The appellant, an estate agency, negotiated a sale of immovable property between the Estate Late Hayisa (seller) and the respondent (purchaser). The respondent failed to raise the purchase price which he indicated was coming from abroad. He notified the appellant of his predicament and advised them to sell the property to another purchaser. The seller cancelled the agreement of sale. The appellant then claimed payment of $4,427.50 as commission (60% to appellant, 40% to Delscart Properties who introduced the buyer). The claim was based on clause 13.4 of the agreement of sale, which was a penalty clause providing that if any party breached the agreement causing cancellation, the defaulting party shall be fully liable for the estate agent's commission. The property was subsequently sold to a third party with the appellant facilitating that sale. The Magistrate's Court dismissed the claim, and the appellant appealed.
The appeal was dismissed with costs. The Court a quo's decision was upheld, albeit on different grounds than those relied upon by the Magistrate (who had focused on the penalty clause being unenforceable).
An estate agent who is not a party to an agreement of sale has no locus standi and no cause of action to claim commission from the purchaser based on a penalty clause in that agreement of sale, even where the purchaser has breached the agreement. The terms of a contract are binding only on the contracting parties and cannot be enforced by a third party. Under common law, estate agent's commission is payable by the seller, not the purchaser. This position is reinforced by section 69 of the Estate Agents Act which voids any contract term purporting to enable an estate agent to choose which party shall pay commission. The estate agent's entitlement to commission arises from a separate contract between the agent and the seller for the provision of agency services.
The Court observed that given the finding on locus standi and cause of action, it was unnecessary to inquire into whether the penalty clause was enforceable or whether the court a quo was correct in finding it unenforceable due to disproportion between the burden on the respondent and prejudice suffered by the appellant. The Court also noted, obiter, that there was a question about the appellant's authority to claim the 40% portion of commission that was due to Delscart Properties, particularly where Delscart had indicated it was not claiming that amount. The Court commented that the seller would be the proper party to claim damages for breach of contract if it had already paid the agent's commission.
This case is significant in Zimbabwean (and by extension relevant to South African) jurisprudence as it clarifies important principles regarding estate agents' rights to commission. It establishes that an estate agent who is not a party to an agreement of sale lacks locus standi to sue a purchaser for commission based on terms in that agreement, even where there is a penalty clause. The case reinforces the common law position that estate agents' commission is payable by the seller, not the purchaser, and that this principle is entrenched in estate agency legislation. It demonstrates the importance of properly identifying the parties to a contract and understanding who has a cause of action arising from breach. The case also addresses the limits of penalty clauses and the principle that third parties cannot enforce contractual terms to which they are not party.