THE REAL ESTATE BROKERt
Gerald E. LeDain*
I.
INTRODUCTION
1. – The organization of real estate brokerage. – The real estate brokerage is
carried on today by individual brokers, firms and corporations. Large brokerage
businesses generally have a sales manager and several salesmen working under
him. A salesman will ordinarily be on a commission basis, receiving a certain
percentage of the commission earned by the broker on every sale brought about
through the efforts of the salesman. In exceptional circumstances a salesman
may receive a basic salary in addition to a commission on each sale. A certain
percentage of the commission earned on a sale is usually allowed to the listing
agent or salesman who brings the property into the office even if he does not
effect the sale. The balance of the salesman’s share of the commission earned
will go to the salesman who sells the property.
The legal relationship between the salesman and the broker presents certain
difficulties of classification, but it would appear to be one of lease or hire of
personal services with an implied mandate given to the salesman to bind the
broker for certain purposes essential to the carrying out of the contract of
employment.’ The salesman must, I think, be deemed to have authority to make
a listing2 agreement with the client on the broker’s behalf, and he will bind the
broker for anything done or agreed to within the scope of his apparent authority3
*Associate Professor of Law, McGill University.
tThis article is based on a lecture delivered January 29th, 1958 under the auspices of
the Montreal Real Estate Board.
‘As to combination of mandate and lease or hire of services see Planiol & Ripert,
Traiti Pratique de Droit Civil Franfais (1954), vol. 11, no. 1431. The right to termin-
ate the relationship, usually given as one of the important matters on which the two
contracts differ (although the jurisprudence has largely reduced the practical importance
is often settled in practice by a written contract of employment be-
of the difference),
tween the broker and the salesman which provides for termination upon giving a
specified notice of, for example, thirty days. Although the salesman is generally referred
to in practice as the “agent”, he would not appear to be a substituted mandatary or sub-
agent but a priposi of the broker carrying out certain services under the direction and
supervision of the broker with a mandate from the latter for certain purposes. Cf.
Juris-Classeur Civil. C.N. 1993-1995, nos. 8,40,50. The broker will be responsible for
damage caused by the fault of the salesman while in the performance of the work for
which he is employed or acting within the scope of his authority, but the client should not
be liable since there is no contractual relationship between himself and the salesman
and the latter does not come under his control.
2The rules of the Montreal Real Estate Board define “listing” as follows: “Listing
shall mean the placing of a property in the hands of a broker to lease, sell or exchange.”
SHe would, for example, bind the broker by an agreement to sell the property for a
commission lower than the one usually charged by the broker.
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2. – The regulation of real estate brokerage in Quebec. – Real estate broker-
age is not subject to any special regulation in Quebec. Brokers and salesmen are
not required to obtain a special license, although the broker must comply with
the general municipal licensing regulations. There is no corporate body re-
cognized by the legislature as having a power of regulation over all real estate
brokers. Membership is voluntary in the two existing organizations, the Mon-
treal Real Estate Board, a corporate body since 1954, and the Corporation of
Real Estate Brokers of the Province of Quebec.
The Montreal Real Estate Board is described in its literature as “an organ-
ization of licensed real estate men co-operating for the betterment of their
profession.” It has established a code of ethics and a tariff of minimum com-
missions and charges which members are expected to follow, as well as a set
of rules and regulations governing co-operative listing. The code of ethics covers
a member’s relations with his fellow members, with clients and with customers
and the public. It requires that every member observe the schedule of fees
established by the Board. A violation of the code of ethics is punishable by
suspension or expulsion. Any business difference arising between members of
the Board is supposed to be submitted to the Arbitration Committee. An appeal
lies from the decision of the Arbitration Committee to the Directors.
3. – The different kinds of listing. –
The three main kinds of listing, or
authority to sell, which are encountered in practice today are the ordinary or
“open” listing, the “exclusive” listing, and the “co-operative” listing. The open
listing is of a non-exclusive nature; the owner is free to list the property with
other brokers. The exclusive listing gives the broker, usually for a specified
period, the sole and exclusive authority to sell the property. The co-operative
listing is a special form of exclusive listing which has been introduced into
real estate practice in Montreal only fairly recently. It is given to a “listing
broker” who files the original of the listing agreement with the Montreal Real
Estate Board. The Boards sends a mimeographed copy of the listing with a
photograph of the property on the back (from which the listing derives its
trade name of “Photo-Co-op”)
to all members of its Co-Operative Listing
Section who may then attempt to find a purchaser for the property. The owner
agrees to pay a commission which is one and a half or two per cent higher than
the ordinary commission, and is divided between the listing broker, the selling
broker and the Board according to a schedule established by the Board. All
negotiations with the owner, including the submission of offers to purchase,
are as a general rule carried out through the listing broker.
II. THE LEGAL RELATIONSHIP BETWEEN THE REAL ESTATE
BROKER AND His CLIENT
4. –
The nature of the work performed by the real estate broker. –
Real
estate brokers are engaged
in the work of arranging sales, exchanges and
leases of immoveable property as well as the placement of loans on the security
No. 21
REAL ESTATE BROKER
of such property. We are here chiefly concerned with the selling function of
the real estate broker but the general principles applicable in this field will
apply on the whole to the other kinds of work carried on by the broker. As
salesman, the function of the broker is to assist his client to sell his property.
He advertises the property and seeks by various means to interest prospective
purchasers in it. He represents the client in negotiations with the other party.
He generally obtains a written offer to purchase which he transmits to the client
for his consideration and acceptance. He may receive a deposit of money on
behalf of his client from the other party. Sometimes he may enter into binding
legal agreements on behalf of the client. He may accept an offer to purchase or
make an offer to sell on his client’s behalf. Occasionally he will arrange for his
client to give a prospective purchaser an option for a consideration.
The broker may, on the other hand, act for a person who desires to purchase
a particular property. Here the broker may obtain for his client an offer to
sell or an option from the owner, and in some cases he may act for a purchaser
who prefers to remain an undisclosed principal.
5. –
The nature of the contract between the broker and his client.
The legal relationship between the broker and his client has always been char-
acterized by our courts as one of mandate rather than lease or hire of personal
services,4 although the representative character of the relationship, traditionally
regarded as the hall mark of mandate, is not too prominent or obvious in the
usual course of dealing today. As a general rule the broker does not make or
accept offers on his client’s behalf but merely brings the parties together by his
negotiations. The parties conclude the agreement themselves. Still the broker
represents the client in negotiations with the other party and win bind the client
by any misrepresentations or fraud which may have induced the other party to
contract. He is also the instrument by which a binding unilateral promise to
purchase is formed when the prospective putchaser gives him an offer to purchase
with a delay to accept.5 When the btoker takes the offer, the other party cannot
withdraw it before the expiry of the delay, at least not without exposing himself
to liability for breach of contract. 6 When the broker takes a deposit from the
4See, for example, La Compagnie Immobilire de Montrial Est v. O’Connor (1910),
12 P.R. 120 (S.C., per Demers J.) ; also Stafford v. Smith (1896), 10 S.C. 470 (C.R.)
where it was held that the contract by which the owner of property empowered another
to sell it with the stipulation that this person should have as his remuneration the
surplus of the price of the sale over a determinate sum constituted a mandat salari and
not a partnership.
5The offer is in practice addressed to the broker, but it must be deemed to be made to
him as agent for the owner of the property.
6It is not necessary here to enter into the question of whether the debtor of a unilateral
promise of sale who purports to withdraw his offer before the expiry of the stipulated
delay is liable at the most for damages or whether such withdrawal is without effect and
cannot prevent the creditor who accepts within the required delay from insisting on
specific performance, although the latter appears to be the better view.
McGILL LAW JOURNAL
[Vol. 4
prospective purchaser he does so as agent for the client.7
6. –
The authority of the broker to bind his client. –
It is characteristic
of mandate that it vests certain specific authority in the mandatary or agent
to bind the mandator or principal towards third persons. This authority may
be expressed or implied. A mandate given to members of a certain profession
or calling carries with it certain implied powers which need not be specified.
They are inferred from the nature of such profession or calling.8 When a
property owner or prospective purchaser of property gives a mandate to a real
estate broker what does he expressly or impliedly authorize him to do?
The ordinary, or open, listing which says nothing specific as a general rule
about the precise powers of the broker obviously gives him the right to offer
the property for sale upon the specified terms, that is, to advertise it as being
for sale upon these terms, and to invite offers to purchase. But does it confer
the power to bind the client by making an offer to sell or accepting an offer to
purchase on his behalf ? In practice real estate brokers apparently do not regard
themselves as having such authority by virtue of the open listing or even of the
terms of an exclusive or co-operative listing agreement which states that the
broker is given “authority to sell” the property of the client “for the price and
under the terms and conditions mentioned below or at such other price and
under such other terms and conditions as I may hereafter agree to.” They
would not as a general rule presume to exercise such powers without more
explicit authorization. Such powers are not essential to the execution of their
mandate. As will be seen, the broker is deemed to have fulfilled his mandate
when he brings the parties into relation with one another, even though the
agreement is made directly by the parties themselves. In practice a broker
obtains an offer to purchase which is addressed to him but it is accepted by the
client himself.
Certainly it is reasonable to assume that the client does not ordinarily intend
that the broker should have power to bind him by acceptance of an offer to
purchase. The implied powers of the broker are to be determined by reference
to the usage or, practice in the field. And although the words “authority to
sell” would admittedly on a strict interpretation include such power to bind
the client, if we cannot invoke usage against such an interpretation on the
ground that the expression is ambiguous, it would seem that in view of the
well established practice or course of dealing there must be read into every
listing a customary clause 9 that the broker is not to be deemed to have power
to bind his client unless he has received explicit authority to do so.
This appears reasonable enough between broker and client, but one may
question the reasonableness of applying such a customary clause against third
7See, for example, Morin v. Turmel, [1956] Q.B. 173.
SArt. 1705 C.C.
9 Art. 1017 C.C.
No. 2]
REAL ESTATE BROKER
persons and ask whether in so far as they are concerned the words “authority
to sell” should not be deemed to disclose an apparent mandate to bind the
principal. On the other hand, is the course of dealing not so well established
that it must be presumed to be known by one who deals with a real estate
broker? The question is a difficult one and shows a tension between law and
practice. It would appear inconsistent to continue to characterize the relation-
ship between the broker and client as one of mandate and to deny this represent-
ative character to it.
A broker may occasionally be asked to act for a client who wishes to acquire
property, but desires to keep his identity secret until the terms have been
settled.’ 0
7. –
The rule that an agent cannot be the buyer or seller of the property. –
The Civil Code provides that “an agent employed to buy or sell a thing cannot
be the buyer or seller of it on his own account.”‘ ” The reason for this rule is
that there would otherwise be a conflict between
the agent’s duty to the
principal and his own interest as a buyer or seller, and the principal’s interest
would be liable to be sacrificed. But there is nothing to prevent the principal
from agreeing that the agent should have the right to buy or sell the property
for himself. In such a case the sale cannot be set aside. The combination of a
mandate given to an agent to sell a property and a promise to sell it to the
agent himself has been recognized as valid.1 2 The mandate is subject to a re-
solutive condition. If the agent chooses to avail himself of the promise to sell
and buys the property himself the mandate is extinguished.
Such would appear to be the legal situation created by certain types of
“option” encountered in practice. The word “option” is often used loosely by
real estate brokers to designate an exclusive mandate or listing,'” but an option
which contains an undertaking to pay a commission if the property is sold
‘ 0The broker may in such case obtain an option from the owner which may be accepted
by a person designated by him, or he may make an offer to purchase. The broker who
acts in his own name will be liable as a principal, 1716 C.C., unless he discloses his
mandate and the identity of his mandator: Doody v. Van Dyke (1924), 37 K.B. 358.
Quacre, whether the broker avoids personal liability by stating that he makes the offer
“on behalf of my client” or “as a duly authorized agent.” In this case the transaction
resembles the sale sous r/serve d’5lirc commitand: Dagenais v. The Modern Realty and
Investment Company Limited (1912), 41 S.C. 428, although the authors usually dis-
tinguish this from an ordinary case of mandate.
“Art. 1706 C.C. See also art. 1484 C.C., providing that agents cannot become buyers,
either for themselves or by parties interposed. This prohibition extends to officers of a
company to whom a mandate to sell or buy has been given: Smith v. Comtois, [1927]
S.C.R. 590, and would also affect the salesmen who carry it out.
12Ptaniol & Ripert, op. cit. vol. 11, nos. 1434(3), 1446, 1466. The fact that the French
Code does not include an article corresponding to the Quebec article 1706 but only
article 1596 which corresponds to the Quebec article 1484 would not appear to make the
French doctrine on this question inapplicable in Quebec.
13 See note 53, infra.
-lMcGILL LAW JOURNAL
[Vol. 4
may be both a promise to sell to the broker himself if he desires to buy within
a certain delay and a mandate to the broker to sell the property to another,
the broker having the right to allow someone else to accept the offer countained
in the option. If the broker takes up the option himself, he is not as a general
rule entitled to the commission since the mandate is extinguished.1 4
8. –
Formation of the contract between the broker and his client.
As with any other contract, the formation of the contract of mandate requires
the consent of both parties. One person may think that he is acting for another
but the other person may not have indicated a desire that he should do so.
The reports contain many cases in which the courts have held that the broker
did not have a mandate. The consent of both parties to the contract may be
either express or implied. An express agreement may be written or verbal.
(The problem of proof will be considered shortly.) Examples of express
written agreements
in practice are the standard exclusive and co-operative
listing agreements which are signed by the owner.
The consent of the principal may be implied from certain acts. It has been
held that when an owner gives a real estate broker the particulars of property which
he wishes to sell, he impliedly gives the broker a mandate to sell the property
and undertakes to pay the broker the usual commission if he is successful.’ 5
Thus the open listing, although not signed by the owner as a general rule,'(
creates an implied mandate. An exclusive mandate, however, will not be in-
ferred from the mere fact that the owner states the price which he would be
prepared to accept for the property and the commission he is prepared to pay.’7
14Lecours v. Dagenais (1915), 47 S.C. 1; Dominion Financial Corporation v. Donald-
son (1927), 43 K.B. 387. Cf. Reddy v. Rutherford (1913), 43 S.C. 289; (1941), 23
K.B. 493. Could one argue that the owner who has stipulated a certain price on the
assumption that he will have to pay a certain commission must be deemed to have agreed
to what would amount to a reduction in the price should the agent buy the property
himself? Cf. Bissonnette J. in Abbott v. Desmarteaux, [1957) Q.B. 378 at 382; “. . . cette
commission, si elle 6tait 16gale, n’6tait pas autre chose qu’une diminution de prix. .. .”
15Grigoire v. McMahon (1935), 73 S.C. 575 (Duranleau J.) ; Brouillet v. Lepage
Limitie (1925), 38 K.B. 143; Handfield v. Binnette, [1947] S.C. 384
(Fortier J.);
Lefebzre v. Blanchette, [1957] Q.B. 702. But presumably the owner must in such a case
know that he is dealing with a real estate broker and not believe that he is giving in-
formation to a prospective purchaser or the representative of a prospective purchaser.
Cf. Allard J. dissenting in Brouillet v. Lepage, supra. See also Dubreuil v. Laberge
(1908), 14 R.L. n.s. 465 (C.R.), in which a right to any surplus which the agent could
obtain over a stated price was inferred from the owner’s letter to agent offering to sell
him the property for a certain price without commission.
‘6While the open listing is generally not signed by the owner, his acceptance of the
buyer’s offer to purchase usually contains his written agreement to pay the broker a
commission of a specified percentage of the sale price.
‘ 7Mainaring v. Crane (1902), 22 S.C. 67, holding that such a mandate requires a
specific written contract or an equivalent admission of its existence from the owner.
No. 2]
REAL ESTATE BROKER
When the broker’s acceptance does not appear on the listing agreement,-8
it will be implied from the fact that he takes the written authority from the
client and acts upon it.19
9. – Proof of the mandate. – The question of proof turns on the distinction
between civil and commercial matters. In accordance with the traditional view
that transactions involving immoveable property are civil in nature, the general
rule concerning the mandate of the real estate broker is that it cannot be
proved by testimony 20 unless there is a commencement of proof in writing.2 ‘
But the sale of a business, even when it includes an immoveable property, is
deemed to be commercial in nature,22 and it has been held in several instances,
some of which apparently involved an immoveable, that the mandate to sell a
business may be proved by testimony.2
10. –
The duration of the mandate. – A broker may be given a mandate
to sell or purchase property without any stipulation of a delay, in which case
the mandate remains in force until terminated by revocation or one of the other
causes known to the law.24 The open listing is usually without a stipulated
delay.
In the case of an exclusive or co-operative listing it is customary to stipulate
a term for the authorization. The rules of the Montreal Real Estate Board
provide that a co-operative listing shall be for a period of not less than forty-five
days.
Sometimes it will be stated that the mandate will remain in force until written
notice to the contrary. If there is both a specified term and the stipulation
concerning notice, the mandate may be considered to continue automatically
‘5 The agent or salesman usually signs as witness of the client’s signature, but the
broker’s acceptance is not ordinarily written on the agreement. At least this is the case
with the co-operative listing agreement.
2 4Art. 1755 C.C.
19Art. 1701 C.C. See Pouliot v. Lavoie, [1952] R.L. 111, at 112 (Marquis J.). As to
(1949)
proof of acceptance see Letarte, Probl~mes juridiques de l’agent d’immeubles,
9 R. du B. 105, at 109.
20Ernest Pitt & Co. v. Payne (1925), 31 R.L. n.s. 308, 63 S.C. 522. Langlois v. Ber-
thlianme (1913), 19 R.L. n.s. 367 (C.R.). Cf. Dudemaine v. Pelletier (1915), 47 S.C. 154,
19 R.L. n.s. 380, where it was held that an implied mandate to sell an immoveable con-
stitutes a quasi-contract which can be proved by testimony.
2lAs to commencement of proof in writing in cases involving real estate brokers see
Clermont v. Howell (1925), 38 K.B. 238; Lemieux v. Morisset, [1948] R.L. 559; Leroux
v. Leclerc, [1952] K.B. 261; Fluet v. Bechand, [1952] K.B. 478; testimony will of
course be admissible if there is an admission of the mandate. Desalliers v. F ranmount
Development Company Limited, [1957] S.C. 307; Brousseau v. Rochon (1916), 22 R.L.
n.s. 458.
22Massi v. McEvilla (1895), 4 Q.B. 197.
23Pekolas v. Bloom (1928), 34 R.L. n.s. 154 (S.C.) ; Financial Trust Co. v. Steinman,
[1947] R.L. 171; Handfield v. Binette, [1947] S.C. 384; Pouliot v. Lavoie, [1952] R.L.
201. Contra: Hamelin v. Hervieux, [1947] S.C. 201.
McGILL LAW JOURNAL
[Vol. 4
after the expiry of the term until written notice to the contrary. 25 The agree-
ment may stipulate that the ‘option’
is automatically renewable for another
period of the same duration unless a written notice to the contrary is given so
many days before expiry. 26 Such a stipulation, when it contains the words
“avant la derni~re chance” in referring to the required notice, has been in-
terpreted to mean that the authorization would be automatically renewed for
successive periods of the same duration so long as the required notice was not
given.27 Where, however, a printed clause in the authorization provided that
the mandate would remain in force until revoked by written notice, but the
principal had written by hand at the bottom of the contract that it would ex-
pire on a certain date, the latter clause prevailed. 28
A mandate may be prolonged or renewed not only by virtue of an express
stipulation providing for this upon failure to give written notice of termination
within a certain delay, but it may be deemed to have been extended by the
acts of the principal.29
11. – Revocation of the mandate. – The mandate given to the real estate
broker, like any other mandate,3 0 can as a general rule be revoked by the
principal at any time. But as in other cases, 3′ if such revocation is carried out
in an unfair and inopportune manner,3 2 the broker will be entitled to claim any
damages which he can prove to have suffered.33 He cannot claim a commission
unless he completed the work for which he is entitled to a commission before
the revocation, 34 but on at least one occasion a broker has been awarded a
quantum meruit for his services up to the time of revocation.3 5
25Brunet v. Caron (1915), 47 S.C. 244 (C.R.) ; Leclerc v. Fissiault (1914), 45 S.C. 182;
Huot v. Thiriault, [1954] S.C. 145; Ligarg v. Au Pierrot Gourmet Ltie, [1948] S.C.
441; Pouliot v. Lavoie, [1952] R.L. 111.
26E.g. Verdun Realties v. Lajoie, [1952] S.C. 145.
2 7Demers v. Chauvin, [1952] S.C. 145.
28Rodier v. Meehan & The House of Brourne Ltd. (1915), 48 S.C. 397 (C.R.).
29Sideleau v. Church, [1956] Q.B. 535; Parent v. Mendelsohn (1918), 27 K.B. 226.
Cf. Donovan v. Hyde (1909), 18 K.B. 310.
for a recent statement of the law.
3OArt. 1756 C.C.
S1See Tupper Plastics & Chemicals Ltd. v. Ronald Parties Ltd., [1955] R.L. 115, at 125,
32 These are the words used by Anglin C.J. in Rodovsky v. California Assorted Raisin
Co., [1926] 2 D.L.R. 481, at 482. (The French expression generally used is “intempestive-
ment et d’une mani6re abusive”.)
33These would presumably include his disbursements, Pothier v. St. Germain (1935),
41 R.L. n.s. 1, but, semble, he will only be entitled to damages if he can show that he had
found a prospective purchaser, Caron v. Couture, (1918), 24 R.L. n.s. 44 (S.C.), or had
taken steps to do so, Blondin v. Duff (1892), 1 S.C. 256. (C.R.) Cf. note 54, infra, as to
exclusive mandate.
34Laliberti v. Gilbert (1940), 78 S.C. 452, 46 R.L. n.s. 240. In Pruneau v. Flood (1917),
55 S.C. 106, although the sale took place after revocation the agent was held to be
entitled to his commission since he had performed the essential work before revocation.
35Allard v. Meunier (1914), 46 S.C. 193. Cf. Dupuis v. Lipine (1934), 72 S.C. 120,
where quantum meruit was denied because no proof had been made of the value of the
services.
No. 2]
REAL ESTATE BROKER
A mandate may in certain circumstances be held to be irrevocable, not merely
in the sense that its revocation will give rise to damages, but that it is deemed
to remain in force notwithstanding the purported revocation.3 6 Such is the case
is
where the mandator renounces his right of revocation or the mandate
essential to the execution of another contract. It would not appear that the
mere stipulation of a delay as in the case of an exclusive listing makes the
mandate irrevocable, 37 although the particular terms of an exclusive mandate
may lead the court to conclude that the principal has renounced his right to
revoke for the specified term.38 In any event the revocation of an exclusive
mandate during the specified term is clearly one which gives rise to a claim
for damages.
No special formality is apparently required to effect a revocation of the
mandate so long as the broker can be shown to have had knowledge of the
principal’s loss of confidence or desire to revoke, 39 but it has been held that
where the written notice provided for by the terms of the listing has been sent
by non-registered letter the principal must prove that the broker received it
in time.40
III. WHEN THE BROKER IS ENTITLED TO A COMMISSION
12. – The necessity of a mandate. – The broker who takes an action for a
commission must allege and prove the formation of a contract of mandate
between himself and the defendant. A broker is not entitled to a commission,
as such, merely because he brought the seller and purchaser into contact if he
never received a mandate to do so. 41 The broker may fail to establish a mandate,
either because the defendant never did in fact agree to one (or at least did not
authorize the particular act for which the broker claims a commission) 42 or
because the broker is unable to prove that he did. Then again the mandate may
be invalid or null.43
36See Planiol & Ripert, op. cit., vol. 11, no. 1492.
3 7 Cyr v. Lecours (1915), 47 S.C. 86 (Robidoux J.), The issue, of course, is whether the
broker can sue for his commission or has only an action in damages.
3aBrown v. Schwartz, [1955] S.C. 354 (Ralston J.), where the mandate was “to re-
main in force for a minimum of thirty days and continue thereafter until revoked ……
39Cyr v. Lecoters (1915), 47 S.C. 86. Third parties will not be affected by a revocation
of which they have no knowledge (art 1758 C.C.).
40Demers v. Chauvin, [1952] S.C. 145.
41Plunzzmer v. Gillespie (1896), 10 S.C. 243. (Archibald J.) ; Bergeron v. Passau, [1952]
K.B. 415.
42E.g. Messier v. Chencry & Barnard (1915), 21 R.L. n.s. 73 (C.R.) where it was held
that the authority given to an agent to sell certain subdivisions of a lot for an agreed price
did not authorize him to sell other subdivisions of the same lot, and Desrochers v. Marianli,
[1947] S.C. 167, where it was held that a mandate given to an agent to obtain a loan from
one company did not authorize him to obtain a loan from another one.
43E.g. Gershevich v. Greenberg & Millinan, [1957] S.C. 265, where it was held that a
mandate given on a Sunday was illegal, null and void by virtue of the Lord’s Day Act.
McGILL LAW JOURNAL
[Vol. 4
Sometimes a broker acting for either the purchaser 44 or the owner 43 will
claim a commission from the other party when he has never received a mandate
from the latter. In such cases the normal presumption against a double mandate
operates against the broker who must establish not only the existence of the
second mandate but its validity in the particular circumstances. 40
An agent who obtains an option or promise of sale in his own name or buys
the property in his own name for resale to a third party without disclosing
that he is a real estate agent will generally be held not to have obtained a
mandate from the owner,47 even though the sale is eventually made to a buyer
presented by the agent. 48
When an agent has introduced the parties to one another and has been the
effective cause of the sale, but has not received a mandate from the party from
whom he seeks payment, the courts have indicated that although he cannot sue
for a commission based on a mandate he may be able to recover in such a case
on some other basis, such as quantum meruit 49 or unjustified enrichment,50
if his action is properly framed for that purpose.
13. –
The terms of the agreement between the client and the broker. –
The broker’s right to a commission will depend first of all upon the general
nature of his mandate, that is, whether it is an exclusive or non-exclusive one,
as well as upon the specific terms in which the agreement to pay a commission
is couched.
a) The ordinary or non-exchsive mandate.
The open listing or non-exclusive mandate is given by an owner who
wishes to list the property with more than one broker or to have the right to
find a purchaser himself without the obligation to pay a commission to the
broker with whom he has listed the property. Although the owner’s acceptance
of an offer to purchase which has been obtained by the broker usually contains
a written agreement to pay the broker a specified commission, the open
listing as such is generally not evidenced by a written document signed by the
owner. It is implied, however, that the broker will be entitled to a commission
if he has been the effective cause of the sale. Just how much he must con-
44Lemieux v. Ecclsiastiques du Siminaire de St-Sulpice (1912), 18 R.L. n.s. 434,
8 D.L.R. 639; Cardin v. L’Archevque, [1947] R.L. 157; Bergeron v. Passau, [1952]
Q.B. 415.
45Brown v. Gault (1901), 19 S.C. 523; Stampfl v. Rolland, [1956] Q.B. 440.
46The validity of the double mandate is considered at the end of this article.
47Besner v. Livesque (1912), 8 D.L.R. 494 (C.R.), 19 R. de J. 60; Reddy v. Ruther-
ford (1913), 43 S.C., (1914), 23 K.B. 493.
48Pesant v. Garrett (1915), 24 K.B. 335; Patenaude v. Hamel (1923), 35 K.B. 333.
49Bergeron v. Passau, [1952] Q.B. 415; Hamelin v. Hervieux, [1947] S.C. 201; Dude-
naine v. Pelletier (1913), 19 R.L. n.s. 380; Lavbnodikre v. Garbpy (1917), 51 S.C. 471
(C.R.). Strictly speaking it would seem that quantum meruit should lie where there is a
contract, an action de in rem verso where there is no contract.
5OZaid v. Delicato (1894), 6 S.C. 219.
No. 2]
REAL ESTATE BROKER
tribute to the completion of the sale and whether it is always necessary that a
formal deed of sale be signed will be considered shortly.
b) The exclusive listing.
An exclusive listing or mandate (of which the co-operative listing is a special
type) gives one broker the sole and exclusive authority to sell during a
specified term, or if no term be stipulated, until termination of the mandate by
notice. An exclusive mandate is customarily conferred by the use of the term
“exclusive”, but it may be sufficiently indicated by other language. It will not,
as we have seen, be inferred from the fact that an owner informs the broker
that he would be prepared to accept a certain price for his property and to pay
a certain commission. 51 But it would appear that an exclusive mandate will be
inferred from the stipulation of a delay or term for the authority to sell. 52 The
word ‘option’ is often used in practice to designate an exclusive mandate. 53
When a broker has received an exclusive mandate he will be entitled to a
commission if the property is sold while his mandate remains in force even if
the sale has not been brought about by his efforts but has been effected by the
owner himself or by the intervention of another broker.54 Unless a listing
agreement stipulates otherwise, it would appear that the seller and purchaser
must at least come to agreement if not sign a deed of sale during the period
51See note (17), supra.
52Gohier v. Villeneuve (1894), 6 S.C. 219; Carle v. Parent (1889) M.L.R., 5 Q.B. 451;
Brunet v. Caron (1915), 47 S.C. 244 (C.R.) ; Allard v. Meunier (1914), 46 S.C. 193.
The client may, of course, reserve the right to sell himself.
53Gossack v. Caplan, [1956] Q.B. 750, at 754; Lussier v. Cloutier, [1950] S.C. 177;
L gar v. Au Pierrot Gourmet Lte, [1948] S.C. 441; Jacques v. Beauchesne, [1953] Q.B.
142, at 143.
54Gratton v. Pilon, [1951] S.C. 59; Wilder-Berminghain Realty Co. v. Lidis, [1951]
S.C. 421; Demers v. Chauvin, [1952] S.C. 145; Blain v. Roy, [1952] S.C. 327; Barne-
,ille v. Thiffault, [1953] S.C. 355; Huot v. Thriault, [1954] S.C. 251; Malo v. Perrault,
[1955] R.L. 65; Gelfenstebt v. Sosna, [1956] S.C. 377. But cf. Pouliot v. Lavoie, [1952]
R.L. 111, per Marquis J., where the broker was given “le droit exclusif de vente”,
the owner agreeing to pay the commission if the broker found a purchaser or the owner
sold the property himself during the term of the mandate. The property was sold by the
owner himself while the mandate was still in force but the broker’s action for a com-
mission was dismissed on the ground that he had not fulfilled his mandate; not only had
he done nothing whatever to carry out his mandate but had even made efforts to dis-
courage the sale which actually took place. It is difficult, however, to determine precisely
what the case can be said to stand for as a general proposition of law since the court
appears to have applied the test for the non-exclusive mandate and not to have discussed
the exclusive mandate as such. It was said that an agreement to pay a broker a com-
mission although he did nothing to fulfill his mandate would be null and void, either as
illegal gift or as a mandate without consideration. See also Dufour v. Vasseur (1925),
31 R.L. n.s. 241 (S.C.), where it was held that the owner of an immoveable who gave
a broker an “option exclusive” for a fixed delay but sold the property himself during the
delay was not obliged to pay the established commission since the broker had not offered
or found a purchaser within the period of his optibn and would, therefore, not have sold
the property even if the owner had not done so himself.
McGILL LAW JOURNAL
(Vol. 4
of the exclusive mandate.55 The listing agreement will often provide, however,
that the broker will in certain circumstances be entitled
to his commission
although the property is sold after his mandate has expired. The co-operative
listing agreement of the Montreal Real Estate Board, for example, stipulates
that the owner will pay the commission “If the property is sold on or before
the day above mentioned [the day on which the mandate expires] or sold after
that date to a person who has made an offer (or to whose attention the property
has been brought) during the period of this agreement .. . whether or not the
sale is arranged through your agency.” 0 An identical or similar clause is
found in the exclusive listing agreements of most brokers.
c) The terms of the sale.
The listing authorizes the broker to sell the property for a certain price and
upon certain terms and conditions. The owner may add “or at such other price
and under such other terms and conditions as I may hereafter agree to.” The
latter words are to protect the broker in the event that the owner eventually
accepts a lower price or different conditions than those which he originally
stipulated. The price and the terms and conditions specified in the listing must
be considered from two points of view: the broker’s right to offer the property
for sale and his right to a commission. He may be liable in damages to the
owner if he offers the property upon terms and conditions not agreed to by
the owner, and he may only be entitled to his commission if the property is
sold for a certain price or upon certain terms and conditions.
In considering the general rules which apply to the second of these points in
the absence of an explicit agreement, it is necessary to distinguish the agree-
ment to pay a commission which consists of a certain percentage of the sale
price from the agreement to pay the broker any difference between the price
stipulated by the owner and the price obtained by the broker.5
(Where the
55Ljgarj v. Au Pierrot Gourmet Ltje, [1948] S.C. 441, (Campbell 3.) ; Cf. Gossack v.
Caplan, [1956] Q.B. 750 per. McDougall J. at 754: “During that period plaintiff is re-
quired to find and present to the principal (defendant) a buyer who is willing to pay a price
acceptable to the principal.”; also cases cited in Leclerc v. Fissiadult (1914), 45 S.C. 182, at
189-190, holding that the broker is entitled to his commission on a sale after the expir-
ation of his exclusive mandate to a purchaser introduced by him before its expiration,
and Massicotte v. Lavoie (1911), 40 S.C. 258 (C.R.).
56It would appear to be clear from this clause that the offer need not have been obtained
by the broker nor the property brought to the purchaser’s attention by him. But compare
De Rosa v. McBain, [1957] Q.B. 656, where the exclusive mandate stipulated that the
broker would be entitled to his commission if the property was sold after the expiry of
his mandate to persons solicited during the mandate. The court held that when the
mandate terminated the agent could not claim a commission unless he had been the
effective cause of a subsequent sale. In this case he was denied a commission on a sale
of the property to the prite-nora of a person to whom he had sent a circular letter offering
the property for sale but who had not replied to or followed up the letter in any way.
5 7E.g. Petit v. Lussier (1914), 46 S.C. 195; Simard v. Dubord (1916), 26 K.B. 81;
Lussier v. Cloutier, [1950] S.C. 177; Ltourndau v. Martineau. [1955] Q.B. 862; Trent-
No. 2 ]
REAL ESTATE BROKER
broker is acting for the purchaser the difference will represent not ah increase
but a reduction in the price stipulated by the owner.)5 8 In the latter case the
broker is clearly not entitled to any commission if he does not succeed in
obtaining any increase or reduction, as the case may be, in the selling price.
When the commission is to be a certain percentage of the selling price, the
fact that the owner sells the property at a lower price than that which he origin-
ally asked the broker to obtain for him will not ordinarily deprive the broker
of his commission if he was the effective cause of the sale.59 But it may result
from the terms of the agreement between the owner and broker that a sale at
a particular price is a condition of the obligation to pay a commission, in
which case the broker is not entitled to any commission if the property is sold
for less than the agreed price. 0 Vvhen a broker has agreed to pay a special
commission, higher than the normal one, if the broker sells the property for
a specified price, it has been held that while the broker cannot claim the special
commission if the property is sold on different terms than those specified he is
entitled to the ordinary commission established by usage.”‘
14. – Effective cause of the sale. – To be entitled to his commission the
broker who has an ordinary or non-exclusive mandate must show that he
was the effective, or as it is sometimes called, “efficient” cause of the sale.
“The agent who brings his principal into relation with the actual purchaser
is the effective cause of the sale”, 62 even though the sale itself is arranged
blay v. Martel, [1956] Q.B. 348; Laurentide Realties Co. Ltd. v. Celestino, [1957] Q.B.
694; Dequoy v. Drolet (1926), 40 K.B. 213. In Dubrenil v. Laberge (1908), 14 R.L. n.s.
465 (C.R.) such an agreement was inferred from the owner’s letter to an agent agreeing
to sell him a property for a certain price without commission, See also Reddy v. Ruther-
ford, note 14, supra.
58Cf. Labrecque v. Dombroski (1916), 49 S.C. 289 where it was held that the broker
retained by a purchaser to buy an immoveable cannot with a view to increasing his com-
mission make his principal pay a higher price than that which was asked by the seller.
59Burchell v. Gowtrie and Blockhouse Collieries Limited, [1910] A.C. 614; Montreal
Agencies Ltd. v.Kinpton, [1927] S.C.R. 598: Toucherte v. Godin, [1947] S.C. 147;
Jacques v. Beauchesne, [1953] QB. 142; Joseph v. Hendy, [1955] R.L. 109. Presumably
the same rule would apply to an exclusive mandate if the owner agreed to a sale upon
different terms during the period of the mandate.
GOSchleifer v. Kaufman (1915), 47 S.C. 145 (C.R.)
revg 45 S.C. 536; MacKenzie v.
PichU & Baby (1914), 20 R.L. n.s. 32 (C.R.) ; Jacques v. Lonard (1915), 47 S.C. 344.
Also held in this case that the named woman separate as to property cannot authorize an
agent to sell her property and agree to pay him a commission without a written author-
ization from her husband.
61Laugelier v. Roy (1916), 22 R.L. n.s. 123. Baikie v. Latourelle (1915), 24 K.B. 171
where a lower rate of interest was agreed to and Bousquet v. Mignault (1915), 48 S.C.
(C.R.) where, land having been given to an agent to sell by subdivision, it was held that
the agent was entitled to the commission established by usage when the owners through
his efforts sold the land en bloc.
62 M1ontreal Agencies Ltd. v. Kimpton, [1927] S.C.R. 598 per Rinfret J. (as he then
was), at 601, citing Burchell v. Gowric and Blockhouse Collieries Limitcd, [1910] A.C.
McGILL LAW JOURNAL
[V9ol. 4
directly by the principal, either with the broker’s knowledge 3 or behind his
back.0 4 The principal will not be allowed to deprive the broker of his com-
mission by arranging the purchase through an intermediary. ‘ The broker
is entitled to his commission if he performs the work which constitutes the
effective cause of the sale while his mandate remains in force, although the
actual sale be made after its expiration.0 6
The cases are far from clear as to precisely what is meant by bringing
the principal into relation with the actual purchaser. It is generally considered
that the broker fulfils his mandate when he finds a person who is willing to buy
the property upon terms acceptable to the principal and puts him into contact
with the latter,0 7 although he may be required as part of his service to the
principal to obtain a written offer to purchase from the prospective purchaser
and to bring it to the principal for his acceptance. It is sometimes said that
the broker must be the causa causans and not merely the causa sine qua non
of the sale,0 s but
the application of this general formula often presents
difficulties in practice, especially where more than one broker has had some-
thing to do with the transaction, which is often the case with an open listing.
In finding the person who eventually becomes the purchaser and in being
the means by which he comes into contact with the owner the broker may
appear to have made the essential contribution to the sale, but he may only
have been the causa sine qua non and not the causa causans if he did not
614, where it was said by Lord Atkinson for the Privy Council: “. . . if an agent . .
.
brings a person into relation with his principal as an intending purchaser, the agent has
done the most effective, and, possibly, the most laborious and expensive, part of his work,
and that if the principal takes advantage of that work, and, behind the back of the agent
and unknown to him, sells to the purchaser thus brought into touch with him on terms
which the agent theretofore advised the principal not to accept, the agent’s act may still
well be the effective cause of the sale.” The Supreme Court of Canada also applied the rule
laid down in the Burchell case in Stratton v. Vachon (1910-11), 44 S.C.R. 395. See also
Budell v. Compton (1922), 28 R.L. n.s. 474 (C.A.). Sometimes it has been said that the
broker has been the effective cause if it was through his efforts that the purchaser became
in the property. Laf!renire v. Goutlet, [1952] S.C. 64; Dalling v. Brun,
“interested”
[19531 S.C. 29.
63Dagenais v. Dionne, [1947] S.C. 352; Duharnel v. Paquin, [1949] K.B. 234.
64Burchell v. Gowrie; Montreal Agencies v. Kimpton, supra.; Joseph v. Hcndy, [1955]
R.L. 109 (Brossard J.).
65Lavut v. United 5c to $1. Stores of Canada Ltd. (1941), 79 S.C. 143. A broker who
had obtained for a company a lease with an option to purchase was held to be entitled
not only to his commission for obtaining the lease but to a further commission on the
transfer of the property when the option was exercised. The client attempted unsuccess-
fully to avoid the necessity of paying this second commission by having the purchase made
by a subsidiary company under its control.
66Pruneau v. Flood (1919), 55 S.C. 106 (C.R.).
67Cf. Gironard v. Beaudoin LDe (1914), 46 S.C. 57 (C.R.).
68Ernest Pitt & Co. v. Payne & Co. (1925), 31 R.L. n.s. 308; (1925), 63 S.C. 522
(Surveyer J.) ; Financial Trust Co. v. Steinmian, [1947] R.L. 171.
No. 21
REAL ESTATE BROKER
conduct the negotiations which resulted in the agreement. True, the principal
to whom a prospective purchaser has been introduced by a broker cannot
deprive the broker of his right to a commission by negotiating directly with
the prospective purchaser and concluding the agreement himself. In such a
case, as we have seen, the broker will as a general rule be entitled to his
commission even though the sale be made for a lower price than that which
the broker was originally asked to obtain. But here the principal is liable for
the commission because he prevented the broker from bringing about the
agreement himself. A broker may be denied a commission even though he was
the person who originally interested the purchaser in the property or in-
troduced him to the owner, if the negotiations broke down 9 or were abandon-
ed 70 by him during the period of his mandate and were successfully resumed
by the owner or another broker acting for him. The lapse of time between
the broker’s introduction of the purchaser and the actual sale should not be
the decisive factor, but the sale must have resulted directly from his efforts.
Two cases in recent years illustrate the difficulty confronting the courts
when one broker is the means by which the purchaser becomes interested
in the property or comes to the attention of the principal and another broker
conducts the negotiations which are required to bring about an agreement.
In the first case 1 the plaintiff broker was the one who first interested the
purchaser in the property and visited it with him, but for reasons which are
it was because the plaintiff asked him for a
not too clear
deposit, although there is a suggestion that a lack of diligence on the plaintiff’s
the purchaser refused to deal
part might have been a contributing factor)
with him further. Another broker, with whom the defendant had listed the
property, did what was necessary to effect the sale. The court held that
although the plaintiff did not complete the sale, he had disclosed the name
of the purchaser to the defendant and had been “the primary means of
bringing about the relation of buyer and seller” between them since he had
first interested the purchaser in the property and it was that interest “which
resulted in the purchase by him.” Having come to the conclusion that the
plaintiff was entitled to some remuneration for his services, the court held
that under the circumstances it would be reasonable to award him one half
to the second
of the commission which had been paid by the defendant
broker. This was in the nature of a quantum meruit which the court ad-
mitted it had to fix “arbitrarily”.
(apparently
69Desrochers v. Power, [1944] S.C. 110; Chadburn v. Piufe (1914), 45 S.C. 442 (C.R.).
Semble, the fact that the property was eventually sold to one who might have been inte-
rested in it by the person originally introduced by the broker will not entitle the broker to
a commission. See also Communmutj des Soeurs de la CharWti de l’H6pital Gintral de
Montrial v. Colonial Real Estate Co. (1918), 27 K.B. 433, (1917-18), 57 S.C.R. 585.
70The House of Browne v. Major Manufacturing Co. (1915), 24 K.B. 270. Foley v.
Aylcn (1920), 26 R.L. n.s. 387 (C.R.) ; Vallie v. Lemieux (1920), 57 S.C. 499 (C.R.).
71Dalling v. Brun, [1953] S.C. 29 (Collins J.).
McGILL LAW JOURNAL
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In the second case72 the plaintiff brokers advertised
the property and
sent the defendant several letters containing the names of persons to whom
they had given the details of the property. Contained in one-of these letters,
in a list of some eighteen names, was the name and telephone number of
the person who eventually purchased the property. But the plaintiffs did
nothing further to effect the sale, and a second broker actually introduced
the purchaser to the defendant and carried out the necessary negotiations
to bring about an agreement between them. The second broker was paid a
commission by the defendant. The court dismissed the plaintiffs’ action for
commission, holding that while they might be said to have introduced the
purchaser to the property, they were not the effective cause of the sale.
These tvo decisions,
if not irreconcilable, appear to afford
little basis
for generalization. They seem to have turned on the view which the court
took in each case of the equities and the good faith of the parties involved. The
first case must be held to have been a particular application of the principle that a
broker may be deemed to have been the effective cause of the sale even though
another broker brought about the actual agreement. The second case illustrates
the fact that it is not enough to introduce the purchaser to the property or even to
bring him vaguely to the attention of the owner (although it is doubtful if the re-
sult would have been different even if the owner’s attention had been especially
drawn to the purchaser as in the first case)
if a failure to do anything further
makes it necessary for another broker to do the necessary work to bring matters
to a conclusion. One cannot conclude from the first case that a court will award
a commission to a broker who can be said to have made some contribution
to a sale but has not been its effective cause, though it may be possible in
a difficult case to modify the impact of the decision on an owner who has
already paid a commission to another broker by fixing an arbitrary amount
for the value of the second broker’s services.7 3 If brokers would like to see
the commission divided in cases in which more than one broker has made
some contribution
in agreement
among themselves or recourse to the arbitration facilities of the Montreal
Real Estate Board.
to a sale
they must seek their solution
It has been held recently by the Superior Court that in order to be entitled
to his commission a broker must show not only that he personally brought
the purchaser into contact with his client but that at the time he executed
the sale the client knew or had reason to believe that the person to whom
72Barrette et Guay Limitge v. Robidoux, [1955] S.C. 426 (Pr~vost J.). Cf. John Findlay
Ltd. v. Golden (1923), 29 R.L. n.s. 49 (S.C.).
73In Grigoire v. McMahon (1935), 73 S.C. 575 (Duranleau J.), after holding that the
broker had been the effective cause of the sale, the court awarded him only one half of the
commission to which it said he was entitled, giving as its reason that the defendant had
already paid another broker, but this would appear to be an isolated solution-of an equit-
able nature having no firm basis in theory or jurisprudence.
No. 2]
REAL ESTATE BROKER
he was selling had been brought into contact with him by the broker.74
In this case the plaintiff brokers had interested the purchasers in the property
and had visited the property with them but had not introduced them to the
owner and indeed had abandoned their efforts to effect a sale when they had
been misled by the prospective purchasers into believing that they were not
interested in buying the property. Other brokers to whom the purchasers
applied arranged an offer to purchase which was accepted by the owner with
a written undertaking to pay the second brokers a commission.
The court based its conclusion on what it conceived to be implicit in the
holding in Burchell v. Gowrie75 and the long line of cases which had applied
it. The rule appears to be a reasonable one since it saves an owner from
mistakenly agreeing to pay a broker a commission when he has already
become liable to pay a commission to another broker, or from agreeing to
sell his property for a certain price under the misapprehension that he does
not have to pay a commission on the sale. But the proper rationale of the
rule presents some difficulty. Probably the simplest approach is to hold that
the broker does not fulfill his mandate unless he personally introduces the
purchaser to his client so that the latter has knowledge of how the purchaser
came to him. There is a suggestion of this view in the Superior Court’s
decision but the decision seems also to have been supported by the following
line of reasoning: the principal cannot be said to have agreed to pay the
broker a commission unless when he executed the deed of sale, a condition
of his obligation to pay a commission, he did so in full knowledge that he was
thereby making himself liable to the broker for a commission because the
latter had brought him into contact with the purchaser. The difficulty with
this line of reasoning, if I have correctly represented it, is that it might lead
one
is
created by the execution of the deed of sale and not merely made absolute
by it. The mandate creates an obligation to pay the commission which
is
conditional on the execution of a sale. How far the principal is free to avoid
payment of the commission by preventing the fulfilment of this condition is
now to be considered.
that the contractual obligation
to pay a commission
to conclude
15. –
The executidn of (a deed of sale as an essential condition of the’
obligation to pay a commission. – The authority given to the broker is an
authority to “sell”. His commission is usually stipulated as a certain per-
centage of the “sale price”. It is generally agreed that it is a condition of the
principal’s obligation
take place. The
question to be considered now is when a sale is deemed to take place and
when, if ever, a broker will be entitled to his commission despite the fact
to pay a commission
that a sale
74Paquette v. St. Jean, [1954] S.C. 212 (Brossard J.). See also Joseph v. Hpndy, [1955]
R.L. 109 (Brossard J.).
75[1910] A.C. 614.
McGILL LAV JOURNAL
[Vol. 4
that a sale has not taken place, or having taken place, has been subsequently
set aside.
When a sale of immoveable property actually takes place in our law is a
today much
question on which there has been in the past and remains
difference of opinion. 76 The controversy turns around the precise nature of
the agreement which is formed by the acceptance of an offer to purchase or
the offer to sell contained in an option. Some have held that this agreement
is a contract of sale which transfers ownership between the parties to it the
moment it is formed. 77 Others have taken the view that it is simply an
agreement to enter into a contract of sale upon certain terms and conditions
by the execution of a formal deed, which alone passes ownership between
the parties.78
is supported by reference
Unfortunately there is a good deal to be said for both views, and the
controversy will probably only be ended by an amendment to the Civil Code
which clearly establishes one or other of them as
the correct one. The
first view
to the general principles governing
formation and perfection of the contract of sale: that a contract of sale is
formed when an offer to sell or to purchase a thing for a certain price is
accepted by the other party, and that when the contract involves a specific
thing it is perfected and transfers ownership by consent alone. 79 Thus the
acceptance of an offer to purchase an immoveable creates a sale. This is the
view held in France. It finds support there in the wording of article 1589
of the French Code, which provides that a promise of sale is equivalent to
sale when the parties are in agreement upon the object and the price.
The first view is not as easily reconcilable, however, with the wording
of the Quebec Code on the subject of promise of sale.80 It is this wording
which appears to be decisive to those who support the second view, although
they concede that the French rule is more logical. On the one hand the
Code says that “a simple promise of sale” is not equivalent to sale;81 on the
other, that “a promise of sale with tradition and actual possession”
is
equivalent to sale.82 The problem, of course, is to determine what is meant
by “simple promise of sale” in article 1476.
Two main arguments are put forward to support the conclusion that the
Code is referring not to the unilateral promise of sale in which the promissor
alone is bound, but to the bilateral contract which is formed by the acceptance
of the promissor’s offer. The first is that the unilateral promise of sale is so
sion about promise of sale applies equally to promise to purchase. Ibid., p. 33.
“6See Turgeon, Consid&ration sur la promesse de vente, (1952-53), 55 R. du N. 321.
77Mignault, Droit civil canadien, v. 7, pp. 26-27. What is said throughout this discus-
78Marler, The Law of Real Property, nos. 430, 436.
79Arts. 1025, 1472 C.C.
SOArts. 1476-1478 inclusive.
8lArt. 1476 C.C.
82Art. 1478 C.C.
No. 2]
REAL ESTATE BROKER
obviously not equivalent to sale that the Codifiers cannot be presumed to have
considered it necessary to say so. All that may be said in answer to this
argument, which must be conceded to have considerable force, is that Pothier, 3
whom the Codifiers were following closely in framing article 1476, thought it
worthwhile to state this obvious truth, and the Codifiers could have been in
sufficient doubt about what was intended by the wording of the French article
1589 to want to be especially careful to avoid any uncertainty. On the other
hand it is difficult to believe that the Codifiers could have concluded from the
wording of the French article, which speaks of a meeting of minds on the
object and the price, that the article was referring to other than a bilateral
contract.
The second argument is drawn from the words “but the creditor may
demand that the debtor shall execute a deed of sale in his favour according to
the terms of the promise, and in default of so doing, that the judgment will be
equivalent to such deed and have all its legal effects” which follow the opening
statement “[a] simple promise of sale is not equivalent to sale.” It is argued
that it is only the agreement formed by the acceptance of the promissor’s offer
which gives rise to the right of specific performance, and that, therefore, the
Code must be speaking about this agreement when it speaks of “,a simple pro-
mise of sale”. A possible answer to this is that by a unilateral promise of sale
the promissor obliges himself to sell should the creditor call upon him to do so
within the stipulated delay. The obligation is to execute a deed of sale. By his
“acceptance” of the promissor’s offer the creditor calls upon him to perform
his obligation, what is called in practice taking up the option –
so that it is not
unreasonable to say that a unilateral promise of sale gives the creditor the right
to demand that the debtor shall execute a deed of sale in his favour according
to the terms of the promise. Perhaps stronger answers than these can be
formulated for the arguments based on the text of the Code which are ad-
vanced in favour of the second view, but I find it difficult to resist the con-
clusion that the second view finds stronger support in the Code than the other
one does. Moreover, insofar as immoveable property is concerned it also seems
to be based on a sound presumption of the intention of the parties resulting from
the necessity of the registration of a deed in proper form in order for the sale
to have effect against third parties. It is reasonable to presume from the
necessity of this formality that in the absence of a contrary agreement owner-
ship is to pass between the parties only upon the execution of a formal deed of
sale. This is the point at which legal possession is given and from which all
adjustments are usually calculated in practice. The formal deed of sale, once
executed, constitutes the agreement of sale between the parties. Articles 1476
and following are to be applied whenever the parties are to be deemed to have
made a promise of contract. They are to be deemed to have done so where
there is clearly a necessity of some formal agreement, the essential terms of
83 0eures, 6d. 3e, Bugnet, v. 3, no. 478.
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which are to be agreed to in advance. It does not mean that every option, or
offer to sell or purchase with a delay to accept, requires some further contract
to give effect to it before ownership can be deemed to have passed. But where
such a further contract is entered into in practice then the rules of article 1476
and following will be applied to determine the effect of the preliminary agree-
ment or promise of contract unless the parties have stipulated otherwise. The
second view then is to be applied as the rule of presumed intention in the
absence of a clear expression to the contrary by the parties.8 4
It seems impossible to speak of the “weight of the jurisprudence” on this
question. A considerable amount of judicial opinion can be found to support
both views.8 5 This division of opinion, as we shall see, is reflected in the cases
which have involved the right of the real estate broker to a commission when
the person from whom he has obtained an offer to purchase for his client has
refused to sign a deed of sale.
84The rule of art. 1478 C.C. that “A promise of sale with tradition and actual posses-
sion is equivalent to sale.” is a rule of presumed intention. The parties may have in-
dicated that despite the transfer of possession ownership is not to pass until the fulfilment
of some further condition, such as execution of a formal deed of sale or payment of the
price. Dulac v. Nadeau, [1953] 1 S.C.R. 164; Mignault, op. cit., vol. 7, p. 29.
85In support of the first view see Labonti v. Larue (1921), 27 R.L. n.s. 60 (C.R.);
Langlois v. Charpentier (1914), 47 S.C. 97; Zusman v. Tremblay, [1951] S.C.R. 659, per
Taschereau J., at p. 671; although see Rinfret C.J. contra at p. 663. In support of the
second view see Talbot v. Bernier (1897), 13 S.C. 410 (C.R.) ; Shea v. D cary (1914),
46 S.C. 453 (C.R.) ; Greaves v. Cadieux (1916), 50 S.C. 361 (C.R.) ; Labelle v. Messier,
[1948] S.C. 465 (Salvas J.); Cousineau v. Gagnon (1914), 23 K.B. 309; Bercovitz v.
Pearson (1914), 23 K.B. 323; Drouin v. Dubois et Wilder-Birminghain Realty Co.,
[1951] S.C. 301 (Brossard J.). Quacre, what the bearing on this question is of the con-
flicting jurisprudence as to whether the seller who is suing for the price on an accepted
offer to purchase is bound to tender a deed of sale. See Lebel v. Les Commissaires d’Ecole
pour la Municipalitg de la Ville de Montmorency, [1955] S.C.R. 298, [1954] Q.B. 824.
The implication of certain cases which have held that the seller may sue for the price
without tendering a deed or calling upon the other party to sign one would seem to be
that there is already a sale without the necessity of a formal deed. Charlebois v. Baril
(1927), 43 K.B. 295 at 305, reversed on another point by the Supreme Court, f 1928] S.C.R.
88; Molleur v. Ewing (1927), 43 K.B. 223, at 233; Desbiens v. Bluteau (1929), 36
R.L. n.s. 201 (S.C.) ; see also Poirier v. Baril (1914), 23 K.B. 495. Nor does it necessarily
follow from the decisions holding that the seller must tender a deed of sale that the court
considered there was not a sale until such a deed was executed. See Taschereau J.
in the Supreme Court in the Lebel case, supra, at p. 303. The courts appear to be simply
applying the doctrine of non adimpleti contractus. Th6 best view, however, would seem
to be that by the accepted offer to purchase the parties agree to sign a deed of sale upon
the terms and conditions laid down in the offer, and it is the execution of the deed of sale
which creates the obligation to pay the price. The seller’s recourses, therefore, should be
an action en passation de litre which may be accompanied by a demand for the price
which will be due on execution of the deed of sale by signature or judgment, or damages,
and not an action for the price alone. Cf. Labelle v. Messier, [1948] S.C. 465 per Salvas J.
at 466.
No. 2]
REAL ESTATE BROKER
The issue does not arise when the broker’s client is at fault. Even assuming
that there is not a sale until a deed of sale is signed, the broker is entitled to
his commission since the condition of the client’s obligation to pay has become
absolute by his having prevented the fulfilment of it.8 6 This is the case where the
the deed of sale,8 7
broker’s principal refuses without justification to sign
where the other party refuses for a reason for which the principal is responsible, s8
where the parties agree to cancel the agreement,8 9 or where the sale having
been concluded, it is subsequently set aside by agreement of the parties, or for a
reason for which the principal is responsiblef 0
86Art. 1084 C.C. The client’s liability also flows from Art. 1722 C.C. which provides in
part: “When there is no fault imputable to the mandatary, the mandator is not released
from such reimbursement and payment, although the business has not been successfully
accomplished. .. ”
87Prud’homme v. Cruickshank (1908), 14 R.L. n.s. 77 (C.A.), 33 S.C. 313, (where
principal refused to sell, then renewed negotiations and subsequently sold to same buyer) ;
Garijpy v. Johnson (1911), 17 R.L. n.s. 143 (C.A.) ‘ Fraser v. Lande (1914), 46 S.C.
383 (C.R.). The same rule should apply where the principal refuses to accept the offer
of a financially responsible person to purchase the property on the conditions stipulated
by the principal. Jarry v. Baril (1915), 48 S.C. 475 (C.R.). (Principal afterwards selling
to the same person) : Roch v. Joron (1915), 48 S.C. 39 (C.R.) ; Shipman v. Pdloquin
(1915), 48 S.C. 492 (C.R.); Girard v. Fitzpatrick (1925), 38 K.B. 503; Bourgon v.
Home Realty Corporation, [1956] Q.B. 438 where it was held that there was no proof of
a mandate.
88 foscovitch v. de Samor (1915), 21 R. de J. 81, (1915), 47 S.C. 337 (seller refusing
to sell because purchaser for whom broker acting failed to fulfill his obligations) ; Aferineau
v. Viau (1914), 46 S.C. 197 (buyer refusing to purchase because seller inserted in deed
of sale conditions different from those in option) ; Brown v. McDonald (1884), 6 S.C. 491
(sale not carried out because of defect in principal’s title) ; Cf. Leclerc v. Denis, [1956]
Q.B. 722, where sale not completed because of illegal openings in principal’s building but
Court of Appeal held, reversing Superior Court, that the broker knew of the openings
when he obtained the offer to purchase and was not entitled to his commission. See also
Sofio v. Lussier, [1950] K.B. 577. There have been a number of cases applying the same
rule where a broker with a mandate to obtain a loan has found a prospective lender but
the loan has not been made for a reason for which the principal was responsible. Arpin
v. Tontant, [1949] S.C. 331; Ht v. Brodeur (1882), 6 L.N. 59; Lewis v. Lamontagne
(1897), 11 S.C. 441 (C.R.) ; Promotion Co. of Canada v. Leriche (1917), 23 R.L. n.s.
329 (C.R.) ; McLaughlin Co. Ltd. v. Dupuis Fr~res LtDe (1925), 40 K.B. 141, [1927]
2 D.L.R. 96; Johnson v. Regent Construction Company Limited (1918), 53 S.C. 463,
(C.R.), (1918), 24 R.L. n.s. 320 (C.A.).
89Brotmnan v. Meyer (1912), 41 S.C. 433 (C.R.). Doody v. Huot (1923), 34 KB. 176;
H5roux c. Dupras, [1954] Q.B. 580; see also Vanasse v. Lafontaine, [1949] K.B. 23,
where owner who put purchaser into possession under promise of sale held to have
prevented fulfilment of condition.
OODpuis v. Breton, [1942] S.C. 49. Cf. Sofia v. Lussier, [1950] K.B. 577. For case
where sale fails for lack of object, as when transfer of license for restaurant or hotel
can not be obtained, compare Lamarre v. Clairmont (1915), 48 S.C. 46 (C.R.), holding
agent was entitled to commission and Lepage v. Bouchard (1912), 43 S.C. 181 (C.R.),
holding that he was not.
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The difficulty arises when the purchaser refuses without justification to give
effect to his accepted offer to purchase by signing a deed of sale. The juris-
prudence leaves an impression of uncertainty as to whether
the broker is
entitled to his commission in this case. The point of departure for an analysis
of the present state of the jurisprudence on this question would appear to be the
decision of the Court of Appeal in 1952 in Breuer v. Boyer.91 By a three to
two decision the court held that the broker was not entitled to his commission
when the prospective purchasers, from whom he had obtained an offer to
purchase that was accepted by the principal, refused to sign the deed of sale,
stating that they did not have the money to make the required down payment.
The reasons given for the majority decision were that in view of articles
1476 and following of the Civil Code the agreement formed by acceptance of
the offer to purchase could not be said to be a sale, and therefore an essential
condition of the owner’s obligation to pay a commission had not been fulfilled,
without any fault being imputable to him; and secondly, the broker failed to
fulfil his mandate in presenting his principal with purchasers who did not have
the means of making the required cash payment. At least two of the judges
making up the majority appear to have been satisfied that at the time he pre-
sented the offer to purchase to his principal for acceptance the broker knew or
had good reason to believe that the purchasers were financially incapable of
meeting their obligations. The acceptance of the offer to purchase contained an
acknowledgment by the owner that the work of the broker was completed on
the signing of the acceptance, but the members of the majority distinguished
between the work which the broker must perform to fulfil his mandate and
any other condition of the principal’s obligation to pay him a commission.
The dissenting judges held that there must be deemed to have been a sale
by virtue of article 1472 and that failing prior knowledge by the broker of
the financial incapacity of the purchasers, the broker’s principal must bear the
risk of such incapacity. The issue really separating the majority and minority
in this particular case might therefore be reduced to one of fact: did the broker
know at the time he took the offer to purchase or presented it to his principal
for acceptance that the purchasers did not have the means of making the cash
payment? For had the minority taken a different view of this question they
91[1952] Q.B. 273. For cases prior to this in which the broker’s claim was rejected:
Globensky v. Dame Morrissette (1893), 4 S.C. 386; Petit v. Lussier (1914), 46 S.C.
195
(C.R.) ; Lussier v. Cloutier, [19501 S.C. 177, all cases in which it was agreed
that the broker should be entitled to anything he obtained over a certain amount; also
CommnnautW des Soeurs de la Charitg de l’Hbpital Gi~nral de Afontral v. The Colonial
Real Estate Company (1918), 27 K.B. 433, (1919), S.C.R. 585; Hoffman v. Deslanriers
(1915), 48 S.C. 15 (C.R.) ; Petit v. Robert (1930), 48 K.B. 249, where principal refused
to conclude contract because property offered in lieu of price was not free from encum-
brances. For a case holding that the broker was entitled to his commission when he found
a prospective purchaser who made an offer that was accepted by the owner even though
the prospective purchaser failed to give effect to the agreement by signing a deed of sale
see Girouard v. Beaudoin Lte (1914), 46 S.C. 57 (C.R.).
No. 2]
REAL ESTATE BROKER
might not have dissented. But there remains the uncertainty resulting from the
divergent opinions expressed as to the nature of the agreement formed by accept-
ance of the offer to purchase, as well as the question of whether the majority
decision might have been different had the broker offered financially responsible
purchasers.
Such was the case a few years later in Barrette et Guay Limitge v. Morency9 2
where Surveyer J., observing that the purchaser was solvent, held that the broker
was entitled to his commission although the purchaser had refused to sign the
deed of sale. The offer to purchase (called
‘Promesse d’achat’) contained a
clause concerning termination of the broker’s work similar to that in the Breuer
case. The court held that the broker had fulfilled his mandate when the offer
to purchase was accepted and he Was not required to see that the purchaser
presented himself for signature of the deed of sale. Moreover, the bilateral
promise to purchase was equivalent to sale (citing Mignault) and gave the
principal recourses which, it was implied, he should exercise. Decisions rendered
since this case, being mainly causes d’esp~ce, have not made too much con-
tribution to the clarification of the general rule.93
Is there a solution to this problem which does not depend on the controverted
application of articles 1476 and following of the Civil Code –
a solution which
assumes that the signature of a deed of sale is an essential condition of the
broker’s obligation to pay a commission? Certainly it appears reasonable to
insist that the broker cannot be said to have fulfilled his mandate unless he
offers a financially responsible purchaser, and it should be his duty to ascertain
the financial capacity of the prospective purchaser or bear the risk of the
purchaser being unable to meet his financial obligations at the time of signing
the deed of sale. After that, the risk should be on the vendor, who should not,
for example, have the right to recover the commission if the sale is dissolved
for non-payment of the price. If the owner who has accepted an offer to
purchase from a financially responsible person clearly refuses to exercise his
recource against that person to compel the execution of the deed of sale then
he may be considered to have prevented the fulfilment of the condition on
92[1955] S.C. 229.
931n particular Dupuy & Fils Lte v. Lamy, [1955] S.C. 422 (Collins J.) where the
offer to purchase provided that if for any reason the sale failed to be completed the
deposit made by the prospective purchaser should be retained by the brokers as liquidated
damages. In an action by the brokers for commission after the principal had consented
to a cancellation of the agreement apparently because the prospective purchaser was unable
to find the necessary money to go through with the sale, the court held that the above
clause in the contract defined the whole of the broker’s rights in such a case and dismissed
the action. Said Collins J.: “… . clauses of the kind in question which purport to give a
commission solely by reason of the execution of a promise of sale are open to suspicion
and could lead to grave abuse in the hands of unscrupulous people dealing with honest people
innocent of the legal effect of such contracts”., citing Breuer v. Boyer. See also dicta in
Abbott v. Desmarteaux, [1957] Q.B. 378 and Laurentide Realties Co. Ltd. v. Celestino,
[1957] Q.B. 694.
McGILL LAW JOURNAL
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which his obligation to pay the commission depends, and the condition thereby
becomes absolute. It is as if the owner had agreed with the other party to
cancel the agreement. If the owner elects to exercise his recourse can the
broker be said to be entitled to his commission before the deed of sale has been
executed by signature or judgment? It is doubtful, but applying the rule of
article 1722 which provides that “Where there is no fault imputable to the
mandatary, the mandator is not released from such reimbursements and payment,
although the business has not been successfully accomplished . . . ” it may be
argued that the broker who has fulfilled his mandate by finding a financially
responsible purchaser
to his commission at the time fixed for
signature of the deed of sale, even if the deed of sale is not signed at that time,
so long as the failure to sign it is not imputable to the broker’s fault.
is entitled
Another question which must be considered in connection with this whole
problem is whether the agreement to pay a commission to the broker which
the owner usually signs with his acceptance of the offer to purchase constitutes
an unconditional obligation to pay the commission. (The statement in the
standard offer to purchase approved by the Montreal Real Estate Board reads
in part: “I … hereby accept said offer and agree to pay .
. . (the broker) a
commission of … % of the sale price. . . .”) The courts do not appear to have
ruled on this question yet. But assuming that the signature of a deed of sale is
an implied condition of the obligation to pay a commission under every
mandate given to a real estate broker, in the absence of a clear stipulation to
the contrary it would seem to require more explicit language than that used in
the customary formula to dispense with this condition.
It has been held that the broker who has been deprived of his commission
by the purchaser’s refusal to sign the deed of sale does not have a claim against
the purchaser for damages.9 4
16. –
The broker’s remuneration. – The remuneration of the broker is
usually stipulated as a commission consisting of a certain percentage of the sale
price.95 It may, as we have seen, consist of the amount by which the selling
price exceeds a certain amount, or if the broker is acting for the purchaser,
the amount by which the purchase price is less than a certain amount.
If the parties have said nothing about remuneration,
the broker will be
entitled to the commission established by usage for the particular type of trans-
action involved, since the mandate is by usage a remunerative one.9 6 The broker
94St. Louis v. Longtin, [1950] S.C. 255 (Demers J.) ; Cf. AMoscozvitch v. Sambor (1915),
47 S.C. 337 (C.R.) where the majority held that the broker was entitled to damages for
loss of commission owing to the purchaser’s failure to sign the deed of sale, but it appears
that they were also prepared to hold that the broker had a mandate from the purchaser.
95See Goyette v. Michzaud, [1949] K.B. 235, holding that the agent will not be entitled
to his commission when no proof has been made of the price for which the sale has been
made.
9 6Raymond v. Marcotte (1914), 46 S.C. 384; Dudemaine v. Pelletier (1913), 19 R.L.
n.s. 380 (S.C.); Grigoire v. McMahon (1935), 73 S.C. 575; Touchette v. Godin, [1947]
No. 2]
REAL ESTATE BROKER
may also claim the commission recognized by usage when he is unable to prove
an agreement to pay a special commission.07 In such cases the broker must
allege and make proof of the usage. Although the contrary has sometimes been
held, s it would appear that a person must be a broker regularly practising as
such to claim the commission established by usage.99 The courts have on several
occasions accepted the tariff of charges recommended by the Montreal Real
Estate Board and observed by its members as evidence of the usage,100 although
in one case the court declined to apply the tariff of the Board to brokers who
were not members of it.’ 0 ‘ It is a nice question how far persons who retain
members of the -Montreal Real Estate Board should be deemed to have agreed
to pay its recommended charges in particular cases. A usage must meet certain
tests before it will be applied by the courts.10 2 The standard rates of commis-
sion charged for the sale of residential and business properties certainly meet
these tests. But what of a rule like the following one in the Montreal Real
Estate Board’s tariff of minimum charges: “If a consideration, cash or other-
wise, has been paid for an option arranged by a broker and the option is not
exercised, the broker may charge the principal granting the option one-half
of the consideration received, but in no event shall this amount exceed the sale
or rental commission to which the broker would have been entitled had the
option been exercised”? Is the client deemed to have impliedly agreed to pay
this charge when he retains a member of the Board or does the rule simply
mean that a member is authorized by the Board to stipulate this charge in his
agreement with the client? The latter would appear to be the better view of the
matter. Such rules may raise a presumption of what the actual practice is but
they do not automatically apply to persons who retain members of the Board.
The practice must be so well established that it may be presumed to have been
known to the client before it can be applied as an implied term of the contract.
17. –
The double mandate. – Although at one time it looked as if the
Quebec courts might hold that it was always immoral or illegal for a real estate
broker to obtain an agreement to pay a commission from both parties to a
S.C. 147; Handfield v. Binnette, [1947] S.C. 384; Lafrcni&e v. Goidet, [1952] S.C. 64.
Juneau v. Cook (1917), 54 S.C. 291, (C.R.), a case involving a commission ag,:nt, has
been cited in some of the real estate cases to support the proposition that the mandate
given to the real estate broker is by usage one for remuneration.
97Lcnmieux v. Morrisset, [19481 R.L. 559. The broker may also be entitled to the com-
mission established by usage where, because he-sold the property on terms different than
those originally stipulated he is not entitled to the special commission to which the principal
had agreed. See note 61, supra.
OSiright v. The King (1914-16), 15 Ex. C.R. 203; Langelier v. Roy (1916), 22 R.L.
n.s. 123 (C.A.).
09Riclards v. Brossard, [1945] S.C. 179; Lafreiire v. Martel, [1948] S.C. 253.
10 (E.g. Handfield v. Binette, [1947] S.C. 384.
‘0 1Dalling v. Brun, [1953] S.C. 29.
1o2joyal v. Beaucage (1921), 59 S.C. 211.
McGILL LAW JOURNAL
[Vol. 4
transaction, on the ground that it necessarily involved a conflict of interest,10 3
the rule which has emerged from the jurisprudence is that the double mandate
is not inherently illegal and may be enforced by the courts in situations where
the interests of the parties do not appear to be opposed, provided the broker has
frankly disclosed his position to both parties and has acted fairly and honestly in
the interest of both. 0 4 There must not be any fraud or collusion. The rules of the
Montreal Real Estate Board permit a broker to collect a commission from a
purchaser if he is authorized in writing to buy property at public auction, forced
sale, or private sale “and providing he is not receiving any commission from
the vendor.” The same rules require that “Where
there is an exchange of
property, full commission shall be charged to each principal as though separate
transactions had been made.”
103Aubut v. Gareau (1928), 27 K.B. 474, revg 23 R de J. 406 (C.R.). See also Lemieux
v. Les Ecclsiastiques du Sinzinaire de St-Sudpice (1912), 18 R.L. n.s. 434 (C.A.);
C6tj v. Ditournay (1919), 25 R.L. n.s. 63 (S.C.). Murphy v. Lafrenire (1928), 34 R
de J. 466 (S.C.) ; Parnass v. Martel (1927) 65 S.C. 505 (S.C.).
104Brouillet v. Lepage Limitie (1925), 38 K.B. 143; Cradock Simpson Company v.
Sperber (1925), 63 S.C. 492 (S.C.) ;Bellerose v. Trottier (1927), 33 R.L. 206 (S.C.) ;
Dupuis v. Breton (1942), 80 S.C. 49; Roy v. Dupri, [1943] R.L. 343 (S.C.) ; Dagenais v.
Dionne, [1947] S.C. 352; C. v. Dankner, [1951] S.C. 392. In the last case it was held that
since plaintiff had not acted honestly towards his other principal, his agreement with the
defendant was illegal. Cf. the Brouillet case, supra, where the majority held that the
broker was entitled to recover from the principal in whose interests he had acted even
though it appeared that he had sacrificed the interests of the other principal. For
the rights of the principal when the broker has acted fraudulently towards him or received
a secret profit or commission: Comtois v. Archambault (1923), 35 K.B. 520; Martel v.
Pageau (1896), 9 S.C. 175; Loiselle v. Poirier (1925), 31 R.L. n.s. 249.
