AGENT SUES FOR COMMISSION IN TERMS OF AN ADDENDUM SIGNED BY SELLER AND PURCHASER WHICH AGENT NEVER SAW DG Premier Property Cape (Pty) Ltd t/a Dogon Group v Chestnut Hill Investments 260 (Pty) Ltd and Another (26681/2009) [2010] ZAWCHC 211 (27 October 2010)
An interesting judgment in which the Court confirmed that an addendum to an agreement of sale, in which the seller and purchaser dealt with their respective liability for the agent's commission, constituted an agreement for the benefit of a third party. The agent could therefore successfully claim his commission despite not having been party to nor ever having sight of the addendum. The Judgment can be viewed here. Facts
This matter deals with a claim by Dogon Group, an estate agency, for payment of commission of R2 million in respect of a property transaction in which Chestnut Hill Investments 260 (Pty) Ltd (?the seller?) sold Erf 319 Clifton to Great Force Investments 205 (Pty) Ltd (?the purchaser?) in August 2009. When the commission was not paid, Dogon Group approached the Court and claimed commission from both the seller and purchaser, each liable for R1 million upon transfer of the property into the name of the purchaser. Dogon Group?s claim was based on: ? an alleged oral mandate; or, in the alternative ? clause 4.1. of an addendum to the deed of sale concluded between the seller and purchaser (on the same day the main sale agreement was signed), but which was not signed by Dogon Group itself. The terms of this clause, so it was argued, constituted an agreement for the benefit of Dogon Group (a stipulatio alteri), the benefits of which it had accepted. Moreover, inasmuch as it had not signed the addendum or previously indicated its acceptance of the benefit, Dogon Group (the applicant before the Court) recorded in its papers before the Court that: ?To the extent necessary, applicant has accepted alternatively hereby accepts the benefits under the written sale agreement.? It also argued that it would have accepted the provisions of the commission clause (the stipulatio alteri) sooner, were it not for the fact that the seller had refused to provide it with a copy of the addendum agreement. Clause 4.1 of the addendum to the deed of sale read as follows: "The seller shall pay to Dogon Group ("the agent") commission in the sum of" R1 000 000 (inclusive of VAT) or such lesser amount as may be agreed between them in writing upon the transfer date of the properly into the name of the purchaser. In addition, the purchaser shall pay die agent commission in the sum of R1 000 000 (inclusive of VAT) or such lesser amount as may be agreed between them in writing over and above the Property Price paid to the Seller, directly to the agent upon registration of transfer (and after fulfilment of all the conditions precedent). Commission shall only be deemed to be earned by the agent and payable by the Seller and Purchaser upon registration of transfer.? The seller defended the matter by arguing that the provisions of clause 4.1 did not constitute an agreement for the benefit of a third party (i.e. Dogon Group) as applied in our law. It was argued in this regard that our law views a stipulatio alteri (a contract for the benefit of a third) not simply as a contract designed to benefit a third person, but as a contract between two persons that is designed to enable a third person to come in as a party to a contract with one of the other two. The mere conferring of a benefit is therefore not enough; what is required is an intention on the part of the parties to a contract that a third person can, by adopting the benefit, become a party to the contract. (Note that the claim against the purchaser was settled after the Court proceedings were instituted and the Court therefore did not make further reference to the position of the purchaser in the judgment.)
Held: ? Each instance of a contract for the benefit of a third party must be decided on its own facts because the enquiry hinges entirely on the question whether there was an intention that the third party could, by accepting the promise, become a party to the contract in which the stipulation was embodied. ? The facts here could be compared to the finding in George Ruggier & Co v Brook in which the purchaser of fixed property addressed a letter to the agents of the seller and offered to buy the property at a stated figure and to pay half the agent's commission. The seller accepted the offer and the agent subsequently successfully sued the purchaser directly for commission, based on the undertaking. The court there held that it was intended by all concerned that the undertaking by the purchaser could be adopted by the seller so as to give him a right of action against the defendant in the event of the sale going through on the terms proposed by the purchaser in the letter. As such, a contract between the agent and the purchaser came into being upon acceptance by the agent of the benefit. ? In the present matter, the express terms of clause 4.1. recorded in peremptory terms that the seller and the purchaser, "shall pay? to Dogon Group commission in the specified sum of R1 million each. These words showed a clear intention that it was to be for the benefit of Dogon Group. ? Moreover, the Court noted that the sole purpose of the addendum (which was signed on the same day as the main deed of sale) was to regulate the question of commission payable to Dogon Group and the respective contributions by the buyer and seller. It was therefore noteworthy that, in concluding the addendum, the seller and purchaser agreed to share the liability for commission on almost identical terms as was originally proposed by the seller in the first draft of the deed of sale, which was forwarded by the seller to Dogon Group for submission to the purchaser, some 4 months before the final agreement was signed. ? It was further instructive that the attorneys for both the seller and purchaser referred to clause 4.1. as constituting a stipulatio alteri. Thus, where both parties to the addendum at one stage recognised the provisions of clause 4 for what they were, it would be absurd for the Court now to attribute a different interpretation to the clause, as contended for by the seller. With regard to the issue that Dogon Group had no knowledge of the document and therefore of the benefit awarded to it in terms thereof, the Court mentioned that this argument of the seller was not without merit. However, the Court held that it was not necessary for it to make a specific finding to this effect because of its finding on the facts.