Question

Ibrahim was the registered owner of several adjoining parcels of vacant land that he had purchased some 12 years earlier. During that period of time, the property had appreciated substantially in value. Recently, Ibrahim was approached by a real-estate agent who suggested that the property might be of interest to a number of developers who had just begun construction in the immediate area. After some discussion, Ibrahim entered into a listing agreement with the agent, and the agent agreed to seek out prospective purchasers for the property. Ibrahim established $200,000 as the selling price he would accept for the land. For several months, the agent attempted to find a buyer for the property, but without success. When the developers in the area were not interested in the property, the agent returned to Ibrahim and suggested that a corporation in which he had an interest might be willing to purchase the land. To this suggestion Ibrahim replied that it did not matter to him who the purchaser was, so long as the purchaser was prepared to pay his price for the land. A week later, the agent returned with an offer to purchase from the corporation in which he had an interest. The offer price was $200,000, and was described by the agent as a “clean deal — all cash.” The offer was prepared on a standard real-estate offer-to-purchase form and contained a clause that read: “Any severance or impost fee plus any expenses for water and sewer connections to be included in the purchase price.” Ibrahim queried the clause, and the agent explained that it meant that the cost of obtaining permission to use the three parcels of land as separate building lots, and the hook-up costs of water and sewer lines to them, would be deducted from the purchase price. He added that this “usually did not cost much.”

At the agent’s urging, Ibrahim signed the offer. Some weeks later, Ibrahim discovered to his sorrow that the severance fees and the water and sewer connections would cost close to 10 percent of the sale price. The municipality required the payment of 5 percent of the value of the property as part of the severance fee, and the water and sewer connections accounted for the remainder. When Ibrahim refused to proceed with the transaction, the purchaser instituted legal proceedings for specific performance, and Ibrahim, on the advice of his solicitor, settled the action. As a result, he received only $180,000 for the property, from which the real-estate agent demanded a selling commission of 5 percent based upon the $200,000 selling price. Ibrahim refused to pay the agent and demanded that the agent compensate him for the $20,000 loss that he had suffered. Eventually, the agent brought an action against Ibrahim for the commission that he claimed was due and owing. Ibrahim, in turn, filed a counterclaim for payment of the $20,000 loss that he had suffered. Question (19): Discuss the arguments that might be raised by the parties in this case. Render a decision.

Answer 1

Arguments raised by Ibrahim-
As per the details mentioned in the case study it is very clear that Ibrahim has ask the agent for a price of Dollar 200 thousand. He made it very unambiguous that he want a sum of dollar 200 thousand and he would not compensate with it. But at the time of selling the land he did not inquire exactly about how much price would be detected. The clause which was made had clear guidelines that" any severance or imposed fee plus any expense for water and sewer connections to be included in the purchase price".
Since it was very clearly mentioned in the clause regarding deduction and Ibrahim did not make inquiry about the exact price that would be detected, he had suffered a loss of 10% in this deal. He should also have inquired about the percentage the the real state agent would be taking as to close the deal. Although it is clear from the case study that he demanded for amount ,so it is is understood that the amount of dollar 200 thousand request to pay the commission of the agent from the buyer's side.
Arguments raised by the real estate agent-
The arguments in the favor of the real estate agent is that he did not receive his commission for closing the deal. It is very natural that if the property is being sold at a particular place generally it is regarded that 1% of the price is the commission which the real estate agent receives from the seller of the property. The real estate agent is working as a intermediary between both the parties in closing the date. And he should also receive a share of commission from the seller.
Please like this answer by giving with thumbs Up. it will encourage me and I will be very thankful to you.