Obligations of the Principal

Question 1

What are the residual obligations of the principal?

Answer 1

1. To pay the agreed remuneration, if any
2. To account
3. If the agent is a mandatary, to indeminfiy the agent in certain instances.

Question 2

What is the obligation to pay the agreed remuneration?

Answer 2

The principal must pay the agent the agreed, usual, or reasonable remuneration.

Question 3

What is the leading case on the ways in which the amount of remuneration may be determined?

Answer 3

Barnabas Plein v Sol Jacobson.

Question 4

What are the ways in which the amount of remuneration may be determined?

Answer 4

1. The amount may be fixed in the agreement, expressly or tacitly
2. In the absence of express or implied agreement, the agreement is commonly regulated by the trade usage applicable in the relevant profession
3. If remuneration is not fixed or subject to regular trade usage/tariff, then the agent is entitled to recover an amount that is reasonable in the circumstances.

Question 5

What is the nature of a commission agreement?

Answer 5

One in which the principal promises to pay a sum of money upon the happening of a specified event, which involves the rendering of some service by the agent. (Gluckman v Laundau & Co)

Question 6

What determines the service and the event?

Answer 6

The contract.

Question 7

In the absence of express agreement relating to service and event in the context of estate agents, what is the general rule?

Answer 7

The estate agent is unempowered.

Question 8

What is the obligation of an unempowered estate agent?

Answer 8

To introduce to the principal a buyer who is ready, willing and able to buy on the stipulated trms or other terms as are acceptable to the principal.

Question 9

Which case demonstrates the effect of the obligation on the earning of the commission?

Answer 9

Commercial Business Brokers v Hassen.

Question 10

What did the court hold in Commercial Business Brokers v Hassen?

Answer 10

The general rule is that an agent such as the appelllant who is employed to sell or find a purchaser for a property or business only becomes entitled to payent of his commission upon the conclusion of a binding contract of sale between the seller and a willing and able purchaser introduced by the agent.

Question 11

What is the event which earns the commission?

Answer 11

The conclusion of a binding contract.

Question 12

What are the requirements to earn the commission?

Answer 12

1. Complete performance or substantial performance.
2. Causation

Question 13

What is the requirement of substantial performance?

Answer 13

Substantial performance will be found where the transaction which results is not the precise one which was envisaged under the mandate but which has almost the same effect.

Question 14

What is the case example of substantial performance?

Answer 14

Sammel v Jacobs.

Question 15

What is the requirement of causation?

Answer 15

The agent must have contributed to the desired result to an extent sufficient to entitle him to claim his commission.

Question 16

What are the general principles relating to causation?

Answer 16

Agent must have been the effective cause of brining the principal and the 3rd partuy together in a transaction.

Question 17

Which case is the leading case on the test for causation?

Answer 17

Aida Real Estate v Lipshitz.

Question 18

What is causation in the case of empowered agents?

Answer 18

The causation would be directed towards concluding the contract on the principal’s behalf.

Question 19

What is causation in the case of unempowered agents?

Answer 19

Whether the agent has causally contributed to bringing the parties together to negotiate a contract

Question 20

What did the court hold in Aida Real Estate v Lipschitz?

Answer 20

If a new factor intervenes causing/contributing to the conclusion of the sale and the new factor is not of the making of the agent, the final decision depends on the result of a further enquiry:
1. Did the new factor outweigh the effect of the introduction by being more than or equally conducive to the bringing about of the sale as the introduction was
2. Was the introduction still overridingly operative (if so=commission)
3. Agent’s instrumentality must have been in all the phases from the introduction t the sale consistent, uninterrupted and a major positive force working towards the successful conclusion of the transaction
4. Test is objective.

Question 20

What is the leading case on forfeiture of commission?

Answer 20

Levin v Levy

Question 21

What did the court hold in Levin v Levy?

Answer 21

Where an agent has acted improperly and unfaithfully in the performance of his duty towards his principal, he will forfeit any remuneration/commission to which he would otherwise have been entitled if his improper or unfaithful conduct is connected with the duty he had to perform.

Question 22

What happens if the agent acts negligently in fulfilling the mandate and this causes the principal loss but the event justifying the commission is fulfilled?

Answer 22

The agent does not forfeit the commission but will face a damages claim.

Question 23

When will an estate agent forfeit their commission?

Answer 23

If they are not entitled to it by law.

Question 24

What does section 48 of the Property Practitioners Act hold?

Answer 24

No person may act as a property practitioner unless in addition to any other requirements have been issued a Fidelity Fund certificate or such person employed has one.

Question 25

What does section 56 of the Property Practitioners Act hold?

Answer 25

Property practitioners not entitled to remuneration in the following circumstances unless they hold a Fidelity Fund certificate.

Question 26

What is the obligation to account?

Answer 26

The principal is obliged to keep proper, up-to-date accounts where remuneration or expenses are to be paid or recovered, must distribute these to the agent, and must allow the agent, where encessary, to inspect the books of account.

Question 27

What is the obligation to indemnify the agent (mandate cases)?

Answer 27

A mandator is liable to indemnify his mandatary in respect of expenses incurred or loss/damage suffered as a result of the execution of the mandate.

Question 28

What are the requirements in relation to the obligation to indemnify the agent?

Answer 28

1. Mandatary must have acted ito the mandate
2. Mandatary must have incurred expenses or suffered loss

Question 29

When does the queston of indemnity arise?

Answer 29

Only if the mandatary has acted ito the mandate.

Question 30

What is the case for the requirement that the mandatary must have acted ito the mandate?

Answer 30

Meikle v Van Essyen.

Question 31

What is the requirement that the mandatary must have incurred expenses or suffered loss?

Answer 31

1. Principal must refund the agent for all expenses reasonably and properly incurred in carrying out the mandate
2. Principal must refund the agent for any damages or loss suffered as a result of executing the mandate

Question 32

When may a mandatary not be indemnified?

Answer 32

1. Assumption of responsibility by the mandatary (agreement/trade usage)
2. The fault of the mandatary (includes excessive expenditure)