Estate Agency Commission: When the Seller Must Pay Despite the Sale Falling Through

Imagine for a moment: you own a flat in Firminy, in the Loire. You entrust the sale to an estate agent. They find a buyer, a preliminary contract is signed. But the administration exercises its right of pre-emption (priority to purchase) and the sale falls through. The agent, understanding, waives their commission. Then, a few months later, you eventually sell the property to the same buyer, without the agent. That is where everything changes. The agent demands their commission. Are they right? The question every owner asks: must I pay a commission if the sale did not go through?

The Court of Cassation, in a ruling of 23 July 1973, answered in the affirmative in certain circumstances. It held that the agent was entitled to their commission as long as they had brought the negotiations to a conclusion and the subsequent sale was carried out in fraud of their rights (i.e., by deliberately circumventing their work).

This decision, although old, remains an absolute reference on the right to commission of business agents and estate agents. It illustrates a fundamental principle: the right to remuneration does not always depend on the actual completion of the sale, but may arise from the performance of the entrusted mission, unless otherwise stipulated. Let us dissect this case to understand your rights and obligations.

The facts: a story like those that happen every day

Mr X, owner of a building in Firminy, entrusts the sale of his property to the company Allorge, a business agent. A preliminary sale contract is signed with a buyer. But the Agence Foncière et Technique, a public body, exercises its right of pre-emption (right to buy first). The sale becomes impossible. The agent, in good faith, then waives his commission. He thinks the sale can never take place.

Some time later, the owner eventually sells his property to the same buyer, directly, without going through the agent. The latter, considering he has been circumvented, demands his commission. The seller refuses, arguing that the sale was not carried out by him and that he had waived it.

The case is brought before the courts. The agent succeeds on appeal, but the seller appeals to the Court of Cassation, arguing a contradiction in the lower court's reasoning: how can payment of the commission be ordered while recognising that the sale could not be completed because of the right of pre-emption? The Court of Cassation dismisses the appeal and upholds the appellate court's reasoning.

The reasoning of the court — dissected

The Court of Cassation relies on two findings. On the one hand, the agent had actually brought the negotiations to a conclusion: he had found the buyer, secured acceptance of the price, prepared the terms of the preliminary contract. He had fulfilled his mission. On the other hand, the seller, after benefiting from this work, had sold the property in fraud of the agent's rights, i.e., by knowingly circumventing his intermediary to avoid him.

In law, the basis of the obligation to pay the commission lies in Article 1134 of the Civil Code (old, now Article 1103) which provides that agreements lawfully entered into take the place of law for those who have made them. But above all, the ruling recalls that the condition of completion of the sale must be assessed in good faith. The seller cannot rely on the absence of an actual sale when it is he who, by his disloyal conduct, prevented that completion. This is an application of the theory of fraud: no one can rely on their own turpitude (dishonesty) to escape their obligations.

The decision does not create new law but confirms consistent case law: the agent is entitled to his commission as soon as he has performed his mission, unless the contract expressly makes payment conditional on the signing of the deed of sale (final sale deed). Here, the contract did not contain such a clause. The judges therefore held that payment was due.

What this means for you — concretely

If you are a seller, know that entrusting a mandate to an agent does not definitively commit you to paying a commission if the sale does not go through, but you must be in good faith. If the agent has done his work and you then sell directly to the buyer he introduced to you, you risk having to pay the commission. For example, in Rive-de-Gier, an owner had to pay €8,000 in commission after selling privately to a buyer found by the agency, because the initial preliminary contract had failed for a technical reason.

For the buyer, this decision has little direct impact, but it highlights the importance of checking that the agent has a written mandate and that the commission conditions are clear. If you are a tenant, this does not directly concern you, but you may be involved if you buy the rented property: beware of clauses that could demand a commission from you if you deal directly with the landlord.

In practice, to avoid a dispute, read the mandate carefully: check whether the commission is due upon signing the preliminary contract or only at the deed of sale. If the mandate provides that the commission is earned as soon as the agent presents a serious buyer, you will have to pay even if the sale fails for a cause beyond your control (such as the right of pre-emption).

Four tips to avoid this type of dispute

• Draft a clear mandate: specify the conditions of the commission: due upon signing the preliminary contract or only at the deed of sale? Indicate whether the commission is retained in case of failure due to an external cause.
• Never circumvent your agent: if you have a buyer introduced by the agency, do not try to deal directly with him, even if the initial preliminary contract has failed. You risk having to pay the commission plus damages.
• Always obtain written confirmation of any waiver: if the agent tells you he waives his commission, ask him to confirm it in writing. Otherwise, he might change his mind later.
• Consult a lawyer in case of doubt: before signing a preliminary contract or refusing to pay, seek professional advice. A simple consultation can save you from a costly lawsuit.

Further reading: related case law and developments

This 1973 decision is part of a consistent line of the Court of Cassation. One can cite a ruling of 10 January 1995 (No. 92-21.674) which held that the agent is entitled to his commission even if the sale is not completed, provided he has performed his mission and the lack of completion is attributable to the seller. Conversely, if the sale fails for a reason beyond the parties' control (right of pre-emption, refusal of financing), the commission is only due if the contract expressly so provides.

Since the Hoguet Law of 1970 and its implementing decrees, the rules have been strengthened: the mandate must be in writing, mention the amount of the commission, and specify the conditions for its payment. The courts are very strict on these formalities. Thus, if the mandate is imprecise, the agent may lose his right to commission.

The current trend is towards consumer protection: ambiguous clauses are interpreted in favour of the seller. But fraud remains sanctioned. In summary, this 1973 case law has not been overturned and continues to apply.

Summary and next steps

FAQ:

• Can an agent claim his commission if the sale fails because of the right of pre-emption? Yes, if the mandate provides that the commission is due upon signing the preliminary contract, or if the seller sold in fraud of the agent's rights.
• Can I sell directly to a buyer introduced by the agent if the initial preliminary contract did not go through? No, this is risky. You could be ordered to pay the commission, as in the 1973 ruling.
• What if the agent waives his commission? Ask for it in writing. Without this, his waiver may be contested.
• What are the time limits for taking action? The limitation period is 5 years from the triggering event (the fraudulent sale).
• Can I negotiate the commission? Yes, freely. But once signed, the mandate is the law of the parties.

If you are in a similar situation: do not try to handle it alone. Gather your documents (mandate, preliminary contract, correspondence) and contact a specialised lawyer. Legal action can often be avoided by a simple formal notice.

Are you in a similar situation? A first 30-minute consultation with Maître Zakine (€45) can save you months of proceedings — and often much more. Book an appointment →