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Civil LawProperty Law

Representation in a contract must be indicated

By May 8, 2022November 8th, 2023No Comments

If a party is representing another party in an agreement or a contract must be indicated to the Parties.

This was held in JK Properties Limited eżerċenti l-kummerċ taħt l-isem Re/Max Alliance Estate Agency -v- Lumen Company Limited decided on 2 May 2022 by the First Hall of the Civil Courts presided by Mr Justice Christian Falzon Scerri.

The Plaintiff company claimed €28792 in agency fees from the Defendant company following a lease agreement it brokered a property in Marsaxlokk. The lease agreement was signed before the Plaintiff company’s letting associate.

The Defendant company filed a statement of defence in which it stated that it does not have a juridical relationship with the plaintiff company and therefore, the brokerage fees are due but not the Plaintiff company.

Mr Justice Falzon Scerri analysed the evidence brought before the court. Clause 17 of the lease agreement states that the Parties were introduced by Gordi Felice of Remax Alliance Estate Agency. The brokerage fees amounted to 10% of the total rent for a year. The Defendant company also agreed to pay 5% of the premium paid together with VAT. These fees were to be paid upon signing of the lease agreement. Furthermore, the Defendant company pointed out that according to Clause 20, the tenant was to set up a different entity and the lease was going to be assigned to this new entity.

The Court pointed out that this action is based on a breach of contract. The Court first dealt with the plea on whether there is no juridical relationship between the Parties of the case. The Defendant company argued that Gordi Felice was not representing JK Properties Limited, since he is not employed with the company and was self employed. The Plaintiff company disagreed and held that Felice was its representative. Article 998 of the Civil Code reads:

“998.  Every  person  shall  be  deemed  to  have  promised  or stipulated for himself, for his heirs and for the persons claiming through or under him, unless the contrary is expressly established by law, or agreed upon between the parties, or appears from thenature of the agreement.”

There is a presumption that a person contracts in his own name and on his own behalf unless there is an indication that he/she is contracting on behalf of another person. This was held in Joseph Chetcuti noe -v- Peter Paul Camilleri, decided by Commercial Court on 4 December 1988.

Article 1871(1) of the Civil Code states that if a person acquires property on behalf of another, the mandatory may demand the property to be transferred. Caselaw dictates that the onus of proof lies on who is makes the claim. In Bernard Attard -v- Raymond Cassar Torreggiani decided by the First Hall of the Civil Courts on 14 November 1966, evidence must be brought not only that the contract was effected but that one party was in fact representing another.

The Court has to decide whether Felice made it clear that he was representing the Plaintiff company. Felice had introduced the parties to the lease agreement. A witness for JK Properties explained that the company had acquired the rights of the Remax franchise and is authorised to allow third parties to run their offices. These are franchisees and would be representing the company. Although the franchisees collect the agency fees, these are in fact owed to the Plaintiff company. He confirmed that Felice was an agent of the Plaintiff company. Felice confirmed this to the court. He earns a percentage from the brokerage fees which are given to the Plaintiff company. The fees are of the company and not his.

The defendant company held that they had a relationship with Felice and Clause 17 mentions him and not the Plaintiff company.

The Court held that the Defendant Company knew that JK Properties was responsible because it signed an Estate Agency Fee Agreement with the company. The Court concluded that the Defendant company knew that Felice was acting on behalf of JK Properties. As such there is juridical relationship between the two. There was no need for Felice to be employed with JK Properties to be able to represent it, but he was a mandatory. There was no need that the representation be in writing, but it can be verbal. This was held by the Court of Appeal in Emmanuel Zahra noe -v- John Pace et noe on 9 May 1997.

As to the payment due the lease agreement held that the brokerage fees is 10% of the annual rent and 5% of the premium. The annual rent of €109,500 and the premium was €200,000. This amounts to €24,721 inclusive of VAT.

The third plea presented by the Defendant company was that the obligation to pay the agency fee did not commence. It is saying that agency fee had to be paid at the beginning of the lease agreement and that the lessee had to obtained financing from the bank. The Court pointed out that the same lease agreement states that the lease agreement was to commence a month after the business opened or on 31 January 2018, whichever came first.  The Court held that no evidence was produced to show when the business commenced and therefore, the due date for the brokerage was not be paid on 31 January 2018. This is a resolutive conditions and not a suspending condition. The latter is a condition which take place in the future. A resolutive condition is one which when the condition realises it would rescind the obligations. The condition is resolutive because it gives a date or a period when the fees were to be paid.

The Court then moved to reject the pleas and uphold the claims ordering the defendant company to pay the fees.

Av Malcolm Mifsud


Mifsud & Mifsud Advocates

The article is available on MaltaToday.

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