Unjust Enrichment and Implied Terms - Barton v Gwyn-Jones
In a recent judgment concerning contractual construction, unjust enrichment and the implication of terms, the Court of Appeal of England and Wales held that an oral agreement for the payment of an introductory fee upon the sale of a property at a specified price would not operate so as to disentitle the introducer from any fee whatsoever upon the sale of that property for a lesser price.
Under the terms of the agreement, Foxspace was to pay Mr Barton the sum of £1.2m in the event of an introduction by him leading to a sale of the property for £6.5m. The agreement was silent on whether any fee would be payable if the property sold for less than that sum.
Mr Barton argued that he was entitled to his fee notwithstanding that the property had sold for less than £6.5m and that, absent payment of that fee, Foxspace would be unjustly enriched. Foxspace argued that the introductory fee was to become payable if, and only if, the £6.5m sale figure was achieved; that as that figure had not been reached, no fee was payable; and that (citing Macdonald Dickens & Macklin v Costello & Ors) Mr Barton’s unjust enrichment claim would undermine the contractual arrangements that had been made between the parties and should therefore not be allowed to stand.
Overturning the first instance decision, the Court unanimously held:
- This was not an “if, and only if” agreement. It would have been bizarre for Mr Barton to enter into an agreement whereby only a small reduction in sale price would deprive of him of any introductory fee at all.
- Under the terms of the agreement, Mr Barton had assumed the risk that there would be no sale at all (in which case he would not be paid), and the risk that the property would not be sold for £6.5m (in which case he would not receive £2m); but there was no allocation of risk in any other circumstances. An unjust enrichment claim would not, therefore, offend the principle in Costello, because contractual arrangements were not being undermined;
Mr Barton would, in the circumstances, be allowed an introductory fee (in the lesser amount of £435,000); any other conclusion “would work a clear injustice.” The correct legal analysis, however (per Davis LJ) was that this should not be regarded as a case of unjust enrichment. Instead, reasonable remuneration would be payable as a matter of quantum meruit (i.e. in exchange for services rendered) pursuant to an implied term of the agreement.