the parties; consequently, leaves the case and the parties as they were before the said judgment and, for the purposes of the present judgment, refers them back to the Montpellier Court of Appeal;
Order SCI la Gaulette, in the person of its liquidator Mr X..., Mr Y..., SCI Lioric and the consorts X... to pay the costs;
Having regard to Article 700 of the French Code of Civil Procedure, orders SCI la Gaulette, represented by its liquidator Mr X..., Mr Y..., SCI Lioric and the consorts X... to pay Sonabi Immobilier the sum of 3,000 euros, and dismisses the other claims;
Holds that, at the request of the Public Prosecutor at the Cour de cassation, this judgment shall be transmitted to be transcribed in the margin or following the judgment set aside;
Thus made and judged by the Court of Cassation, First Civil Division, and delivered by the President at its public hearing on the sixth of October two thousand and eleven.
REASON APPENDIXED to this judgment
The judgment under appeal is criticised for dismissing SARL SANOBI IMMOBILIER's application for SCI GAULETTE, Mr Georges Y... and SCI LIORIC to be ordered to pay it jointly and severally the sum of 23,700 euros and for dismissing its application for the consorts X... to be ordered to pay the sums payable by SCI GAULETTE;
On the grounds that "although SCI GAULETTE was duly summoned in the person of its liquidator, Mr Armand X...who declared himself authorised to receive the document but who did not enter an appearance in that capacity, did not constitute a solicitor, so that the case will be decided by a judgment deemed to be contradictory by application of the provisions of article 474 paragraph 2 of the Code of Civil Procedure; Whereas by private deed dated 12 December 2005, SCI LA GAULETTE, represented by Mr Armand X..., gave a mandate to S. A. RL. SANOBI IMMOBILIER, for the purpose of selling office premises with a surface area of approximately 176 m2 located at 331 avenue de Docteur Julien Lefebvre in Villeneuve Loubet, for the net selling price of E198,000; Whereas this mandate was granted on a non-exclusive basis and provided for a fixed fee for the agent of 12% inclusive of tax. T. C, to be paid by the purchaser, i.e. a presentation of 221, 760 E including commission; Whereas, referring to a visit that she arranged for Mr Y... on 12 December 2005, of which she informed her principal by letter dated 14 December 2005, and relying on a clause in the mandate which reads as follows: "During the term of this mandate and its renewals, as well as during the 18 months following its expiry or termination, the principal undertakes not to deal directly or through the intermediary of another agent with a buyer to whom the property has been presented by the agent or a substitute agent. In the event of failure to comply with this clause, the agent will be entitled to a fixed indemnity, payable by the principal, the amount of which will be equal to that of the agent's remuneration, inclusive of all taxes, provided for in this mandate. "S. A. R. L. SANOBI Immobilier is seeking an order against S. C. I. LA GAULETTE on a contractual basis, and against Mr Y... on a tortious basis, for payment of the sum of E22,176 in respect of the remuneration to which it would have been entitled, since they signed the sale of the property through another agency; Whereas, by letter dated 3 January 2006, S. C. I. LA GAULETTE and Mr Y... were ordered to pay the sum of E22,176 in respect of the remuneration to which they would have been entitled, since they signed the sale of the property through another agency; Whereas, by letter dated 3 January 2006, S. C. I. LA GAULETTE and Mr Y... Whereas, in a letter dated 3 January 2006, S.C.I. LA GAULETTE informed its agent that, as the commission requested by the GIRAL IMMOBILIER SERVICES agency, to which it had also given a non-exclusive mandate to sell its property, was lower, the purchaser, S.C.I. LIORIC in the process of being formed, represented by Mr Georges Y...The buyer, the SCI LIORIC in the process of being formed, represented by Mr Georges Y..., had asked him to finalise the deal with this agent, which it was about to do in view of the commitment to purchase signed by the latter with this agency; Whereas the promise of sale was signed between Mr Y... on behalf of a SCI LIORIC in the process of being formed, and Mr Armand X... representing the S. C. I. LA GAULETTE on LA GAULETTE on 3 January 2006, through the agency GIRAL IMMOBILIER SERVICE; it is clear from the documents submitted to the court that S. C. L LA GAULETTE had given a non-exclusive mandate to this agency on 11 December 2005 for the purpose of selling the same property at the net selling price of 198,000 euros, but with a commission payable by the purchaser of 5. 000; Whereas, by virtue of the above-mentioned clause in its mandate, invoked by the appellant, the latter cannot prohibit its principal from entering into a contract with one or more competing agencies during the course of the mandate, which would be contrary to the definition of a non-exclusive mandate; That SANOBI IMMOBILIER cannot claim remuneration simply because it showed the property offered for sale, without demonstrating that it was through its intermediary that the transaction was concluded within the meaning of article 6 of the Law of 2 July 1970, and that it was deprived of this right due to a fault on the part of the seller; that in the present case, SCI GAULETTE cannot be criticised for having contracted through the estate agency whose commission was less onerous, exercising its freedom to compete with the various agencies to which it had given an exclusive mandate to find a buyer; Whereas the buyer, who was responsible for paying the agency commission, cannot be accused of wrongdoing that is prejudicial to the appellant agency as it did not allow him to receive his remuneration, since the mere fact of agreeing with the seller to contract through a less expensive professional does not constitute wrongful conduct towards the agency that showed him the property; Whereas, in these circumstances, confirming the decision, S. A. R. L. SANOBI IMMOBILIER will be dismissed of all its claims both against its principal, currently represented by its liquidator Mr X...Whereas as the respondents have not shown that the appellant acted with intent to harm them, their claim for damages for abusive and vexatious proceedings will be dismissed; whereas, on the other hand, equity requires that they benefit from the provisions of Article 700 of the Code of Civil Procedure;
On the adopted grounds that "S. A. R. L. SANOBI IMMOBILIER, an estate agency, is seeking to hold its agent, SCI LA GAULETTE, and the purchasers of the property that was the subject of the agent's mandate, Mr Georges Y... who set up SCI LIORIC, liable on the basis of the provisions of article 1382 of the Civil Code, while referring to contractual liability in the grounds of its conclusions; Whereas in order for its claim to succeed, it is up to SARL SANOBI IMMOBILIER to establish the fault of SCI LA GAULETTE, Mr Georges Y... and SCI LIORIC.. and SCI LIORIC, its loss and the link between the alleged fault and the loss suffered, it being specified that SARL SANOBI IMMOBILIER is not seeking payment of a commission but damages. Whereas, in order to reframe the debates, it should be specified that only SCI LA GAULETTE signed a mandate with SARL SANOBI IMMOBILIER and is therefore in a contractual relationship with the estate agency; that the rules of contractual liability therefore apply between them. Whereas, on the other hand, as regards Mr Georges Y... and SCI LIORIC, insofar as there is no contract binding the parties, only the rules of delictual liability apply. Whereas with regard to SCI LA GAULETTE, the agency agreement between SARL SANOBI IMMOBILIER and SCI LA GAULETTE stipulates that "during the term of the agency agreement and its renewals, as well as during the 18 months following its expiry and completion, the principal undertakes not to deal directly or through another agent with a buyer to whom the property has been presented by the agent or by a substitute agent. In the event of failure to comply with this rule, the agent would be entitled to fixed compensation, payable by the principal, equal to the amount of the remuneration inclusive of all taxes, in this case the sum of 23,764.4 euros inclusive of all taxes. But whereas, on the one hand, SARL SANOBI IMMOBILIER did not submit any visit voucher to the debates attesting that SCI LA GAULETTE had visited the disputed property through its intermediary. Whereas, moreover, SARL SANOBI IMMOBILER does not prove that SCI LA GAULETTE dealt directly with Mr Y.... On the contrary, it acknowledges that the sale was concluded through the intermediary of GIRAL IMMOBILIER SERVICES. Finally, SARL SANOBI IMMOBILIER cannot use a clause in its agency contract to prevent the principal from dealing with another estate agency, since it has only entered into a non-exclusive agency contract with the principal; Allowing an estate agency to require that no sale can be signed for a period of time (in this case at least 18 months) through an agent other than itself is tantamount to obliging the principal to contract only through this agency, i.e. to consider that this agency benefits solely from an exclusive mandate, a mandate that SCI LA GAULETTE has not signed; Therefore, SARL SANOBI IMMOBILIER's claim that SCI LA GAULETTE should be ordered to pay SARL SANOBI IMMOBILIER the sum of 23,760 euros will be dismissed. Whereas as regards Mr Y... and SCI LIORIC, S. A. R. L. SANOBI submits that they were at fault insofar as Mr Y... indicated that he had absolutely nothing to say in response to the summons delivered to him on 5/1/2006 and that he therefore clearly sought to evict him; that during Mr Y...'s visit, Mr X..., manager of SCI LA GAULETTE, was on the premises; That Mr Y... is manager of SARL FRANCK SERVICES and SCI LIORIC; That the commission paid to the estate agency is unusually low; That the manager of SARL FRANCK SERVICES and SCI LIORIC voluntarily helped SCI LA GAULETTE to breach its obligations. But whereas the fact of not responding to a summons issued by an estate agency does not lead to the conclusion that the interested party intended to evict the said estate agency. Whereas, moreover, the other arguments put forward by SARL SANOBI IMMOBILIER cannot in themselves be analysed as faults that Mr Georges Y... and SCI LIORIC; nor does SARL SANONI establish the existence of a conspiracy to deprive it of any commission; Whereas SARL SANOBI should be reminded that only the signing of an exclusive mandate by a principal could give it the right to demand that it be the only agency involved in concluding the property sale; Whereas in the present case, SANOBI only benefits from a non-exclusive mandate and S. A. RL. SANOBI that Mr Georges Y... and SCI LIORIC committed tortious acts in concluding the purchase of the property that belonged to SCI LA GAULETTE. Whereas, as a result, SARL SANOBI's claim for an order against Mr Georges Y... and SCI LIORIC to pay it the sum of 23,760 euros will be dismissed. Since no order has been made against SCI LA GAULETTE, SARL SANOBI's claim against the consorts X... in their capacity as partners in SCI LA GAULETTE cannot succeed;
Whereas, on the one hand, the agency agreement between SANOBI IMMOBILIER and SCI GAULETTE provided that during the term of the agency and any renewals thereof, the principal undertook not to deal, either directly or through another agent, with a buyer to whom the property had been presented by the agent or a substitute agent; that in the event of non-compliance with this clause, the agent is entitled to fixed compensation, payable by the principal, the amount of which is equal to the agent's remuneration, inclusive of all taxes, under this mandate; that by stating that SONABI IMMOBILIER was requesting payment of its remuneration and, as such, had to meet the conditions of Article 6 of the Law of 2 July 1970, when SONABI IMMOBILIER was only requesting payment of a fixed indemnity provided for in the agency agreement in the event of the principal's failure to perform its obligations, the Court of Appeal misapplied the terms of the dispute in breach of Article 4 of the Code of Civil Procedure;
Whereas, on the other hand, the agency contract concluded between SANOBI IMMOBILIER and SCI GAULETTE provided that during the term of the agency, the principal undertook not to deal, either directly or through another agent, with a buyer to whom the property had been presented by the agent or a substitute agent; whereas in the event of non-compliance with this clause, the agent is entitled to a fixed indemnity, payable by the principal, the amount of which is equal to the agent's remuneration, inclusive of all taxes, under the present agency contract; that in asserting that the agency agreement provided that the SANOBI IMMOBILIER agency could not claim its remuneration by the mere fact of having shown the property offered for sale, when the agency agreement stated, in a clear and precise clause, that SONABI IMMOBILIER was entitled to compensation if the principal dealt, directly or indirectly, with a buyer who had been introduced by SONABI IMMOBILIER, the Court of Appeal distorted the agency agreement in breach of Article 1134 of the Civil Code;
Whereas, moreover, the agency agreement between SANOBI IMMOBILIER and SCI GAULETTE stipulated that during the term of the agency, the principal undertook not to deal, either directly or through another agent, with a buyer to whom the property had been presented by the agent or a substitute agent; that in the event of non-compliance with this clause, the agent is entitled to a fixed indemnity, payable by the principal, the amount of which is equal to that of the agent's remuneration, inclusive of all taxes, provided for in this mandate; that in considering that SCI GAULETTE, the principal, could not be criticised for having entered into a contract through the agency GIRAL IMMOBILIER SERVICES with Mr Y.. and SCI LIORIC, when it itself noted that this purchaser had been presented to the principal by SONABI IMMOBILIER, the agent, the Court of Appeal did not draw the consequences from its own findings and thus violated article 1147 of the Civil Code ;
Lastly, in considering that the purchaser had not committed any fault, while noting that he had, with knowledge of the agency contract benefiting SANOBI, since SANOBI had shown him the property in question, helped SCI LA GAULETTE to breach its contractual obligations by concluding the sale with another agency, the Court of Appeal did not draw the legal consequences from its own findings and thus violated article 1382 of the Civil Code.