Disputes in Brokerage Contracts
When is the commission due? Is a verbal agreement binding? And how can the broker prove his right?
Brokerage contracts are among the most common contracts in commercial and real estate transactions. Many disputes arise from them, especially regarding the entitlement to commission, the legal value of verbal agreements, and the means by which the broker can prove his right. Therefore, it is important to clarify the legal framework governing this type of contract under both Egyptian and Turkish law.
First: The Concept of a Brokerage Contract
A brokerage contract is an agreement under which a person, called the broker or intermediary, undertakes to mediate in concluding a contract between two parties in return for a specified commission, without being a party to that contract himself.
The broker does not undertake to guarantee a specific outcome in the content of the contract; rather, his obligation is limited to exerting effort to bring the parties together and facilitate the conclusion of the contract.
Second: When Is the Commission Due?
The basic rule in both Egyptian and Turkish law is that the commission becomes due if the result for which the broker acted is achieved, namely if the contract is concluded between the parties as a result of his mediation.
Under Egyptian law:
Commercial law provides that the broker is entitled to his commission if his mediation leads to the conclusion of the contract, even if the contract has not yet been performed, unless non-performance is due to a legitimate reason that renders the contract void from the outset.
This means that:
The commission is due once the contract is concluded.
Actual performance of the contract is not required.
Except where the contract is void or invalid from the beginning.
Under Turkish law:
The Turkish Code of Obligations provides that the broker is entitled to commission once the contract he mediated is concluded, provided that there is a causal link between his mediation and the conclusion of the contract.
In other words:
The broker’s intervention must have played an effective role in concluding the agreement.
No commission is due if the parties concluded the contract without benefiting from his mediation.
Third: Is a Verbal Brokerage Agreement Binding?
In principle, a brokerage contract is a consensual contract, meaning it is concluded by mere mutual consent, whether in written or verbal form.
Under Egyptian law:
A verbal brokerage agreement is legally valid and binding. The real difficulty lies not in its validity, but in proving its existence.
If one party denies the agreement, the broker must prove it by all means of evidence legally acceptable in commercial matters.
Under Turkish law:
The general rule is also that a verbal agreement is valid, unless the law requires a specific form in special cases, such as when the subject of brokerage concerns real estate contracts that require official registration.
In other cases, the verbal agreement remains valid in principle, with the burden of proof resting on the broker.
Fourth: When Is the Commission Not Due?
The broker is not entitled to commission in the following cases:
If no contract is concluded between the parties.
If the contract is concluded without any real role played by the broker.
If it is proven that the broker acted in bad faith or committed fraud or deception.
If the contract is void from the outset.
If the parties expressly agreed that the commission would only be due after full performance of the contract.
Fifth: How Can the Broker Prove His Right to Commission?
Proving the right to commission is the core of most brokerage disputes. This can be done through several means, the most important of which are:
Written Evidence
This is the strongest means of proof, including:
A written brokerage contract.
Official letters or written correspondence.
Receipts or documents proving the agreement on the commission or its amount.
Electronic Correspondence
Such as:
Emails.
Messages exchanged through messaging applications.
Audio recordings, provided they are lawful and obtained legally.
These means are now accepted by courts in Egypt and Turkey as strong indications of the existence of the contractual relationship.
Witness Testimony
Especially in commercial transactions, witness testimony is admissible to prove:
The existence of a verbal agreement.
The broker’s role in concluding the transaction.
Proof of the Causal Relationship
The broker must prove that his intervention was the direct cause of concluding the contract, such as by showing:
That he introduced the parties to each other.
That he arranged meetings between them.
That he participated in negotiations.
That he transmitted offers and agreements between the parties.
Sixth: The Broker’s Main Legal Obligations
The broker must:
Act honestly and impartially.
Not mislead either party.
Preserve the confidentiality of information.
Work in the interest of both parties without unlawful bias.
If the broker breaches these obligations:
He may lose his right to commission.
He may also become liable for compensation.
Seventh: The Legal Nature of Disputes in Brokerage Contracts
Disputes in brokerage contracts usually revolve around:
Denial of the existence of the brokerage agreement.
Denial of the amount of commission.
Allegations that the broker had no causal role in concluding the contract.
Allegations of bad faith on the part of the broker.
Resolving such disputes requires:
Careful examination of the facts.
Thorough analysis of the available evidence.
Professional legal drafting of claims and defenses.
Eighth: Practical Legal Advice
To protect your rights as a broker or intermediary:
Always ensure there is a written agreement.
Clearly specify the commission rate.
Keep all correspondence and communications.
Document your role at every stage of the transaction.
Do not rely solely on verbal promises, regardless of the level of trust.
Conclusion
A brokerage contract is simple in form but complex in its legal effects.
Commission is not earned merely by claiming mediation; rather, it is earned by proving that the broker was the real and effective cause of concluding the contract and that he acted honestly and impartially in accordance with the law.
Consulting a specialized lawyer from the beginning of any dispute saves time and significantly increases the chances of fully protecting legal rights.