1. Commission Structures and Essential Elements of Contracts

2. Commission Structures
Brokerages may charge either a flat fee or commission but not both
Structures set out in S36(1) of REBBA 2002
Flat fee = stated amount in listing agreement
The seller(s) pay this amount to the listing brokerage (LB) who pays co-operating brokerage(s)
Commission = percentage of sale/rental price (i.e. 3%)

3. Commission Structures
Graduated Arrangement
This fee arrangement is often used for higher priced homes
It is a type of percentage sale commission
For example, you sell a home for $1 million – you get 5% commission for the first $400,000 followed by 4.5% commission for the next $300,000, and finally $4% on the next $300,000 (total of $45,500)
Rebates
Broker may offer rebate incentive to buyer/seller
Rebate may be a percentage of commission or flat amount

4. Essential Elements of a Contract
Capacity – this means parties must be legally competent to enter into a contract
Mentally sound
Not intoxicated (drunk)
The parties must be able to understand what was taking place when the contract was being signed
Not a minor
The parties must be over the age of 18
If a party is a minor, the contract is voidable unless minor does something once they are over age of 18
Not illiterate
The person must understand the terms of the contract for them to be legally enforceable

5. Essential Elements of a Contract
Lawful Object
The contract must be lawful in order for it to be enforceable in court
Consideration
Each party must receive something
Exchange may be act for money (I will pay you $20 to wash my car), act for act (I will wash your car if you wash mine), or promise for promise (I promise not to sue you if you promise to pay me the money you owe me)
Courts do not look at value/adequacy of consideration, but the consideration must be lawful

6. Essential Elements of a Contract
Consideration must be executory and not past consideration
It must be exchanged at the time of the contract
Contracts can only be made without consideration if a seal is used
Such contracts are only valid if the parties to the contract are aware of the legal effects of a seal
Courts accept pre-printed, handwritten or red wafer seals
Business corporations should use a corporate seal or contain: “I have the authority to bind the corporation”

7. Essential Elements of a Contract
Mutual Agreement
There must be an offer and an acceptance
An offer that is different from the actual offer cannot be accepted
Offer and acceptance must be the same
For instance, you receive an offer from someone who wants to buy your property for $250,000. You cannot change the price to $300,000
Genuine Intention
Parties must consent to the terms of the contract and agree to be bound under it

8. Essential Elements of a Contract
Clear and Definite
Agreement must be sufficiently precise and clear
Essential terms must be agreed upon in order for a binding contract to exist
These include price, closing date, property address
Some terms may be arbitrated into the contract by a third-party , such as commission (percentage of sale)
Court may imply certain terms into a contract
Contracts that contain a “time is of the essence” clauses but do not have closing dates may be invalid due to lack of certainty
Negotiation provisions may also cause uncertainty (e.g. a contract in which purchase price will be determined in five years)

9. Essential Elements of a Contract
If any of these essential elements of a contract are missing, no contract exists
An agreement lacking these essentials may still be construed as an undertaking to make a contract at a later date

10. Most Common Contract Errors
Common mistake
Mutual mistake
Unilateral mistake
Misrepresentation
Intoxicated person
Undue influence/duress