A) ABSTRACT / HEADNOTE
This landmark case from 1950 concerns the enforceability of a broker’s commission in real estate transactions and the legal scope of agency agreements. The Supreme Court of India evaluated whether an estate broker, authorized to “negotiate” and “secure” a purchaser at or above a certain price, could claim his commission when the principal ultimately sold the property for a lower price to the same buyers introduced by the broker. The Court ruled in favor of the broker, emphasizing that once the agent had introduced ready and willing purchasers who completed the transaction, he earned his contractual commission, even if the actual sale was concluded at a lesser price due to the principal’s decision.
The ruling differentiated between the authority to negotiate and the authority to conclude a binding contract and clarified when a broker’s commission becomes due. The Court also discussed implied terms of agency, the principles of good faith in agency relationships, and examined English precedents like Luxor (Eastbourne) Ltd. v. Cooper and Rosenbaum v. Belson. The judgment remains significant in Indian contract law and law of agency for brokers, estate agents, and commission disputes.
Keywords: Estate Broker, Commission, Real Estate Sale, Agency Authority, Contract Negotiation, Binding Agreement, Principal-Agent Relationship, Implied Terms, Indian Contract Law, Supreme Court of India
B) CASE DETAILS
i) Judgement Cause Title
Abdulla Ahmed v. Animendra Kissen Mitter
ii) Case Number
Civil Appeal No. XLIV of 1949
iii) Judgement Date
14th March 1950
iv) Court
Supreme Court of India
v) Quorum
Shri Harilal Kania C.J., Saiyid Fazl Ali, Patanjali Sastri, Mehr Chand Mahajan and S.R. Das JJ.
vi) Author
Justice Patanjali Sastri (Majority opinion); Justice Mahajan (Concurring separate opinion)
vii) Citation
AIR 1950 SC 15; [1950] SCR 30
viii) Legal Provisions Involved
Sections 182, 183, 211, 217 of the Indian Contract Act, 1872
Doctrine of Agency and Commission
English precedents on estate agency commissions
ix) Judgments overruled by the Case (if any)
None overruled, but Luxor (Eastbourne) Ltd. v. Cooper distinguished
x) Case is Related to which Law Subjects
Contract Law, Law of Agency, Civil Law
C) INTRODUCTION AND BACKGROUND OF JUDGEMENT
The case arose in the context of a real estate transaction negotiated through a broker, Abdulla Ahmed, who was tasked with securing a buyer for a property owned by Animendra Kissen Mitter. The commission agreement stipulated specific remuneration structures based on various sale price brackets. A crucial issue was whether the broker earned his commission when the principal sold the property to the same buyers introduced by the broker, but at a price lower than initially negotiated. The litigation ensued when the principal sold the property to a nominee of the prospective buyers at a lesser price and refused to pay the agreed commission.
The legal backdrop includes the fundamental principles of the law of agency and contractual obligations arising from commission agreements. The case required the Court to interpret the terms “negotiate” and “secure a buyer” in the context of an estate brokerage. The conflicting High Court decisions, the ambiguity in the commission note, and the eventual sale transaction—though at a reduced price—formed the basis of the appeal before the Supreme Court.
D) FACTS OF THE CASE
The appellant, Abdulla Ahmed, was a real estate broker engaged by the respondent, Animendra Kissen Mitter, through a commission note dated 5th May 1943. The note stated that if the appellant secured a buyer at Rs. 1,00,000 or more, he would be paid Rs. 1,000 as commission, and higher commissions were specified for prices exceeding Rs. 1,05,000 and Rs. 1,10,000 respectively.
On 2nd June 1943, the appellant secured two purchasers ready and willing to buy the property at Rs. 1,10,000. He exchanged letters with the buyers, thereby purporting to conclude the sale contract and informed the respondent on 3rd June 1943.
However, on 9th June 1943, the respondent revoked the appellant’s authority and independently entered into an agreement with a nominee of the same buyers for a sale price of Rs. 1,05,000. Later, he executed a conveyance deed in December 1943.
The appellant sued for the full commission of Rs. 6,000, asserting that he had fulfilled his obligation by introducing buyers who completed the purchase. The respondent resisted, claiming that the agent lacked authority to conclude the contract and that the eventual sale was independent of the appellant’s involvement.
E) LEGAL ISSUES RAISED
i) Whether the estate agent had authority to enter into a binding contract of sale on behalf of the principal.
ii) Whether the broker earned his commission upon introducing buyers who were ready and willing to buy, irrespective of whether the sale took place at the negotiated price.
iii) Whether the reduction in the sale price affected the broker’s right to claim commission based on the higher negotiated price.
iv) Whether the sale to the nominee of the original buyers can be deemed a direct result of the broker’s efforts.
F) PETITIONER / APPELLANT’S ARGUMENTS
i) The counsels for Petitioner / Appellant submitted that:
The appellant had authority, under the express terms of the commission note, to conclude a binding contract. The broker acted within his scope when he accepted the offer from the buyers at Rs. 1,10,000 and sent a confirmation to the principal.
The commission note’s language, particularly the phrases “negotiate the sale” and “secure a buyer”, necessarily implied authority to finalize terms, especially since the agent was expected to ensure the transaction was free of encumbrances and based on a guaranteed good title. This necessarily implied greater responsibility and discretion.
Reliance was placed on the conduct of the respondent who, upon being informed of the contract, did not repudiate the agent’s authority or contest the deal. The respondent remained silent, indicating ratification or acceptance.
Even if authority to conclude a binding contract was absent, the agent fulfilled his contractual duty by introducing a buyer who was ready, willing, and able to purchase at the agreed price. The subsequent sale to the same buyer’s nominee demonstrated that the agent was the effective cause of the sale.
Further, it was argued that any reduction in price was a mala fide act designed to deprive the agent of his rightful commission and should not affect the broker’s entitlement.
G) RESPONDENT’S ARGUMENTS
i) The counsels for Respondent submitted that:
The appellant was never granted authority to conclude a contract for sale. The commission note lacked specific terms and conditions such as mode of payment, title approval, or conveyance details, which are typically essential for a valid real estate contract. Therefore, the letters exchanged with the buyers were not binding.
The buyers themselves rescinded the agreement, alleging that the broker had misrepresented the commission terms. Hence, there was no completed transaction at Rs. 1,10,000, and any subsequent sale was unrelated to the agent.
The sale to the nominee of the buyers was at a reduced price of Rs. 1,05,000, which did not match the commission bracket of Rs. 1,10,000. Consequently, the broker was not entitled to a higher commission.
Reliance was placed on the decision in Luxor (Eastbourne) Ltd. v. Cooper [(1941) AC 108], arguing that unless the transaction was completed at the agreed price, no commission was payable.
