Let’s say you’re a real estate agent with an obligation to sell a property to someone. However, at one point, you appoint another real estate agent to take over this responsibility of sale for you. 

This is what we know as a Conjunction Agreement

Put simply, it’s a transfer of responsibility from one agent to another. But, of course, there are some other key details around the arrangement that are worth knowing – read on to find out more. 

How Does A Conjunction Agreement Work?

A Conjunction Agreement essentially allows one agent to transfer their obligation to sell a property to another agent. So, instead of selling the property yourself like you originally planned, you allow another agent to do it for you. 

However, it requires that the earnings from that sale are distributed between the two agents. 

In other words, both the first and second agent will receive a portion of the overall commission made from the sale. The amount received by each agent will depend on what the agreement itself stipulates, so it’s important to have clear discussions about your preferences prior to entering into the agreement. 

How Do You Enforce A Conjunction Agreement?

Conjunction Agreements have also been a topic of discussion for Australian courts. While an agreement is always made to be clear, sometimes parties will still run into trouble and misunderstandings, bringing the issue to court. 

So, how exactly is a Conjunction Agreement enforced? How do you know if a Conjunction Agreement arises in your situation?

To better understand how this works, let’s have a closer look at the case of Equity 2 Pty Ltd v Best Price Real Estate Pty Ltd

Equity 2 Pty Ltd v Best Price Real Estate Pty Ltd [2020] 

In this case, the first agent transferred the obligation to sell land to another agent. This second agent then brought legal action against the first agent, giving rise to the issue of whether they were entitled to a percentage of the commission made from the sale. 

The Court found that no such Conjunction Agreement existed between the parties. This was justified on the grounds that the contract itself was clear. The agreement to sell the land was the first contract between the initial agent and the buyer, and when the buyer then purchased the land from another agent, this gave rise to a separate contract. 

Thus, there was no Conjunction Agreement and the second agent was not entitled to a percentage of the commission earned under that first arrangement. 

The case also highlighted that where a contract is sufficiently clear, a party cannot rely on ‘implied terms’ to argue the existence of a Conjunction Agreement. Furthermore, the first agent did not act in a way that was in breach of their duty of good faith. 

What Does This Mean For Agents?

As we noted, the case demonstrates that the clarity of the contract will outweigh any ‘implied terms’. As such, when entering into arrangements as an agent, it’s essential to check that the terms of your contract are 100% clear as these will be referred to closely in any potential legal proceedings. 

It will determine whether or not a Conjunction Agreement arises, and consequently, whether a party will be entitled to a portion of the commission received from the relevant sale. 

What Does A Conjunction Agreement Include?

A Conjunction Agreement will generally outline the transfer of the obligation to sell property to another party. However, it should also include:

  • The nature of services to be provided
  • Information about fees and commissions
  • Extent of authority to act on behalf of a client

Make sure the terms of the contract are clear between all parties to avoid any confusion or misunderstandings later down the track. 

Where Can I Get A Conjunction Agreement?

If you’re an agent and you need legal help with a Conjunction Agreement, our lawyers offer a Conjunction Agreement package which includes the following:

  • Drafting a Conjunction Agreement in accordance with the requirements of your business
  • Phone consultations with a Sprintlaw lawyer who can answer your legal questions
  • A complimentary amendment to the final draft we provide you

Key Takeaways

If you’re a real estate agent, it’s crucial that you have your terms clearly set out in writing. This way, you can also avoid any issues around commission payments and earnings between parties. 

If you need any help, our expert lawyers are always ready to chat. We also offer help with the following matters:

If you would like a consultation on your options going forward, you can reach out to our team of legal consultants at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.

About Sprintlaw

Sprintlaw is a new type of law firm that operates completely online and on a fixed-fee basis. We’re on a mission to make quality legal services faster, simpler and more affordable for small business owners and entrepreneurs.

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