Contracts, Putting Communications in

its Context: Wells v Devani

Contract law developed over the centuries with the traders. 1 Communications in the
prior centuries were mostly verbal. Thus, the principle came to be that a contract
could be formed by any modality of communication, oral, written or implied. As
means of writing and printing developed in the past century, business contracts have
come to be in writing. Most business contracts are formed on standard contract
terms. With the facility of mobile phone communications, however, businesspersons
are talking business on the phone all the time. With this, contentions will arise
whether they were only negotiating or had gone the distance and made a contract.
Indeed, if the substance of the communication between the parties on the phone is
clear and definite, there is every reason to conclude that a contract is formed on the
phone. We may be getting back to the past. The United Kingdom Supreme Court in
Wells v Devani2 explored the effects of ready and quick phone conversations.

The Phone Call: Wells and Devani

Edward Wells is a retired stockbroker. He got a set of flats developed in a town in the
United Kingdom. Despite his efforts, eight of the flats remained unsold. Concerned,
Wells mentioned the problem to Nicholson, his neighbour. Nicholson told him that he
knew real estate people in London who might help. Wells requested him to make
enquiries. Following the conversation, Nicholson sent two e-mails, one of them was
to
a person Devani. The e-mail described the property, gave the contact details of
Wells and inquired if he would be interested. The e-mail further requested to pass it
on to anyone else who might be interested. Devani immediately replied to Nicholson:
‘Thanks for this. It may well be of interest.’

The same day, Tuesday, January 29, 2008, Devani established contact with Wells
on the telephone. Following the conversation, Wells faxed the details of the property
to Devani. Almost immediately, Devani got in touch with Ms Ogbonna of Newlon
Housing Association informing her of the property. Ogbonna took a drive by the
building and got back to Devani on Friday that Newlon was interested and he should
arrange a visit to see the flats.

Devani sent a text message to Wells on Friday itself, requesting to arrange for a
viewing of the flats. Wells got back to Devani on Monday. They spoke twice on the
phone, fixing a viewing at lunchtime on Monday itself. Ogbonna visited the flats
representing Newlon and met up with Wells. Devani had planned to attend the
meeting but could not make it. The meeting went off well. Newlon was interested in
the flats. The parties entered into a sale agreement. Wells then telephoned Devani to

1
This note is a shorter and re-worked version of the case ‘BP 0435 Oral Agreements, Implied Terms and the
Context: Wells v Devani’ developed by the author of the case for facilitating learning of the case by the
student.
2
The Court of Appeal judgment is Devani v Wells, [2016] EWCA Civ 1106. The United Kingdom Supreme Court
judgment is Devani v Wells, [2019] UKSC 4.
share the good news. Following the phone call, the same morning, Devani sent
Wells the following email:

Further to our conversation, I am delighted that Newlon has agreed to

purchase all eight remaining flats …

As per our terms of business our fees are 2% + VAT and I look forward to
receiving your solicitor’s details so that we can invoice them directly as per
your instruction.

A few days later, the sale of the eight flats to Newlon was completed. In
consequence, Devani claimed a commission of £42,000 plus VAT. Wells, however,
refused to pay it.

The Dispute: Central London County Judge

Following the refusal by Wells to pay, Devani initiated proceedings before the
Central London County Judge to recover his commission. Devani contended that the
parties had formed a contract on the phone. He claimed that he had told Wells on
the phone that he was an estate agent and his commission for the transaction would
be 2% plus VAT. Wells presented that Devani never said he was an estate agent
and instead, gave the impression that he was an investor. The following exchange
happened at the oral hearing of Devani before the judge:

Q. There was no mention of standard terms and conditions on the phone on 29

January?

A. It was orally ‘2%’. When he asked me ‘What are your fees’? I said, ‘My
standard fees are 2%’. Apart from that, that was it at that point.

It was put to Devani that it was not discussed as to when the commission would
become due. Devani agreed:

Yes, sir, you’re absolutely right. But what was discussed here's 2%. If I find—
in my head, I find a purchaser who agrees to buy the property, that's when the
fee is due to me.

A little later, Devani stated again: ‘Just the fee, just the rate was discussed.’

Reviewing all evidence and having heard oral evidence, the judge concluded the
facts as follows:

Taking all the above considerations together, my conclusions about the 29 th

January conversation are: (a) that throughout that conversation [Devani]
considered himself to be proposing himself as an agent not a buyer, and was
looking to a commission from [Wells] as his source of profit; (b) that he did
not describe himself as a buyer or investor or say anything intended to give the
false impression that he was; (c) that, though it is possible that [Devani] was
silent on the subject of fees and that [Wells] did wrongly believe him to be an
investor because of his references to Mr Nicholson, it is on the balance of
 probability more likely that, as [Devani] says, [Wells] did ask him about his
fees and he did reply that his standard terms were 2% + VAT.

The judge was of the view that Wells sought to take advantage of the absence of a
written agreement with Devani and his evidence was tailor made. The judge stated: ‘I
prefer [Devani's] evidence and do not accept [Wells].

In conclusion, we could present the phone conversation between Wells and Devani
on January 29 in the following stylised manner.

Devani: “I am calling you on the suggestion of Mr. Nicholson. I belief you have flats
in Hackney to sell and looking for help. I am an estate agent and could help you with
it.”

Wells: “Yes. I have eight flats to sell in a building in Hackney. What are your fees?”

Devani: ‘My standard fees are 2%’.

Wells: “I look forward to you getting buyers.”

Devani: ‘Could you kindly fax me the details of the property.’

Wells: ‘Sure. It will come soon.’

Following the establishment of the facts, Wells contended that the communication
between the parties on the phone was uncertain and incomplete. The parties had not
communicated a crucial aspect as to when the commission would become payable.
Thus, Wells contended that the communication could not be taken to be forming a
contract between them. The county judge ruled in favour of Devani but the Court of
Appeal, the second highest court of law in the UK, agreed that the oral agreement
was not ‘sufficiently complete to amount to a binding contract.’ The dispute came
before the United Kingdom Supreme Court.

Court are contract makers and no breakers

The Supreme Court stated the settled principles of formation of contracts. A contract
can be formed by any means of communication. The subjective state of mind of the
parties is of no relevance. An objective assessment has to be made of what was
‘communicated between them by words or conduct.’ The objective view will settle
whether a contract got formed and on what terms. It may happen that the words and
conduct are vague and uncertain to claim that no contract is formed. But the courts
are ‘reluctant to find an agreement is too vague or uncertain to be enforced’
particularly when the parties have acted on their agreement. The court elaborated it:

The object of the court is to do justice between the parties, and the court will
do its best, if satisfied that there was an ascertainable and determinate
intention to contract, to give effect to that intention, looking at substance and
not mere form. It will not be deterred by mere difficulties of interpretation.
Difficulty is not synonymous with ambiguity so long as any definite meaning
can be extracted. But the test of intention is to be found in the words used. If
 these words, considered however broadly and untechnically and with due
regard to all the just implications, fail to evince any definite meaning on which
the court can safely act, the court has no choice but to say that there is no
contract. Such a position is not often found.

The contracting parties are free to contract on any terms. The contract is of the
parties and not the court. The courts do not insert terms from their side. But the
courts see themselves as contract makers and not contract breakers. They do all
they can to give effect to the intention of parties and make the contract work. The
first determination is whether the parties intended to contract. In a business
communication, the presumption is the parties intend to contract. Unless the
communication asserts that they are not getting into a contract, one takes that the
parties are exploring to contract. Thus, the requirement of the intention to create a
contract is readily met. The remaining determination is whether the communication is
clear and definite in its substance for it to have matured to become a contract.

Communications happen in a context

Communications happen in a context. The communication between the contracting

parties has to be located in its context to understand what the parties want from each
other. The Supreme Court illustrated the point:

Lawyers frequently speak of the interpretation of contracts … as if it is

concerned exclusively with the words used expressly, either orally or in
writing, by the parties. And so, very often, it is. But there are occasions,
particularly in relation to contracts of a simple, frequently used type, such as
contracts of sale, where the context in which the words are used, and the
conduct of the parties at the time when the contract is made, tells you as much,
or even more, about the essential terms of the bargain than do the words
themselves. Take for example, the simple case of the door to door seller of
(say) brooms. He rings the doorbell, proffers one of his brooms to the
householder, and says ‘one pound 50’. The householder takes the broom, nods
and reaches for his wallet. Plainly the parties have concluded a contract for the
sale of the proffered broom, at a price of £1.50, immediately payable. But the
subject matter of the sale, and the date or time at which payment is to be made,
are not subject to terms expressed in words. All the essential terms other than
price have been agreed by conduct, in the context of the encounter between the
parties at the householder's front door.

The Court of Appeal had ruled that there was no binding contract between Wells and
Devani. The Supreme Court reviewed the position taken by the Court of Appeal:

They have at their heart the proposition that, unless the parties themselves
specify the event which will trigger the agent's entitlement to commission,
their bargain is incomplete; and that it is not possible to turn an incomplete
bargain into a legally binding contract by adding expressly agreed terms …

The Supreme Court commented on the position:

 I recognise that there will be cases where an agreement is so vague and
uncertain that it cannot be enforced. So too, there will be cases where the
parties have not addressed certain matters which are so fundamental that their
agreement is incomplete. Further, an agreement may be so deficient in one or
other of these respects that nothing can be done to render it enforceable. But I
do not accept that there is any general rule that it is not possible to imply a
term into an agreement [communications between the parties] to render it
sufficiently certain or complete to constitute a binding contract.

The Supreme Court stated the principle for implying into communication. It asserted:

Indeed, it seems to me that it is possible to imply something that is so obvious

that it goes without saying into anything, including something the law regards
as no more than an offer. If the offer is accepted, the contract is made on the
terms of the words used and what those words imply.

Thus, in every communication of offer, we can imply or read anything which is

so obvious that ‘it goes without saying.’ The court stated the second principle
to read or imply into communication is to give business efficacy. Business
efficacy, to make the transaction work, is the very foundation of the contract.
The court noted that terms could be read in the communications:

… such business efficacy as the parties must have intended. For example, …
in default of agreement, a reasonable price must be paid. … Similarly, I see no
reason in principle why a term cannot be implied into an agreement between a
property owner and an estate agent that the agreed commission will be payable
on completion of the sale of the property to a person introduced by the agent.

Putting the phone call in its Context

The Supreme Court placed the phone communication between Wells and
Devani in its context. The court noted:

… there was a short telephone call initiated by Mr Devani, who introduced

himself as an estate agent, and … offered his services at an expressly stated
commission of 2% plus VAT. It was known to both of them that Mr Wells was
looking for a buyer or buyers so that he could sell the flats, and it was plain
from the context, and from the conduct of the parties towards each other, that
Mr Devani was offering to find one or more buyers for those flats. The express
reference by Mr Devani to the 2% commission was, in the context, clearly
referable to the price receivable by Mr Wells upon any sale or sales of those
flats achieved to a person or persons introduced by Mr Devani.

The court recognised that the parties did not discuss the event that would give
rise to the payment of the commission. The court noted:

I have no doubt it would naturally be understood that payment would become

due on completion and made from the proceeds of sale. Indeed, it seems to me
that is the only sensible interpretation of what they said to each other in the
course of their telephone conversation on 29 January and the circumstances in
 which that conversation took place. In short, Mr Devani and Mr Wells agreed
that if Mr Devani found a purchaser for the flats he would be paid his
commission. He found Newlon and it became the purchaser on completion of
the transaction. At that point, Mr Devani became entitled to his commission
and it was payable from the proceeds of sale.

A hypothetical situation is the purchaser found by the agent enters into a purchase
contract and then, repudiates it. Would a commission be payable to the agent?
There may be ambivalence in answering it. Should we then not say that the
communication, when it was made, had vagueness and uncertainty? The court
recognised the perception of difficulty or uncertainty in the hypothetical case. The
court proceeded that the hypothetical situation should not stand in the way in this
case where the sale contract is performed and the buyer paid. The court noted:

… estate agents may wish to bargain for a variety of different events as

triggering a liability to pay commission. But it is difficult to imagine an estate
agent's contract which did not make the client liable to pay after receipt in full
of the purchase price, as occurred here.

Thus, the court located the phone conversation between Wells and Devani in its
context and concluded that it was a part of the oral agreement that the commission
will become payable on the purchaser completing the purchase.

Thus, a verbal communication needs to be located in its contexts and meaning and
substance given to the communication. The thrust is to make and not break
contracts. It is only if the communication is irretrievably vague or uncertain that the
courts would set them aside. In this context, we could further explore the limits of the
case. If Devani had stated that he was an estate agent but not mentioned his
commission, would the oral communication have been a binding contract?