Arroway Estate Agents v Rock Investments (Pvt) Ltd

On 24 January 2013, the plaintiff estate agent (Arroway Estate Agents) was given a mandate by the defendant (Rock Investments (Pvt) Ltd) to source buyers for the defendant's property, Stand 119 Northwood Township (Mashanda Flats). The defendant's representative, Cara Gilboy, completed an instruction form but amended a standard clause to provide that the purchaser (rather than the seller) would pay the 5% agent's commission. On 25 January 2013, the plaintiff wrote to the defendant stating that according to the Estate Agent Council Act, commission must be paid by the seller, not the buyer. The defendant did not respond to this letter but allowed the plaintiff to proceed. The plaintiff's representative, Mildred Tandadzai, showed the property to prospective buyers in the presence of Cara. The buyer, ZB Financial Holdings Group Pension Fund, made an offer of $600,000 which the defendant accepted. The property was eventually sold for $623,000, and transfer was effected on 6 May 2013. The defendant refused to pay the commission of $30,000 (5% of $600,000), claiming there was no valid contract and that one Richard Karichi had fraudulently misrepresented himself as the plaintiff's employee when securing the mandate.

• Whether a valid contractual relationship existed between the plaintiff estate agent and the defendant seller
• Whether the parties reached consensus (meeting of minds) on the terms of the agency agreement, particularly regarding who was to pay the commission
• Whether alleged fraudulent misrepresentation by a third party (Richard Karichi) vitiated the contract
• Whether the plaintiff was the effective cause of the sale and thus entitled to commission
• Whether an estate agent is entitled to commission when the seller completes the transaction directly with a buyer introduced by the agent

The defendant was ordered to pay: (1) US$30,000.00 being agent's commission for the sale of Stand 119 Northwood Township of Sumben, Harare; (2) Interest on US$30,000.00 at the prescribed rate from 28 February 2013 to the date of payment in full; (3) Costs of suit.

The binding legal principles established are: (1) An estate agent who is mandated to find a purchaser for property and successfully introduces a willing buyer with whom the seller concludes an agreement is entitled to commission as the effective cause of the sale, even if the seller completes the transaction behind the agent's back. (2) Where parties dispute contractual terms, subsequent conduct can demonstrate acceptance and consensus ad idem - here, the defendant's continued cooperation after receiving notice that the seller must pay commission constituted acceptance of those terms. (3) Under estate agency law, commission is payable by the party giving the mandate (the seller), as the contract is between the seller and the agent, not the buyer. (4) The relationship between estate agent and seller, while sui generis, creates binding obligations once the agent performs by introducing a willing purchaser, even though the agent is under no initial obligation to perform.

The court noted that there are circumstances where an estate agent may not be entitled to commission from a seller: (1) where the agent takes the initiative by approaching the property owner to ascertain interest in selling without clear agreement on commission (Bosch v Flower Box (Pty) Ltd 1971(4) SA 640(E)); and (2) where an agent is approached by a buyer and then persuades the owner to sell (Botha v Smit 1976(4) SA 885(A)). The court also observed that it was "mischievous" of the defendant to contend there was no contract after the plaintiff had performed its obligations, suggesting this was an attempt to avoid a legitimate debt. The court commented on the improbability of the defendant's version regarding Richard Karichi's involvement, particularly the claim that it rejected an offer of $675,000 but readily accepted a lower offer of $600,000 from the same source.

This case clarifies important principles of estate agency law in Zimbabwe, confirming that: (1) the relationship between an estate agent and seller is sui generis - the agent is under no obligation to find a buyer but the seller is bound to pay commission upon the happening of the specified event (introduction of a willing buyer); (2) conduct can demonstrate acceptance of contractual terms even without express written agreement; (3) under the Estate Agent Council Act, commission must be paid by the seller (the party giving the mandate), not the purchaser; (4) an estate agent is entitled to commission if it was the effective cause of the sale, even where the seller completes the transaction directly with the introduced buyer; and (5) alleged fraud by a third party not connected to the agent does not vitiate the agency contract where the principal knew and dealt with the true representative of the agent.