If the buyer and seller mutually cancel the contract, does the agent lose the right to receive the commission?

Meaning of Commission

A commission is the compensation that the employer agrees to pay the broker in exchange for performing the duties of contacting, coordinating, or introducing the buyer and seller to meet, leading to the execution of a purchase, sale, lease, or agreed transaction. It may be set as a fixed amount or calculated as a percentage of the transaction value as agreed by the contracting parties.

Duties of the Broker in Finding Contracting Parties

The broker's duties are to find and recommend contracting parties who are ready and match the employer's requirements, including providing information about the property, coordinating appointments, and facilitating negotiations so that both parties can agree to a contract.

Point at Which the Broker's Duties Are Considered Completed

According to the law, the broker is entitled to receive a commission when the contract arises from the broker's introduction or management. If the sale or lease occurs due to the broker's actions, it is considered that the duties have been completed, and the broker has the right to receive the commission according to the law or the agreement of the contracting parties.

In cases where there may be no right to receive

If the contract is not made or it cannot be proven that the sale resulted from the broker's actions, the broker may not yet have the right to claim a commission. Additionally, if the brokerage contract stipulates that the transfer of ownership or full payment must be completed before receiving the commission, the conditions must be followed accordingly.

Important factors that courts often consider

Courts often consider whether the broker has facilitated or arranged in a way that caused the contract to be made, including reviewing the terms of the brokerage contract, the circumstances of the parties, and the reasons for contract cancellation to determine whether the broker still has the right to receive the commission.

Unable to find buyers or sellers according to the conditions

If the broker cannot present a contracting party that meets the conditions set by the employer or cannot find a buyer or seller ready to make a transaction, it may be considered that the broker's work has not been successful.

Transaction failure due to broker's fault

In cases where the transaction fails due to the broker's error, negligence, or providing incorrect information, the right to receive a commission may be forfeited.

Failure to comply with the brokerage contract terms

If the broker does not comply with the conditions specified in the contract, such as not following the prescribed procedures or violating important agreements, the contracting parties may refuse to pay the commission.

No evidence of work performed

In practice, if the broker cannot provide evidence of work performed, such as contacts, presentations, or coordination, it may be difficult to prove the right to claim a commission.

Common scenarios

For example, a broker introduces a buyer to a seller and they agree on a price, but later both parties claim to cancel the original contract and make a new contract themselves without going through the broker to avoid paying the broker's fee.

Cancellation solely to avoid commission

If the contract cancellation has no genuine business reason but is intended to evade paying commission, the court may consider this an act of bad faith and may still regard the broker as entitled to the commission since the success of the sale resulted from the broker's efforts.

Subsequent transactions without the broker

In cases where the contracting parties use information or business opportunities originating from the broker to make contracts themselves later, even without directly involving the broker, it may still be considered a consequence of the broker's role, entitling the broker to claim commission based on fairness and the circumstances of the case.

Agreement in the brokerage contract

The agreement in the brokerage contract is the most important factor, as it sets the conditions for paying the commission, such as requiring the contract to be made, the transfer of ownership, or the proportion of compensation.

Broker appointment letter

The broker appointment letter serves as evidence confirming the relationship between the employer and the broker, helping to clearly specify the scope of duties and rights in operations.

Evidence of introducing the buyer

Introduction evidence, such as messages, emails, or presentation documents, helps prove that the broker was the one who facilitated the meeting of the contracting parties.

Negotiation and coordination

Participation in negotiation, price bargaining, or coordination between buyer and seller is another factor reflecting the broker's role in making the deal happen.

Evidence of contact between contracting parties

Contact evidence, such as chats, appointments, or communication records, can be used to consider whether the transaction arose from the broker's connection.

For sellers

Sellers should start by thoroughly reviewing the brokerage fee conditions in the brokerage contract to see if there are any remaining obligations. Then, they should officially notify the broker when canceling the contract for transparency and to reduce misunderstandings, as well as keep evidence of the cancellation, such as a contract cancellation letter or confirmation messages from the contracting party, to use as evidence in the future.

For buyers

Buyers should check the reason for the contract cancellation to determine what problem caused it and whether it relates to the original conditions. Then, they should make a written agreement on the cancellation to prevent discrepancies and be cautious about potential disputes over brokerage fees that may arise if new transactions occur later.

For brokers

Brokers should prepare a clear brokerage contract from the beginning, specifying the conditions for receiving compensation in detail, including keeping evidence of all work steps, such as communications, appointments, and property presentations, to confirm their rights. Additionally, they should set strict conditions for receiving brokerage fees to reduce the risk of being avoided payment in the future.